OCA - Oceania Group - retirement villages

[BlackPeter]

Still trying to ‘reconcile’ in my mind the words ( ie hype) with the numbers so had another look through the latest presentation
http://nzx-prod-s7fsd7f98s.s3-websit...805/294060.pdf

Presentation reminded me of a saying often said in financial circles "A great deal more fiction is written in Powerpoint than in Word”

Which part of this report in particular do you consider to be "fiction"?

Anybody knows how the sales in the The BayView are going? Bit far away for me to pop around and check ...

[winner69]

Which part of this report in particular do you consider to be "fiction"?

Anybody knows how the sales in the The BayView are going? Bit far away for me to pop around and check ...

I didn’t say any particular part was fiction .....I was just recalling an old saying because the ‘words’ and the numbers don’t seem to match up to me .....all a bit obtuse.

Mind you I didn’t understand the last presentation CBL put out ....that appeared to be a pretty cool production....maybe not understanding it was a blessing

[Joshuatree]

29/1/2019

I have bought more for our Estate ,waiting to add for more myself. Too many helicopter parents here micro managing their children and we know what they turn out like

Over 3 months
OCA down re 9%
SUM,RYM,MET re 12-12.5% down
ARV re 2% up

Sector thing alright atm.

[Joshuatree]

While there's a few posters that won't like to hear it, the Bull's got an exceptionally good point, but possibly not the one he intended to make. One of the interesting facts about the sector is that the ratio Income tax / Net Profit before tax is very low and sometimes its even negative. For example OCA had an effective tax rate over the last two years of 5.3% and -1.4%. Last year they reported a $76m pre-tax profit and taxation increased the profit by $1m!! The very low effective tax rates in the sector will not be lost on the IRD, but I believe is the correct result from the current tax legislation. IRD would not be doing their job correctly if they did not put forward recommendations to get tax free capital gains reclassified as income but it requires policy changes.

If the tax legislation is changed, the effective tax rate could return to circa 28%. That's a big hit to EPS for all the retirement village companies including OCA but some of this hit is likely to be factored into the current prices and is a cause of recent share price weakness.

Could the legislation be changed in the next 1 to 5 years - yes
Could Labour win an election campaining for a comprehensive capital gains tax? - Its unlikely but not quite an impossibility (Brexit and Trump winning both also looked unlikely but happened)
Would it be political suicide to make tax changes so that retirement villages paid capital gains taxes but size thresholds exemptions mean most households were outside the net - no

The banks got done for several billion dollars when the tax rules changed and the structured finance deals they were doing were suddendly deemed not to generate tax free income. Tax rules/interpretations can, and do change. The similarity with the retirement village sector is that these deals were resulting in effective tax rates well below the nz company tax rate. Different causes exist for OCA and the others, but the same outcome exists of a low effective marginal tax rate.
https://www.nzherald.co.nz/business/...ectid=10617445

Disc - Hold one of the retirement companies and the wife has OCA shares.

Yes outstanding post and possibilities there, thank you scrunch.

[winner69]

Which part of this report in particular do you consider to be "fiction"?

Anybody knows how the sales in the The BayView are going? Bit far away for me to pop around and check ...

What I struggle with is this story (my translation) -

Everything’s going great and to plan (they used robust a few times). They sold an extra 42 new units (23 last year to 65 this year is an awesome effort) and the development margins remained very high. In addition resales were up by 10 (69 to 79 pretty good). They seemed pretty pleased at the prices they were getting (up on last year). All fantastic stuff, especially the extra 52 sales, but underlying earnings were only up $1m odd

All the lines and columns on the pretty charts show numbers much higher than last year .....except the profit ones.

[BlackPeter]

What I struggle with is this story (my translation) -

Everything’s going great and to plan (they used robust a few times). They sold 42 new units (23 last year to 65 this year is an awesome effort) and the development margins remained very high. In addition resales were up by 10 (69 to 79 pretty good). They seemed pretty pleased at the prices they were getting (up on last year). All fantastic stuff, especially the extra 52 sales, but underlying earnings were only up $1m odd

All the lines and columns on the pretty charts show numbers much higher than last year .....except the profit ones.

Isn't that what they try to explain on slides 26 to 28?

[winner69]

Isn't that what they try to explain on slides 26 to 28?

Not really .....funny enough I fully understand Slide 26

Somebody as suggested that OCA produce a Profit Bridge like Air NZ do. A diagram showing the main components (plus and minuses) of how underlying earnings increased from $19.9m to $20.9m

The market per se maybe don’t get it (understand) and that is why the share price is where it is. A bridge might help more understand what’s going on.....if you, Maverick and Couts are the only people who ‘get it’ the share price is always going to be lower than what most think it should be.

[trader_jackson]

"its a matter of common sense really"
But Roger says OCA is waay cheaper than ARV?

My goodness OCA heading lower to $1.02 while ARV up today at $1.32...

OCA was listed so dam cheap (as I mentioned at the time - to a very skeptical reception might I add...) it was always going to go up... ARV wasn't listed at such a bargain basement discount... Imagine if OCA had listed near the top of its range - say 95c like ARV was (still a whopping 10c lower than the highest indicated point), the share price would hardly be up... (95c to $1.03 with less dividends than ARV paid in 20 months)... for comparative sake, ARV 20 months after it was listed was at $1.15 and basically only went higher from there... so the argument "Sure ARV hasn't gone down as much but its woeful SP appreciation since OCA listed of just 3% speaks for itself in terms of its bottom of the pack ranking." is not great, in my view.

[Beagle]

Not really .....funny enough I fully understand Slide 26

Somebody as suggested that OCA produce a Profit Bridge like Air NZ do. A diagram showing the main components (plus and minuses) of how underlying earnings increased from $19.9m to $20.9m

The market per se maybe don’t get it (understand) and that is why the share price is where it is. A bridge might help more understand what’s going on.....if you, Maverick and Couts are the only people who ‘get it’ the share price is always going to be lower than what most think it should be.

You are a mind reader mate. That's exactly what I have been thinking although AIR's profit bridge won't be looking so fancy this year but at least it will be crystal clear.
I might suggest exactly that to Earl and why I think its a good idea. He's a well qualified bean counter so I am sure he'll know where I'm coming from.

My sense is the grind is coming for some people and a test of $1 is imminent. Some weak hands are going to get shaken out.

[Beagle]

While there's a few posters that won't like to hear it, the Bull's got an exceptionally good point, but possibly not the one he intended to make. One of the interesting facts about the sector is that the ratio Income tax / Net Profit before tax is very low and sometimes its even negative. For example OCA had an effective tax rate over the last two years of 5.3% and -1.4%. Last year they reported a $76m pre-tax profit and taxation increased the profit by $1m!! The very low effective tax rates in the sector will not be lost on the IRD, but I believe is the correct result from the current tax legislation. IRD would not be doing their job correctly if they did not put forward recommendations to get tax free capital gains reclassified as income but it requires policy changes.

If the tax legislation is changed, the effective tax rate could return to circa 28%. That's a big hit to EPS for all the retirement village companies including OCA but some of this hit is likely to be factored into the current prices and is a cause of recent share price weakness.

Could the legislation be changed in the next 1 to 5 years - yes
Could Labour win an election campaining for a comprehensive capital gains tax? - Its unlikely but not quite an impossibility (Brexit and Trump winning both also looked unlikely but happened)
Would it be political suicide to make tax changes so that retirement villages paid capital gains taxes but size thresholds exemptions mean most households were outside the net - no

The banks got done for several billion dollars when the tax rules changed and the structured finance deals they were doing were suddendly deemed not to generate tax free income. Tax rules/interpretations can, and do change. The similarity with the retirement village sector is that these deals were resulting in effective tax rates well below the nz company tax rate. Different causes exist for OCA and the others, but the same outcome exists of a low effective marginal tax rate.
https://www.nzherald.co.nz/business/...ectid=10617445

Disc - Hold one of the retirement companies and the wife has OCA shares.

This sort of fearmongering is not new and has been canvassed on here at length before.
I hope Cindy's Kindy try and get a comprehensive CGT through in the next election because this presents as the best chance to get rid of the present Government.
IRD's job is to interpret legislation and enforce it.
Sure, anything is possible including nuclear war in the next 1-5 years but I think one is best to concentrate on clear and present risks not on vague possibilities don't you ?
If you really thought this was a material risk to the sector you and your wife wouldn't be holding would you...