ARV - Arvida Retirement Villages

[trader_jackson]

Good question, would also be worth posting this on OCA thread

I think for FY19 we will see faster EPS growth for ARV than OCA... half year release late november should confirm this somewhat... then Mr Market might start viewing ARV in more favourable light.

[Lewylewylewy]

For me, oca. I sold out of oca a while ago because i wasn't happy with the percentage of low price vs premium units, which i believe don't make financial sense. This has now been fixed. The only thing i don't like about oca is the risk of wage increases, which i believe are better covered if by SUM.

I think that oca are a good buy, but no longer a bargain. Im not that excited about the arv growth story. But then ive not got up to date research on arv, so maybe im wrong.

[Bjauck]

For me, oca. I sold out of oca a while ago because i wasn't happy with the percentage of low price vs premium units, which i believe don't make financial sense. This has now been fixed. The only thing i don't like about oca is the risk of wage increases, which i believe are better covered if by SUM.

I think that oca are a good buy, but no longer a bargain. Im not that excited about the arv growth story. But then ive not got up to date research on arv, so maybe im wrong.

I think wage increases are relected in the maximum contribution (payable either by the Health Board or by the resident) within each Health Board. There was a 9.9% increase in that amount in July 2017 to reflect the pay equity settlement.

The government will need to set the level so that providers will want to provide accommodation. I think that there will come a point when ORA purchasers can no longer be tapped to provide any cross-subsidy to care beds.

The max contribution amounts for Manukau City area in Counties Manukau:
$1,112.30 2018
$1,051.12 2017
$ 959.84 2016
So there was a 15.9% increase in two years (when in the same period there was a 3.2% increase in the CPI)

The OCA village of Elmwood in Manukau for example have developed vacant land, in the last few years, and provided more ORA villas and rooms and their latest developments have been top range villas (I think still cheaper than the closest SUM village villas).

[Lewylewylewy]

That's right, and thanks for the good info there. What bothers me is that the party goes up then they have to ask for more from the health board. What if the health board says no? Possible under a govt that spends too much, has no reserve and promises lots.

Probably oca are a safe bet, but I get worried about such things.

[M M]

I'm in pretty much the same boat as you Bjauck except that I have some ARV along with SUM and am looking at buying some OCA now. ARV's numbers look good to me though OCA have positives as well, I decided having some of both was the best solution for now.

[Bjauck]

...Probably oca are a safe bet, but I get worried about such things.

The cost of good quality long term care with an ageing population is an ongoing issue. Various scenarios (and combinations thereof) for the government for meeting increasing costs:

(1) Reducing the quality of care
(2) Increasing the number of residents who contribute to the costs
(3) No longer subsidising the cost of hospital level care for “wealthy” residents.
(4) Nationalising rest homes or building State Institutions - this is often a left-wing solution (a beguiling solution for some socialists). This could come about if government refuses to pay more for the cost of care to private providers - and private providers refuse to provide more beds to meet demand. Most on both left and right would dismiss this option as doomed to fail.
(5)Increasing taxes, introducing new taxes to provide enough money for first rate care...(Hello to our old friend the TAX Working Group!)
(6) Letting Robots take over. Maybe technology will come to the rescue if carers price themselves too high. Who knows what sensors in the rooms and robotic toilets and lifting gadgets may be able to do in a few years....

[Newby]

Latest Forsyth Barr research, is available from Forsyth Barr, probably only to their customers

STMOD edited

[trader_jackson]

Latest Forsyth Barr research, is available from Forsyth Barr, probably only to their customers

STMOD edited

Yea forsyth updated about a week ago, but it doesn't matter really anymore, everybody to busy buying OCA to look at their research note...
And for more than 12 months they've had a 12 month price target of $1.50+

[winner69]

Yea forsyth updated about a week ago, but it doesn't matter really anymore, everybody to busy buying OCA to look at their research note...
And for more than 12 months they've had a 12 month price target of $1.50+

You seem to know these things about ARV

Why is analysts (including Forbar) earnings forecasts (expectations) diminishing as time goes by. Like current consensus F19 earnings is lower than it was a year ago, 6 months ago etc. (same for f20)

Is it that they aren’t totally convinced about ARV performing or something.

[trader_jackson]

You seem to know these things about ARV

Why is analysts (including Forbar) earnings forecasts (expectations) diminishing as time goes by. Like current consensus F19 earnings is lower than it was a year ago, 6 months ago etc. (same for f20)

Is it that they aren’t totally convinced about ARV performing or something.

In November 2015 FY18 EPS forecast was 6.2c and FY19: N/A

In May 2016 (Don't have November for some reason) FY18 EPS forecast was 7.2c and FY19 8.0c

In November 2017 FY18 EPS forecast was 8.3c and FY19 EPS Forecast was 9.7c

FY18 was actually 8.9c - beating 3 continuously upgraded FY18 estimates by a large margin... in just 2 and a half years underlying EPS forecast by Forsyth (which we all know love and have a bigly bias for ARV since its listing nearly 4 years ago) was smashed by nearly 44%.

A week ago (September 2018) FY19 EPS forecast was 9.3c and was downgraded from 9.7c in late 2017 due to a note in March mentioning "a more conservative view on operating costs and sales margins in FY19 and FY20", price target was subsequently dropped under $1.60 to be 'only' 10% above yesterday's record close price (and we won't bother looking at the dividend yield slapped on top of that)...

If track record is anything to go by (although yes, still small by other players standards ARV are building up quite an impressive one - operationally and financially), I'd reckon they'll be hitting closer to that 'original' 9.7c than the 'already far to bullish' forecast of 9.3c (with target price of over $1.50, the former with target price over $1.60)

One thing is for sure: it'll be way higher than in May 2016 when the target price (yes, waay back then) was nearly today's share price, yet FY19 EPS was only forecast to be 8.0c, not 9.3c (or 9.7c)

To say "analysts earnings forecasts are diminishing as time goes by" is right for FY19 and FY20, but ARV's (actual, not forecast) track record would show they have quite literally been all wrong (far to conservative) in the past which begs the next question, why did I bother doing this post when we know all of the underlying EPS forecasts are just 'random made up numbers' that ARV are almost sure to exceed (as they have done ever since listing)?