ARV - Arvida Retirement Villages

[winner69]

Not a dog. Has done okay since listing in line with NZX50. How many new units are forecast for delivery in FY20 ?

A bigly number I reckon

[Beagle]

Not a dog. Has done okay since listing in line with NZX50. How many new units are forecast for delivery in FY20 ?

trader jackson, this is your baby, thoughts ?

[percy]

In yesterday's The Press there was an article on ARV's Rhodes on Cashmere.
They received consent for two stories,never three stories.Now they want three stories.
I guess all retirement village operators are tarred with the same brush.

[Beagle]

Not a dog. Has done okay since listing in line with NZX50. How many new units are forecast for delivery in FY20 ?

Trader Jackson - I am surprised with this being your baby you haven't got an answer for this question. The company itself indicated a number for FY21 but I am curious why they haven't got a target for FY20 ? In the absence of clear data I will continue to avoid on the basis of lack of transparency.

[trader_jackson]

My apologies all, I have only just had a touch of time now to address this.

FY19 estimate by Forsyth for net new builds delivered for OCA is 238 (113 new units, 77 new beds, 38 new care suits) - an increase of 6% on FY18's total portfolio of 3982 units, care suites and beds.
FY19 estimate by Forsyth for net new builds for ARV is (and recently confirmed in ARV's investor update) is 114 (all new units) - an increase of 3.2% on FY18's total portfolio of 3593 units, care suits and beds.
Yup, its basically a hand down victory to OCA.

FY20 and FY21 is where things start to get a bit more interesting -
FY20 - Forsyth reckon OCA and ARV are growing at the same rate: OCA's developments of 203 units (an increase of 4.8% on FY19E), while for ARV: developments of 178 units, also an increase of 4.8% on FY20E portfolio
FY21 - OCA's developments of 220 (an increase of 5.1% on FY20E portfolio), while for ARV: developments of 235 units, an increase of 6% on FY20E portfolio
How the tides have begun to turn! But how is this possible? The headlines would indicated OCA should be developing 'significantly more' than ARV...

It was noted in OCA's 2018 report that they would increase their build rate to 250-300 care suites and retirement village units... It was noted in ARV's recent investor update that building activity would be increasing to 200+ units in FY21. 200+ units could be 200, or 250, or 300, and I haven't even considered acquisitions that ARV could still make. Additionally, I know how important having a track record is to some people on this thread... it cannot be ignored that ARV have begun building up a solid and stead track record of development... FY17 was just 5 new units and beds developed, then it went to 101 in FY18, now 114 in FY19, soon to be 178 in FY20, and a bigly 235 in FY19. Meanwhile OCA are all over the show, decommissioning, shifting the elderly around, redeveloping and delivering big numbers one year (eg FY19 where 238 units are to be delivered), but apparently forecast to deliver over 6% less a few years later (FY20). You talk of transparency, yet OCA have a very lumpy development side of things with accounting changes and various other adjustments making things more opaque than ever... is the 250-300 number they mention excluding decommissions? what is the actual net number then and why don't they mention that? (maybe because it is more around ARV's build rate, aka alot lower than the trumpeted 250-300 number)

Meanwhile the care side of things is experiencing great cost pressure, with occupancy still barely above the national average (and waay below ARV)... so 'average looking' it would seem they 'invented' a new number ("Average occupancy at care homes not affected by redevelopment activity in the period"), jeez if ARV did this, it would probably be 98%+. OCA seem to have been unsuccessfully (so far) in being able to pass increased costs onto the end user... ARV care side of things meanwhile continues to increase in profitability (almost defying the odds). In terms of care, ARV looks to have the most solid profitability in the listed sector currently (yes, even better than the famed RYM), with sum other companies outright losing money on the care side of things (with that forecast to continue for sum companies).

And lastly, as we know form sum others, new builds does not exactly correlate to new sales, and OCA's much, much lower occupancy rate compared to ARV suggests they may not be able to sell as many caresuits and beds (or, just as importantly, resell existing ones) as easily as ARV (and indicators have shown ARV has managed to maintain margins much better, for resales at least, while slowing building up their development margin - a margin that, although still high, has also recently contracted at OCA)

As many of you will know, I have shares in both ARV and OCA, both since day one, and both defying the general consensus on their respective threads at the time of their respective listings, but the more I think about it, the more I am not so sure on OCA!

[Beagle]

Good post t.j. but SUM might note that you completely overlooked the development margin each respective company is making. 17% is MUCH lower than other companies but thanks for sharing your thoughts.

[Maverick]

My apologies all, I have only just had a touch of time now to address this.

FY19 estimate by Forsyth for net new builds delivered for OCA is 238 (113 new units, 77 new beds, 38 new care suits) - an increase of 6% on FY18's total portfolio of 3982 units, care suites and beds.
FY19 estimate by Forsyth for net new builds for ARV is (and recently confirmed in ARV's investor update) is 114 (all new units) - an increase of 3.2% on FY18's total portfolio of 3593 units, care suits and beds.
Yup, its basically a hand down victory to OCA.

FY20 and FY21 is where things start to get a bit more interesting -
FY20 - Forsyth reckon OCA and ARV are growing at the same rate: OCA's developments of 203 units (an increase of 4.8% on FY19E), while for ARV: developments of 178 units, also an increase of 4.8% on FY20E portfolio
FY21 - OCA's developments of 220 (an increase of 5.1% on FY20E portfolio), while for ARV: developments of 235 units, an increase of 6% on FY20E portfolio
How the tides have begun to turn! But how is this possible? The headlines would indicated OCA should be developing 'significantly more' than ARV...

It was noted in OCA's 2018 report that they would increase their build rate to 250-300 care suites and retirement village units... It was noted in ARV's recent investor update that building activity would be increasing to 200+ units in FY21. 200+ units could be 200, or 250, or 300, and I haven't even considered acquisitions that ARV could still make. Additionally, I know how important having a track record is to some people on this thread... it cannot be ignored that ARV have begun building up a solid and stead track record of development... FY17 was just 5 new units and beds developed, then it went to 101 in FY18, now 114 in FY19, soon to be 178 in FY20, and a bigly 235 in FY19. Meanwhile OCA are all over the show, decommissioning, shifting the elderly around, redeveloping and delivering big numbers one year (eg FY19 where 238 units are to be delivered), but apparently forecast to deliver over 6% less a few years later (FY20). You talk of transparency, yet OCA have a very lumpy development side of things with accounting changes and various other adjustments making things more opaque than ever... is the 250-300 number they mention excluding decommissions? what is the actual net number then and why don't they mention that? (maybe because it is more around ARV's build rate, aka alot lower than the trumpeted 250-300 number)

Meanwhile the care side of things is experiencing great cost pressure, with occupancy still barely above the national average (and waay below ARV)... so 'average looking' it would seem they 'invented' a new number ("Average occupancy at care homes not affected by redevelopment activity in the period"), jeez if ARV did this, it would probably be 98%+. OCA seem to have been unsuccessfully (so far) in being able to pass increased costs onto the end user... ARV care side of things meanwhile continues to increase in profitability (almost defying the odds). In terms of care, ARV looks to have the most solid profitability in the listed sector currently (yes, even better than the famed RYM), with sum other companies outright losing money on the care side of things (with that forecast to continue for sum companies).

And lastly, as we know form sum others, new builds does not exactly correlate to new sales, and OCA's much, much lower occupancy rate compared to ARV suggests they may not be able to sell as many caresuits and beds (or, just as importantly, resell existing ones) as easily as ARV (and indicators have shown ARV has managed to maintain margins much better, for resales at least, while slowing building up their development margin - a margin that, although still high, has also recently contracted at OCA)

As many of you will know, I have shares in both ARV and OCA, both since day one, and both defying the general consensus on their respective threads at the time of their respective listings, but the more I think about it, the more I am not so sure on OCA!

You've inspired me TJ to finally check out ARV properly - hopefully with an open mind. I `ll try not to make it just a pissing contest about “my dog is bigger than your dog”, but it is the obvious one to compare as a point of reference.
Firstly, your new build deliveries figures from Forsyth differ quite a bit from both OCA and ARVs own projections

Forsyth projections OCA , ARV - OCAs own projection -ARV own prjctn
2019 -238 ,114 -272 -114
2020 -203 ,178 -191(maybe 250+) -140
2021 -220 ,235 -300+ -200+


Secondly, I just keep finding ARV`s reports lack some specific financial detail. For example , ARV often lump all of their margins, sales figures etc without always separating out into villas, care suites, apartments. This makes it impossible to do accurate analysis.

Then they make fair dinkum, sloppy, mistakes, for example , in FY2018 presentation of results say their development margin is now 19% (which is important because its improving at last, right?) - however if you use their other numbers provided it's actually 15.7 %. (as it has constantly been for 3 years, no improvement (OCA is 28.5% by the way ,similar to SUM and RYM).
Another mistake is in HY2019 , here they give the itemised groups of new sales; 73 x ILU + 2 x Srvce aptmt + 2 x Care suites. (great ) but they add it up to 79 (??).
Perhaps I`m being a bit anal, but heck , just needs a bit of proof reading and care.

As far as being 95% occupancy against 92% for OCA as a positive ,I see it differently , i'd rather buy a business (at the same profitability) where there is room for improvement rather than the other way around.

I have concluded that OCA is my preferred choice over ARV. While ARV are probably doing just fine (I have to assume some bits, as there are areas they are not clearly itemising). I am far more confident through more thorough and accurate reporting of OCA .(even though OCA reports are considered by most as overcomplicated, I find they are necessary to get the full details.)


I also prefer OCA because,it has almost double the build margins, actively refurbishing its old stuff, more ambitious build rates, directors buying up shares (that's all the story you need right there), and overall I feel overall they have their eye on quality and detail.(something that is crucial in construction)
ARV just feels to me more like it's being driven more by private equity rather than OCA - even though it`s the other way round.

For what it's worth I forcast OCA should deliver 9.0 cps shortly (no imputation credits) -FWD PE 11.2. ARV to deliver 9.3 cps (plus 1 cent of imputation credits thrown in, so apples for apples let's say ARV 10.3 cps ) FWD PE 12.3
ARV is still a great company at good value its just that OCA right now is screaming bargain.Just my opinion of course -

[Beagle]

SUM on the same forward metrics and their track record over a long period of time speaks for itself. SUM a screaming bargain, OCA also a bargain, (but note the private equity overhang) and ARV a good company (but with very poor development margins) that's probably pretty good value at the current price. Met trading at a very deep discount to NTA but not for me, real can of worms with weather tightness issues on their older stock). RYM are trading on a "blue chip" basis despite growing at a significantly slower average underlying earnings rate than SUM has since it listed.

[trader_jackson]

ARV, the dog that once beat all the others, beat most of the others in the past financial year.
Having a quick look back at the past 52 weeks (as at today - taken from NZX website), here are the total returns for the listed operators:
1. RYM with 16.0%
2. ARV with 10.2%
3. OCA with 3.0%
4. SUM with -4.9%
5. MET with - 14.7%

Alot of contrast really with over 30% gap between first and last. I suppose RYM really is the gold standard after all, but I'm sure 52 weeks ago almost nobody on this forum wouldn't have thought ARV would come in a comfortable 2nd. It appears sum cracks are starting to appear in sum other track records, while others are really coming into their own... what is clear is that the top 3 all have a strong care offering as part of their overall product offering... I would go as far as to say the last 52 weeks above has been very much a vote on the quality of their respective care offerings.
No, this is not an April fools post

[trader_jackson]

You've inspired me TJ to finally check out ARV properly - hopefully with an open mind. I `ll try not to make it just a pissing contest about “my dog is bigger than your dog”, but it is the obvious one to compare as a point of reference.
Firstly, your new build deliveries figures from Forsyth differ quite a bit from both OCA and ARVs own projections

Forsyth projections OCA , ARV - OCAs own projection -ARV own prjctn
2019 -238 ,114 -272 -114
2020 -203 ,178 -191(maybe 250+) -140
2021 -220 ,235 -300+ -200+


Secondly, I just keep finding ARV`s reports lack some specific financial detail. For example , ARV often lump all of their margins, sales figures etc without always separating out into villas, care suites, apartments. This makes it impossible to do accurate analysis.

Then they make fair dinkum, sloppy, mistakes, for example , in FY2018 presentation of results say their development margin is now 19% (which is important because its improving at last, right?) - however if you use their other numbers provided it's actually 15.7 %. (as it has constantly been for 3 years, no improvement (OCA is 28.5% by the way ,similar to SUM and RYM).
Another mistake is in HY2019 , here they give the itemised groups of new sales; 73 x ILU + 2 x Srvce aptmt + 2 x Care suites. (great ) but they add it up to 79 (??).
Perhaps I`m being a bit anal, but heck , just needs a bit of proof reading and care.

As far as being 95% occupancy against 92% for OCA as a positive ,I see it differently , i'd rather buy a business (at the same profitability) where there is room for improvement rather than the other way around.

I have concluded that OCA is my preferred choice over ARV. While ARV are probably doing just fine (I have to assume some bits, as there are areas they are not clearly itemising). I am far more confident through more thorough and accurate reporting of OCA .(even though OCA reports are considered by most as overcomplicated, I find they are necessary to get the full details.)


I also prefer OCA because,it has almost double the build margins, actively refurbishing its old stuff, more ambitious build rates, directors buying up shares (that's all the story you need right there), and overall I feel overall they have their eye on quality and detail.(something that is crucial in construction)
ARV just feels to me more like it's being driven more by private equity rather than OCA - even though it`s the other way round.

For what it's worth I forcast OCA should deliver 9.0 cps shortly (no imputation credits) -FWD PE 11.2. ARV to deliver 9.3 cps (plus 1 cent of imputation credits thrown in, so apples for apples let's say ARV 10.3 cps ) FWD PE 12.3
ARV is still a great company at good value its just that OCA right now is screaming bargain.Just my opinion of course -

Thank you for taking the time to do a deep dive into ARV

1. Projections - it seems Mr Market may not agree with what either company is actually saying to investors (interesting, OCA seem to sometimes barely meet the figures they disclose, while ARV often provide a small beat)

2. ARV's do lack some detail, this has been noted by some analysts, it is what it is I suppose (I accept your criticism here)... as for margins, I am more interested in trends, OCA is going in the wrong direction recently, while ARV is going in the right direction...

3. I'd rather buy a business that can walk the walk than talk the talk (and, perhaps even worse, essentially 'make up' a measure - that nobody else uses in the sector - to try make it look like occupancy is making big jumps... occupancy, when measured by industry standards is not 92%, in fact it still isn't 90%... at least this is one thing that is tracking in the right direction [it is up on PCP] but given how fantastic OCA's care side of things is suppose to be, it is surprisingly low! )

I suppose at the end of the day, you can't manipulate the bottom numbers too much (although you can play around with accounting policies every now and then to provide a prospectus beat, or perhaps invent new measures to make things look better than they really are ae)

In the dogs competition: ARV won last financial year, OCA the year before that (although that was always going to happen, as I've previously explained) ... who will win FY20? I reckon sharetrader seems to think overwhelmingly OCA (I agree, right now, that OCA is cheap - although not alot cheaper than ARV)... this time last year sharetrader also thought OCA would win (it ended up producing a return equating to not even a third of the return ARV produced)... time will ultimately tell who it may be (to be honest, I think it could be a close competition - and competition is good )