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  1. #41
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    The trouble with having to rely on the wages to revenue ratio to drive profits is, you only need a few renegade facility managers to destroy a good portion of your profits. This happens when too many agency workers are called in to cover shifts, as well as an over allocation of hours to staff unecessarily. Added to that would be a failure by the manager to manage consumable supplies in a proper fashion, promoting huge wastage.
    Last edited by couta1; 31-03-2017 at 10:33 AM.

  2. #42
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    It has been clear over the past few days investors in ARV are, not surprisingly, interested in Oceania, as evident by ARV's share price weakness... so fittingly I decided to reading over the PDS...

    Will hopefully be able to find time to post a bit more, but there are a few things that did jump out at me...

    1. I do like the dividend, and payout ratio, allowing for good growth, while rewarding shareholders with good dividends along the way.

    2. The number of people being paid over 500k and the directors fees... when comparing to ARV, I can see partly where couta1 is coming from regarding seemingly top heavy management...
    In 2016, 51 employees had remuneration over 100k, with the top guy earning earning between 660k - 669k.
    Contrast this to ARV... they had just 10 employees with remuneration over 100k... the top being on 370 to 379k (and ARV are not 1/5th the size of Oceania!)
    I note that Oceania expects the remuneration and benefits of employees of the Oceania Group exceeding $100,000 in respect of FY2017F to be lower from those in FY2016... and I also note that 27 (most) of these employees were between the 100k and 119k mark, so if most of these were cut out (and the rest, say, moved down a bracket or two) we could be looking at something more realistic.. and it sounds like it could be possible.

    3. I also note that, at time of listing, ARV had 1800 residents, with approximately 1000 (including part time) staff... Oceania has 2800 staff with 2600 aged care residents... but I assume (hope) this excludes about a thousand people or so in units?

    4. Operating expenses were forecast (FY15 prospective) at ARV to be 50.2m (about 77% of Total revenue), and for Oceania FY: 150.1m (about 71% of Total Revenue), so going by this metric, management of expenses (namely wages) doesn't look that bad

    5. Not so sure on the directors fees... seem a tad exorbitant, in comparison to ARV at least:
    Fees for directors of Oceania that apply from listing have been fixed as a total pool of $582,500 per annum... ARV recorded directors fees of $382k in FY2016 (which I believe can go up to $400k)... Are the directors of Oceania worth 52% more? ARV has a current market cap of $424.5m, Oceania has an implied market cap of up to 570.6m... 34% more (and that is assuming it goes for top dollar).

    I may have raised more questions that answers with my post above... but then again, we all know ARV is the old dog that you wouldn't dare touch

    Disclosure: promising, but more research required
    Note: some 'points' may be interrelated
    Last edited by trader_jackson; 01-04-2017 at 09:25 PM.

  3. #43
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    This one is not for me.Appears to be Mutton dressed up as Lamb.
    Happy having a "free ride" with the two I consider best of breed,RYM and SUM.

  4. #44
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    Any similarities to Southern Cross in the U.K.? Wasn't one of their problems that they relied too heavily on revenue from a single customer (the govt).
    https://www.google.co.nz/amp/s/amp.t...business-model

  5. #45
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    Quote Originally Posted by huxley View Post
    Any similarities to Southern Cross in the U.K.? Wasn't one of their problems that they relied too heavily on revenue from a single customer (the govt).
    https://www.google.co.nz/amp/s/amp.t...business-model
    The downfall of Southern Cross appears to be very simple, and dramatically different to the 4 listed (soon to be 5) operators: they leased all their houses... so of course as soon as things got tricky, and the rents kept rising, it is not surprising to see them fall over... I believe the article discusses this. They also don't appear to have any ORA's or higher margin care suits, and were purely a care based.

  6. #46
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    Trader Jackson, the 27 employees receiving salaries between 100-119k are not where the cuts should occur, these people are the hard grafters of the company at ground level. The other 24 employees receiving over 119k is where the top heavy management structure lies, and is where the cuts should occur.

  7. #47
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    Quote Originally Posted by trader_jackson View Post
    The downfall of Southern Cross appears to be very simple, and dramatically different to the 4 listed (soon to be 5) operators: they leased all their houses... so of course as soon as things got tricky, and the rents kept rising, it is not surprising to see them fall over... I believe the article discusses this. They also don't appear to have any ORA's or higher margin care suits, and were purely a care based.
    That's certainly why I said one of the problems! But the reason SC couldn't pay their rent bill was due to only 20% of their residents self funding their services.

    I haven't looked closely at this company, but I have seen it mentioned in the herald:
    "Oceania Healthcare has more of a 'needs-based' product offering compared to other lifestyle retirement village developers. One of the main benefits of care is the stability of cashflow. It's largely government funded, with underlying growth in demand as the population ages."

    Just posted as a talking point: Is there a potential for over-reliance on local government funding?
    Last edited by huxley; 02-04-2017 at 06:49 AM.

  8. #48
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    You have raised a genuine area of concern Huxley and this ties in with my earlier comments on why the wages to revenue ratio is the key determinant of whether a care based company is profitable or not, until an increase of revenue from development margins occurs, this is a risk factor, and is why many not for profits have gone to the wall over the last few years. However in Oceania's favour, they do have plenty of land to build on and have already forecasted their projected build rate increase as a percentage of total beds.

  9. #49
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    Quote Originally Posted by couta1 View Post
    Trader Jackson, the 27 employees receiving salaries between 100-119k are not where the cuts should occur, these people are the hard grafters of the company at ground level. The other 24 employees receiving over 119k is where the top heavy management structure lies, and is where the cuts should occur.
    Yes, I suppose this is plausible, especially given ARV have just 7 over over 120k.

  10. #50
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    Quote Originally Posted by huxley View Post
    That's certainly why I said one of the problems! But the reason SC couldn't pay their rent bill was due to only 20% of their residents self funding their services.

    I haven't looked closely at this company, but I have seen it mentioned in the herald:
    "Oceania Healthcare has more of a 'needs-based' product offering compared to other lifestyle retirement village developers. One of the main benefits of care is the stability of cashflow. It's largely government funded, with underlying growth in demand as the population ages."

    Just posted as a talking point: Is there a potential for over-reliance on local government funding?
    Yes good question... the same was (likely) raised when ARV went public.
    In Recent Forsyth report on the retirement sector:
    Needs Based (Being serviced apartments and care beds as a % of total portfolio) is a potential indicator as to how reliant on government funding a village is:
    Arvida: 74%
    Metlifecare: 18%
    Oceania: 72%
    Ryman: 56%
    Summerset 32%

    However, the percentages above cannot be directly correlated to government funding, Oceania and Arvida are less than Southern Cross and this is being further reduced as both villages focus on independent villa (the high margin stuff) development over the coming years. The percentages above also include premium offerings, that are still deemed 'care based' but may not be government funded, eg care suits and ORA's over these are other care beds... very different to straight government funding of Southern Cross in the UK. What government funding is very good for is keeping cash coming in 'at all times'.

    Oceania, Arvida and Ryman (to an extent) have a very strong focus on continuum of care... something that will become more important as the population ages and would rather make a short and easy 'trip from one room to another' in the same village, than, for example, have to 'walk out' of a MET or SUM village and hope to find a Dementia bed at Arvida.
    Last edited by trader_jackson; 02-04-2017 at 07:17 AM.

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