ARV - Arvida Retirement Villages

[Waltzing]

"full of gloom "

W(<>n)

come from an accounting and legal family back ground ....

Its balance sheets, balance sheets, balance sheets...

and ARV doesnt have a balance sheet that sets the world on fire.

Technically insolvent ...

Posted positive comments on retail ...

[Snow Leopard]

....Technically insolvent....

Perhaps you want to "justify" that comment?

[Maverick]

Deleted... had some accounting questions which I've since sorted.

[Waltzing]

"justify"

True it not insolvent from a traditional accounting definition.

https://www.investopedia.com/terms/a/accounting_insolvency.asp

Term Assets , Term Debt.

page 47 meet "Current Liabilities" the next day... impossible without increasing debt.

These sector balance sheets have no cash on hand to speak of.

Dividends nearly always paid out of debt.

True plenty of NTA reval to borrow against but thats why you dont get DIV's. It all gone on increasing so called NTA.

If anything happened it would be a rush to get more debt. It has no spare buffer ratios.

[trader_jackson]

Weighted average number of shares for F22 / 67m was their guidance before acquisition / acquisition expectations about 33m in first year / so the 67m plus needs to add the plus bit of say 3 months new business / remember acquisition is eps accretive eh

I'll stick with 13 cents ..... probably wrong again but good story

Agree that they have keep raising more and more and added little real value ..... but this time it is definitely different

A good story is important - ARV tells a pretty good story, although it took many years for this to be the case.

OCA's story is patchy, RYM's story is good but the story is long and waning, and SUM, well their story is sumthing else I suppose... roll on next month's FY result!

[Maverick]

Well , I did a half arse job this morning on ARV after my interest was spruiked by their seemingly good newsletter today. Initially I thought things weren't too bad at all, quite good in fact and certainly worth a further dig even just for the exercise of it. Now that I've since dug deeper I`ve completely changed my opinion.

In summary;
ARV has projected $67m underlying profit, then issued a truckload of more shares to buy more villages. Proforma earnings of the acquisition suggest this will add $9.3m , but transaction costs take off $8m and then a further $5m for covid ( largely due to reduced occupancy from 95% to 94% - noted BEFORE omicron).
That results in $63.4m profit- still a very nice increase from PCP of $52m
BUT...with all the new shares that's EPS of 8.8cps. ( last year they made 9.6 cps last year)

To be fair, all these big costs are one offs.

Furthermore, today's newsletter from ARV shows an impressive spike in sales. Well that needs unpacking too. There should be 24 extra proforma ( love that word) resales from the new acquisitions. When you deduct that from the total presented today the actual result is level with the previous quarter. In other words this inspiring sales graph is not what it seems, things are just “normal.”

I agree with Beagle just not bothering them at this stage as a lot of good stuff is already baked in its SP and at some point the market might not want to ”look through” these one off expenses.

I think they are a quality company and run a good ship but I also think it will be a while, maybe another year or more if they improve their build rates and stop buying more things, before the results will start to speak for themselves.

[Beagle]

Now you're on to it Mav. As usual they will announce headline numbers that look impressive at first glance and as usual when you drill down into it and look at the underlying eps growth you will end up thinking its pretty underwhelming.

[winner69]

Hi Mav - I see you answered the questions you asked yesterday so saved me answering them. Thanks

I agree with a lot of the extra stuff you added.

BASE F22 underlying earnings before acquisition they said were $67m (or 12.9 cents eps). Acquisition was going to add a portion of the $33m F22 Arena earnngs (you say maybe $9.5m) and it was going to be eps accretive (double digit eh).

Expectations they set were F22 Underlying Earnings in excess of $70m and eps > 13 cents. Transaction costs wont be included in Underlying Earnings as one off.

I had also noted the sales number they mentioned included some from Arena - so that says the BASE $67m won't be achieved and if they do report $67m its only because of the acquisition. Seems they have told a pack of lies eh and not yet owned up to it.

As you point out there's this Covid $5m .... jeez will reduce underlying earnings even more

Just have to wait and see what eventuates but its starting to look ugly.

I apologise for raising peoples hopes this was going to be a good year .... I was wrong

Deleted the disparaging remarks comparing Arvida to Oceania .....becauseI've just realised Oceania is so much better

[winner69]

Be interesting how they treat the 12% discount they got on the Arena acquisition in the accounts (v CBRE valuation)..... nearly $50m

No doubt a bit of jiggery pokery magic with revaluations and maybe creating a leaky fix provision so those costs won't impact future profits.

Oceania had the same problem on Waterford - they just booked the extra $9m to profit

[trader_jackson]

Forsyth saying they have Increased FY23 Confidence which is the total opposite of some of the reaction on this thread...
Forsyth upgraded their earnings forecast accordingly - upgrading FY22 underlying profit by 14%... I suppose something good must be somewhere in yesterday's news update...

I reckon underlying profit will be around 11.0 cents per share - a near 15% increase on FY21 but not much of an increase on FY20 I suppose... but still a record high underlying EPS and not bad given alot of 'one off' stuff... Breaking it down:
FY22E: 11.0cps (1st half [actual]: 4.9cps)
FY21: 9.6cps (1st half: 3.8cps)
FY20: 10.2cps (1st half: 5.0cps)
FY19: 9.3cps (1st half: 4.3cps)
FY18: 8.9cps (1st half: 3.7cps)
FY17: 7.7cps (1st half: 3.5cps)
FY16: 6.1cps (1st half: 3.0cps)

One thing is for sure - 2nd half is always stronger than 1st half... so we can easily expect at least 10cps, but as I said, I reckon it will be more around 11.0cps... and anything above say 11.5cps will be truly excellent.

11.0cps would mean ARV is currently on an underlying PE of 15.6 for FY22E - that's the lowest (ie cheapest) in the sector so they say (yes, ARV is even cheaper than OCA... in fact it was even cheaper before when the share price was $1.50 a few weeks back... and would be extremely cheap if underlying cps was even remotely around the 13 cent mark!)

Would have been nice to see ARV produce an underlying 12cps or more FY22 result - then they could headline it with something like "Record profits & EPS doubled in 6 years", but regardless, sub 16 FY22E underlying PE is not high for a company with a pretty solid track record of growth despite challenging circumstances (and many doubters).