OCA - Oceania Group - retirement villages

[SailorRob]

ANZ ups their stake by another 7.5 million shares to total 70.68 million, 9.76% of shares on issue.

What's the story here BaaBaa, this isn't their custodian service, so it's the investment arm? Is this holding on behalf of the bank itself?

[Baa_Baa]

What's the story here BaaBaa, this isn't their custodian service, so it's the investment arm? Is this holding on behalf of the bank itself?

Can't say I know the details but the bulk of their holding is through the investment arm, ANZ New Zealand Investments Limited 9.5% whereas ANZ Bank New Zealand Limited 0.24% and also ANZ Custodial Services New Zealand Limited 0.24% are small beer by comparison, albeit 3.4m shares between them.

Just says to me that a big insto sees, and is probably promoting, value for their investors at these currently discounted share prices.

[SailorRob]

This helpful to know if your net worth is 10m, not so helpful if it's 100k. PM me if you don't mind.

Well, not really. It would depend on my age and how I got the money as well.

If I was 18 and net worth was 100k from investing saved cash from a part time job then it would have more relevance than if I was 60 and had inherited 15 million and lost 5 trading 12 Screens to leave me with a 10 million net worth.

I get your point but there's a lot of nuance. For what it's worth my net worth is North of yours and purely from saving and investing.

I honestly would take no notice at all of my position in OCA just focus on what I write up about the opportunity and see if you agree or not with it.

What you should be doing in order to help make your decision is following what Bull*$!^ calls the Magic Formula TM.


- Read the IPO document in its entirety and see if the original plans and model have changed and if they have achieved what they set out in the IPO

- Study the insiders, particularly the directors and their financial involvement (this is where their position size to net worth really matters)

- Put together all of the financial statements since the IPO into your own spreadsheet so you have all the data from all 3 statements for each year in one place. See how the numbers flow around and make sure you're happy with what's happening. How are the assets growing and how do they produce earnings. Are there any hidden assets or liabilities?

- Understand the business model and the balance sheet/funding model (critical)

- Study the industry and the competitors, look at the numbers from SUM and the other at more mature stages.

- Visit a couple of locations and talk to residents/staff

- Read a few annual reports, from the back to the front. Study the footnotes carefully.

- Try and look at how the capital moves in the business, how much capital is required and where is it from

- Study closely how earnings are produced and estimate what they will be in future and how durable they are, understand the difference between cash and 'earnings' and how they measure and report underlying earnings.

- Create your own spreadsheets for numbers of staff, residents, various units/building etc since IPO and look at pro IPO information

- Get your head around the development margins - how are they measured and realised

- Understand the accounting particularly of depreciation and what is expensed.

This is a bare minimum before taking a position, let alone 5%.

Or you could look at a chart on a screen from its 'look' decide what's going to happen next.

[SailorRob]

Can't say I know the details but the bulk of their holding is through the investment arm, ANZ New Zealand Investments Limited 9.5% whereas ANZ Bank New Zealand Limited 0.24% and also ANZ Custodial Services New Zealand Limited 0.24% are small beer by comparison, albeit 3.4m shares between them.

Just says to me that a big insto sees, and is probably promoting, value for their investors at these currently discounted share prices.

ANZ Wholesale Trans-Tasman Property Securities Fund has about 3% and ANZ Wholesale Australasian Share Fund about 1.3% of share outstanding.

[Ferg]

If anyone wants to get their head around not just the cash impact of the float, but also the P&L impact of that same float I recommend you pull a handful of annual reports, and then examine and compare the values sitting in the following accounts across the years:

Balance Sheet: deferred management fees ($45m) & Refundable ORAs $879m (p35 of 2023 AR)
P&L notes: management fee income (note 2.2 p46)
Note 3.4: gross versus nett ORAs on p57 - in particular the deductions of $191m & $34m in FY23.

The life cycle of the ORA is 100% is banked and recorded as a gross liability per note 3.4 (and the cash flow report) => 30% is eventually deducted from gross ORA (also per note 3.4), but the offsetting entry for the deduction ends up in deferred management fees on the liability side of the Balance Sheet ($45m as at FY23) => this balance sheet DMF value then gets released to the P&L as income per note 2.2 and finally upon departure of the resident the balance of the ORA float is repaid (less any other fees receivable from the departing resident - per the cash flow report).

Four things:

• If you track the numbers through the years you will see relationships between the various DMF numbers (being the deduction from gross, the DMF liability and DMF income) year on year such that forecasting next years DMF contribution to income is relatively trivial.
• The $45m of DMF on the Balance Sheet is not a liability, rather it is unearned income.
• There is measurable relationship between sales+resales values and the gross float received each year.
• The balance of unearned DMF of $45m represents the accumulated difference between the method by which management fees are charged (e.g. 10/10/10 for ILUs) versus how they are released to the P&L (which is over the expected tenure of the client).

DMF income has a snowball effect assuming there are no fundamental changes to 1) contracts, 2) life expectancy, and 3) the accounting policies, and assuming sale prices continue to increase (on average) over time, and that demand exists for the inventory that is constantly turning over. Keep in mind a resale can be up to 7 years later for a villa, or more.

Meanwhile, as SR has pointed out repeatedly, the entire gross ORA has been available to OCA the entire time at zero interest cost to fund whatever OCA wants. Also keep in mind that it is never actually repaid by OCA - the repayment is effectively funded by the incoming resident (plus some more cash). And as Maverick has pointed out, once the pipeline of development slows or stops, this is a cash generating machine much like any other RV.

[winner69]

Ryman in their attempt to show Cash Flow from existing operations v development flows breaks Investing Cash Flows into existing and new developments

Like they say Capex on Existing Villages and Head Office is $47m …New Villages $396m

Does Oceania have a Capex on Existing Villages number?

[Ferg]

Does Oceania have a Capex on Existing Villages number?

I think this is the split of capex per the cashflow. FY23 $55m on PPE, and $103m on developments. Note 3.2 shows the $55m as capex (excluding capitalised interest and ignoring for now the $1.5m transfer ex development). Note 3.1 has $92.8m + $5.4m = $98m (also ignoring the $1.5m transfer noted previously). Difference between $103m and $98m is likely due to capex accruals. I haven't checked this but I'm guessing refurbishment costs for departing residents are part of the $55m

I think I can see where you are heading with this....go for it! But don't do what Craigs do and only work with half the numbers. Their analysis on this particular aspect is cack.

Reminds me of the first rule of asking a question in business: you should already know the answer....

[RTM]

http://nzx-prod-s7fsd7f98s.s3-websit...119/409149.pdf

Liz obviously listening to Mav, SR etc.

[winner69]

http://nzx-prod-s7fsd7f98s.s3-websit...119/409149.pdf

Liz obviously listening to Mav, SR etc.

Liz’s average buy price over the years is still just over $1.03 ……but she knows it’ll be worth while when share price gets to 4 bucks ..or was it 10 bucks

[forest]

Can't have to many, Liz is a believer in this.