OCA - Oceania Group - retirement villages

[Bikeguy]

Wish everyone the best tomorrow. Remember it’s only money aye

Yes, good luck to all holders

[Baa_Baa]

Best they stay quiet on it. Interestingly Summerset are much more open about this aspect.

It's an extremely important underlying benefit to shareholders, of the business model, that OCA have access to $950m (held as a liability on the balance sheet), that has no interest payable, can be used for any purpose the company wants to, and is non-callable except the 30% repayable on resident exits which in itself is replaced by new residents, unless ~2,800 care suites and units all decided to leave at the same time. That's going happen, yeah right!

They should be making a song and dance about it, or at least spelling out to shareholders how fundamentally important the 'float' is to financial stability, growth and future earnings.

[SailorRob]

It's an extremely important underlying benefit to shareholders, of the business model, that OCA have access to $950m (held as a liability on the balance sheet), that has no interest payable, can be used for any purpose the company wants to, and is non-callable except the 30% repayable on resident exits which in itself is replaced by new residents, unless ~2,800 residents of care suites and units all decided to leave at the same time. That's going happen, yeah right!

They should be making a song and dance about it, or at least spelling out to shareholders how fundamentally important the 'float' is to financial stability, growth and future earnings.

What benefit would it be to spell out to shareholders though, the true measure of success for them would be if there were very limited transactions in their stock. Why would they actively want to change their shareholders? Would be better off if there was no trading at all - as it would be with a private business.

If you own a business with 5 of your school friends and the other 4 are always trying to transact with each other, something is wrong.

For me I'd rather that only myself, you, Mav, ValueNZ and Ferg know about it!

If I was looking to sell though yes I'd want a fair price from a knowledgeable buyer.

[Baa_Baa]

What benefit would it be to spell out to shareholders though, the true measure of success for them would be if there were very limited transactions in their stock. Why would they actively want to change their shareholders? Would be better off if there was no trading at all - as it would be with a private business.

If you own a business with 5 of your school friends and the other 4 are always trying to transact with each other, something is wrong.

For me I'd rather that only myself, you, Mav, ValueNZ and Ferg know about it!

If I was looking to sell though yes I'd want a fair price from a knowledgeable buyer.

# of shareholders <=> transactions in the stock. Average daily trading volume is only about 250k shares and has been for many months.

If everyone who is an existing shareholder truly understood what they own, and why, then I'd expect transaction volumes to significantly reduce, except for the traders looking for a flip or swing trade.

Fact is, none of us are selling or buying from each other, our only realistic mechanism for that is the sharemarket, and currently that massively under prices the business, imo. So I assume none of us is currently realistically looking for an exit at "a fair price" on the market. We would all be disappointed if we were doing that.

As an aside, if you look at the daily 'course of trades', there's a surprising number of very very low volume trades every day on this boring retirement village operator. Maybe Sharsies punters looking for a quick win, who knows. Certainly they're not heavily invested investors interested only in the long term prospects and outcomes of the company

[SailorRob]

# of shareholders <=> transactions in the stock. Average daily trading volume is only about 250k shares and has been for many months.

If everyone who is an existing shareholder truly understood what they own, and why, then I'd expect transaction volumes to significantly reduce, except for the traders looking for a flip or swing trade.

Fact is, none of us are selling or buying from each other, our only realistic mechanism for that is the sharemarket, and currently that massively under prices the business, imo. So I assume none of us is currently realistically looking for an exit at "a fair price" on the market. We would all be disappointed if we were doing that.

As an aside, if you look at the daily 'course of trades', there's a surprising number of very very low volume trades every day on this boring retirement village operator. Maybe Sharsies punters looking for a quick win, who knows. Certainly they're not heavily invested investors interested only in the long term prospects and outcomes of the company

​Yes you've made a very good point here.

[Balance]

It's an extremely important underlying benefit to shareholders, of the business model, that OCA have access to $950m (held as a liability on the balance sheet), that has no interest payable, can be used for any purpose the company wants to, and is non-callable except the 30% repayable on resident exits which in itself is replaced by new residents, unless ~2,800 care suites and units all decided to leave at the same time. That's going happen, yeah right!

They should be making a song and dance about it, or at least spelling out to shareholders how fundamentally important the 'float' is to financial stability, growth and future earnings.

So what happened with Ryman that its huge $4.88 billion free 'float' in Sept 2022 still necessitated the CR of $902 million in 2023? Interest bearing debt was $3.03 billion so Ryman's debt was 62% of the 'float' at the time.

OCA's 'float' was $935.7m vs debt of $617m as at Sept 2023 - ie. Debt was 66% of float, higher than that of Ryman when Ryman had to do the CR.

So should OCA be making a song and dance about the 'float'?

[Ferg]

So what happened with Ryman that its huge $4.88 billion free 'float' in Sept 2022 still necessitated the CR of $902 million in 2023? Interest bearing debt was $3.03 billion so Ryman's debt was 62% of the 'float' at the time.

Surely you know the Ryman CR was used to repay the USPP debt - a low fixed rate USD denominated debt that someone in their wisdom converted to NZD floating with hedging instruments. It was a monumental FUBAR which had nothing to do with the float. How is this comparable to OCA - do OCA hold USPP debt which they have converted from USD/fixed to NZD/floating??? /tui

https://www.livewiremarkets.com/wire...-hefty-penalty
https://www.nzshareholders.co.nz/scr...an-healthcare/

The first link highlights the 'penalty' but the author fails to see how it arose.

[Balance]

Surely you know the Ryman CR was used to repay the USPP debt - a low fixed rate USD denominated debt that someone in their wisdom converted to NZD floating with hedging instruments. It was a monumental FUBAR which had nothing to do with the float. How is this comparable to OCA - do OCA hold USPP debt which they have converted from USD/fixed to NZD/floating??? /tui

https://www.livewiremarkets.com/wire...-hefty-penalty
https://www.nzshareholders.co.nz/scr...an-healthcare/

The first link highlights the 'penalty' but the author fails to see how it arose.

Yes, I know that the CR was used to repay the USPP debt. But Ryman CHOSE to repay that debt early - the $902m CR meant that Ryman was in compliance with its debt obligations and it could have chosen to repay any debt, not necessarily the USPP debt.

As an aside, Ryman's 'float' was $5.379 billion vs interest bearing debt of $2.5 billion in Sept 2023 so debt was less than 50% of the 'float'. And Chris Lee reckons Ryman needs another CR??

Put it another way, Ryman's equity + float of $10.24b funded 78% of Ryman's total assets vs OCA's $1.953b funding 72.6% of OCA's total assets.

Re the 'float', you can see that my post 20356 was in direct response to Baa-Baa's post about how wonderful the 'float' is in providing financial stability, growth & future earnings - which in Ryman's case, it clearly did not.

Interesting, Chris Lee reckons Ryman still in trouble and another cap raise coming ...

"In Ryman’s case there should be another placement soon, perhaps priced around $3.50. The believers would participate. The punters would punt. (Some market commentators disagree, believing that banks will not be pushing for capital increases. My view is that reliance on banks is a risky tactic.)

Ryman’s last placement was at $5.20. The shares are now priced around $4.00."

https://www.chrislee.co.nz/taking-stock

So homework tonight is 'what's the difference between OCA and Ryman, such that OCA won't need to do a cap raise'? Submit your homework here before 8:30am tomorrow prior to the FY results announcement.

[Ferg]

Yes, I know that the CR was used to repay the USPP debt. But Ryman CHOSE to repay that debt early - the $902m CR meant that Ryman was in compliance with its debt obligations and it could have chosen to repay any debt, not necessarily the USPP debt.

Ryman had no business borrowing in USD, especially at rates in excess of 0.7. They have no natural hedge or any other business conducted in USD.

I believe the reason they chose to pay it back was the FX rates moved against them, as did interest rates. From memory the original USD rates were around 5.5% but they hedged backed to NZD using CCIRS instruments. In other words they took a gamble and lost. This has nothing to do with the operational side of the business.

And IMO their CEO is not being forthcoming with the $130m+ cost of existing the USPP debt early - instead he uses the word 'growth' in the same breath as raising capital which IMO was misleading:
https://www.nzherald.co.nz/business/...M46UGA4GC4QVU/
He is on from about half way through that interview.

TLDR: the Ryman USD USPP debt fiasco and the subsequent CR has zero bearing or relevance to the underlying operations and/or ORAs.

[Bikeguy]

Ryman had no business borrowing in USD, especially at rates in excess of 0.7. They have no natural hedge or any other business conducted in USD.

I believe the reason they chose to pay it back was the FX rates moved against them, as did interest rates. From memory the original USD rates were around 5.5% but they hedged backed to NZD using CCIRS instruments. In other words they took a gamble and lost. This has nothing to do with the operational side of the business.

And IMO their CEO is not being forthcoming with the $130m+ cost of existing the USPP debt early - instead he uses the word 'growth' in the same breath as raising capital which IMO was misleading:
https://www.nzherald.co.nz/business/...M46UGA4GC4QVU/
He is on from about half way through that interview.

TLDR: the Ryman USD USPP debt fiasco and the subsequent CR has zero bearing or relevance to the underlying operations and/or ORAs.

Well written, thank you