OCA - Oceania Group - retirement villages

[mistaTea]

LOL.

If you weren't such an obvious social misfit, I may actually think of inviting you to my tropical seaside home.

Clearly Bob is out, probably value too…

But are the rest of us still in the running for a trip?

[SailorRob]

I don't get this statement. I have investments in many companies I don't fully understand. Personally I don't think it's necessary to have a nuts and bolt deep understanding of every nuance of a business. If that were true I doubt anyone would invest in anything. My main reason for buying OCA is the ageing population. Simple as that for me!/QUOTE]

“My main reason for buying OCA is the ageing population. Simple as that for me!

”

Seems like a pretty fair opinion to me, no one escapes this (aging) and it’s a fundamental driver of these businesses

I do think you have some good insights, and I have taken many of them onboard at times Sailor,

I do not think for other market participants, so unless they share their opinions I have no idea what their insights are…

I still think that a fundamental such as aging is very good supply/demand environment for a business involved in retirement housing etc, and not once have I suggested it is the “only” requirement for a successful investment in this sector…

It is up to each investor as to which business they think will be successful in producing them their best return on their investment.

Apologies Kiwical and Bikeguy for my reaction.

I agree with not needing to have a nuts and bolts deep understanding of every nuance of a business.

It's the part 'My main reason for buying OCA is the ageing population. Simple as that for me'! That got me going.

Seriously we need to be better than this, we need to think through the implications of things and ask 'and then what' for everything.

Identifying a trend such as an aging population or a market that is guaranteed to grow will give you no reason whatsoever in and of itself to make an investment and may actually in most cases be a negative thing. To understand why this is you need to study the base case rate for these things over time.

The only exception may be of you have identified a market or trend that others have not.

Generally speaking, if there is going to be an obvious growing demand for something, such as an ageing population, in a free market economy this will attract capital and resources This could be from a range of sources like a new retirement company IPO using the story of 'aging population' to entice 'investors', current listed companies competing for this increased demand and overbuilding, small retirement business owners expanding their facilities or starting a new small village - the list goes on. The obvious demand can be the death of the industry.

Do a study of the obvious demand coming into the commercial airline business in the mid 20th Century, the Auto industry... The THOUSANDS of bankruptcies and the three of four companies that made it and then THEY went bust too.

Look at mobile phones - demand obvious and the top dog Nokia... Well obvious.

There are so many bloody examples, why would you think this is different?

Aside from these points which BOOKS have been written about, let's touch on another more obvious point.

The future demographic characteristics are extremely well known and modelled, there is high quality data out there for all to see, we can even see different projections to include different immigration levels, different average lifespans etc.... So this is to say that it's NOT a reason to buy OCA due to the aging population as this is fully factored into the price you're paying as you dont have information the market does not.

The worst thing is thinking like this will actually also misprice the stock in the upwards direction meaning lower returns.

So to even say that the aging population is a reason to buy is bad enough. But to say that it's the main reason is sheer madness and then to insinuate that due to this profound insight you don't need to know much of the nuts and bolts as it's just 'this simple' - having the same insight as everyone else and expecting this to be a reason to buy...

I see in another post, you made a comparison with Japan, i.e. what has happened to the Japanese population... So did you then conduct a study on how this affected the aged care industry there? Did you look back to a time when they were faced with the aging population coming on, and see how the demand was met? Did buying retirement companies back then lead to incredible returns, average returns or low?

Well hell this was enough for me to put down the Sheet which I was rebuilding and issue a pretty harsh response.

Come on people - you have to EARN that money that you're investing, don't do stupid $hit. Think how many hours that it takes AFTER tax to obtain that money and maybe spend that amount of time thinking about things before investing it.

Don't go to all the effort of getting money and then being like 'ohhh myyyy, duhhhh NZ population is aging, I'll buy OCA - its that simple duhhhh...

Sorry but come on.

[mistaTea]

Apologies Kiwical and Bikeguy for my reaction.

I agree with not needing to have a nuts and bolts deep understanding of every nuance of a business.

It's the part 'My main reason for buying OCA is the ageing population. Simple as that for me'! That got me going.

Seriously we need to be better than this, we need to think through the implications of things and ask 'and then what' for everything.

Identifying a trend such as an aging population or a market that is guaranteed to grow will give you no reason whatsoever in and of itself to make an investment and may actually in most cases be a negative thing. To understand why this is you need to study the base case rate for these things over time.

The only exception may be of you have identified a market or trend that others have not.

Generally speaking, if there is going to be an obvious growing demand for something, such as an ageing population, in a free market economy this will attract capital and resources This could be from a range of sources like a new retirement company IPO using the story of 'aging population' to entice 'investors', current listed companies competing for this increased demand and overbuilding, small retirement business owners expanding their facilities or starting a new small village - the list goes on. The obvious demand can be the death of the industry.

Do a study of the obvious demand coming into the commercial airline business in the mid 20th Century, the Auto industry... The THOUSANDS of bankruptcies and the three of four companies that made it and then THEY went bust too.

Look at mobile phones - demand obvious and the top dog Nokia... Well obvious.

There are so many bloody examples, why would you think this is different?

Aside from these points which BOOKS have been written about, let's touch on another more obvious point.

The future demographic characteristics are extremely well known and modelled, there is high quality data out there for all to see, we can even see different projections to include different immigration levels, different average lifespans etc.... So this is to say that it's NOT a reason to buy OCA due to the aging population as this is fully factored into the price you're paying as you dont have information the market does not.

The worst thing is thinking like this will actually also misprice the stock in the upwards direction meaning lower returns.

So to even say that the aging population is a reason to buy is bad enough. But to say that it's the main reason is sheer madness and then to insinuate that due to this profound insight you don't need to know much of the nuts and bolts as it's just 'this simple' - having the same insight as everyone else and expecting this to be a reason to buy...

I see in another post, you made a comparison with Japan, i.e. what has happened to the Japanese population... So did you then conduct a study on how this affected the aged care industry there? Did you look back to a time when they were faced with the aging population coming on, and see how the demand was met? Did buying retirement companies back then lead to incredible returns, average returns or low?

Well hell this was enough for me to put down the Sheet which I was rebuilding and issue a pretty harsh response.

Come on people - you have to EARN that money that you're investing, don't do stupid $hit. Think how many hours that it takes AFTER tax to obtain that money and maybe spend that amount of time thinking about things before investing it.

Don't go to all the effort of getting money and then being like 'ohhh myyyy, duhhhh NZ population is aging, I'll buy OCA - its that simple duhhhh...

Sorry but come on.

This is very good advice.

[SailorRob]

Thanks and that's exactly how I see it as well. I'm not driving at anything other than the P&L includes the net proceeds from sales & resales as well as the revaluation of the entire portfolio. Cheers

Ok - I just re-read this part again and no this is not correct per the reasons outlined in my previous post. Yes resale gains and development margin are there in the underlying P&L but neither realised gains nor the 'net proceeds from sales & resales' are in the standard P&L. The standard P&L contains the unrealised gains as calculated by the independent valuers. The underlying P&L contains the realised gains as calculated by Management. Per the Venn diagram analogy, these data sets may or may not overlap from an output perspective, so the bold part of your statement is incorrect. As Baa_Baa mentioned one can't reimagine or reinterpret the results in ways not presented. I can't explain this any other way.....what is not to understand?

Hi Day Trader, 64 pages back now, but I don't think you ever responded to this.

It's ok if you don't understand.

[Greekwatchdog]

For Bars Review by Andrew Ibbotson

OUTPERFORM


Oceania Healthcare (OCA) reported an in-line result at our annuity EBITDA line and a decent beat at the volatile new sales gain line. We see the results as a side show to the broader issues of: (1) too much debt; (2) capital raise concerns; and (3) long-term cash generation and profitability. On the first two issues we believe OCA got the message and appears to be targeting a dramatic reduction in capex. Capex declined by ~-NZ$50m sequentially in 2H24, and we estimate investing cash flow for the next three years to be ~NZ$100m annually, half the previous three years. This will result in a substantial decline in new unit deliveries in FY26 and FY27, but the associated ~NZ$300m lower net debt is far more important for the investment case. With assets ~7x its market value of equity, lowering debt rather than growing assets should be the focus — profitability should follow. We reiterate our OUTPERFORM rating with an increased target price of NZ$1.00.
What's changed?
Earnings: Increased annuity EBITDA +2%/+5%/+3% and underlying earnings +12%/+18%/+1% over FY25/FY26/FY27
Target price: Increased to NZ$1.00, due to lower net debt and increased earnings offsetting lower dividends.
The Helier appears to be performing well — a young portfolio should command a higher earnings multiple
The most significant surprise versus our estimates was OCA's expectation to have recovered all capex for its flagship development, The Helier, by the end of FY25. OCA has fallen short on its expectations before, but this suggests a reduced tail risk. More broadly, 85% of OCA's book value of assets now come from sites developed or acquired since 2017. A young and not fully sold down portfolio under earns today but should deliver stronger growth going forward. We estimate that OCA has the lowest level of resales relative to independent living units (ILUs) and the largest gap between ILU new and resale prices in the sector. Both point to growth ahead.


Signs are accumulating that we are through the worst in care
OCA reported care EBITDA from ongoing operations ~+8% ahead of our estimates, up ~+15% year-on-year in 2H24. This was driven by a combination of daily care fees growing ahead of staff expenses for the first time since listing, and continued growth in DMF and resale gains. One swallow does not a summer make, but we forecast care margins to expand meaningfully from here.


The aged care companies have a credibility issue with regards to non-GAAP disclosure; OCA did not help itself
Non-GAAP measures make up ~80% to 90% of through the cycle ‘underlying earnings’ for the major listed aged care operators. Consequently, the quality, consistency and accuracy of these many non-GAAP disclosures is crucial. At 1H24 OCA stated that it had 409 new units ‘currently available for sale’ and 382 ‘additional units currently under construction’. As it turns out, rectified but not highlighted at this result, OCA counted ~100 units that were delivered in 2H24 in both categories.

[winner69]

Another great win against the odds for the Warriors. The fans are in raptures and it seems some who may have lost the faith have returned. Maybe turning point of the season …..’this is our year’ back on track.

Oceania share price went up last week after a great report from management. Faithful really excited with the result and even a guru broker says OUT PERFORM. Again a turning point and share price gaining momentum and heading to a buck. This will be our year says Oceania fans.

So a great week. UP THE WAHS and go Oceania

[SailorRob]

For Bars Review by Andrew Ibbotson

OUTPERFORM


Oceania Healthcare (OCA) reported an in-line result at our annuity EBITDA line and a decent beat at the volatile new sales gain line. We see the results as a side show to the broader issues of: (1) too much debt; (2) capital raise concerns; and (3) long-term cash generation and profitability. On the first two issues we believe OCA got the message and appears to be targeting a dramatic reduction in capex. Capex declined by ~-NZ$50m sequentially in 2H24, and we estimate investing cash flow for the next three years to be ~NZ$100m annually, half the previous three years. This will result in a substantial decline in new unit deliveries in FY26 and FY27, but the associated ~NZ$300m lower net debt is far more important for the investment case. With assets ~7x its market value of equity, lowering debt rather than growing assets should be the focus — profitability should follow. We reiterate our OUTPERFORM rating with an increased target price of NZ$1.00.
What's changed?
Earnings: Increased annuity EBITDA +2%/+5%/+3% and underlying earnings +12%/+18%/+1% over FY25/FY26/FY27
Target price: Increased to NZ$1.00, due to lower net debt and increased earnings offsetting lower dividends.
The Helier appears to be performing well — a young portfolio should command a higher earnings multiple
The most significant surprise versus our estimates was OCA's expectation to have recovered all capex for its flagship development, The Helier, by the end of FY25. OCA has fallen short on its expectations before, but this suggests a reduced tail risk. More broadly, 85% of OCA's book value of assets now come from sites developed or acquired since 2017. A young and not fully sold down portfolio under earns today but should deliver stronger growth going forward. We estimate that OCA has the lowest level of resales relative to independent living units (ILUs) and the largest gap between ILU new and resale prices in the sector. Both point to growth ahead.


Signs are accumulating that we are through the worst in care
OCA reported care EBITDA from ongoing operations ~+8% ahead of our estimates, up ~+15% year-on-year in 2H24. This was driven by a combination of daily care fees growing ahead of staff expenses for the first time since listing, and continued growth in DMF and resale gains. One swallow does not a summer make, but we forecast care margins to expand meaningfully from here.


The aged care companies have a credibility issue with regards to non-GAAP disclosure; OCA did not help itself
Non-GAAP measures make up ~80% to 90% of through the cycle ‘underlying earnings’ for the major listed aged care operators. Consequently, the quality, consistency and accuracy of these many non-GAAP disclosures is crucial. At 1H24 OCA stated that it had 409 new units ‘currently available for sale’ and 382 ‘additional units currently under construction’. As it turns out, rectified but not highlighted at this result, OCA counted ~100 units that were delivered in 2H24 in both categories.

If they really want to run the business around the market value of the equity....

Buy back the equity.

[Bikeguy]

Apologies Kiwical and Bikeguy for my reaction.

I agree with not needing to have a nuts and bolts deep understanding of every nuance of a business.

It's the part 'My main reason for buying OCA is the ageing population. Simple as that for me'! That got me going.

Seriously we need to be better than this, we need to think through the implications of things and ask 'and then what' for everything.

Identifying a trend such as an aging population or a market that is guaranteed to grow will give you no reason whatsoever in and of itself to make an investment and may actually in most cases be a negative thing. To understand why this is you need to study the base case rate for these things over time.

The only exception may be of you have identified a market or trend that others have not.

Generally speaking, if there is going to be an obvious growing demand for something, such as an ageing population, in a free market economy this will attract capital and resources This could be from a range of sources like a new retirement company IPO using the story of 'aging population' to entice 'investors', current listed companies competing for this increased demand and overbuilding, small retirement business owners expanding their facilities or starting a new small village - the list goes on. The obvious demand can be the death of the industry.

Do a study of the obvious demand coming into the commercial airline business in the mid 20th Century, the Auto industry... The THOUSANDS of bankruptcies and the three of four companies that made it and then THEY went bust too.

Look at mobile phones - demand obvious and the top dog Nokia... Well obvious.

There are so many bloody examples, why would you think this is different?

Aside from these points which BOOKS have been written about, let's touch on another more obvious point.

The future demographic characteristics are extremely well known and modelled, there is high quality data out there for all to see, we can even see different projections to include different immigration levels, different average lifespans etc.... So this is to say that it's NOT a reason to buy OCA due to the aging population as this is fully factored into the price you're paying as you dont have information the market does not.

The worst thing is thinking like this will actually also misprice the stock in the upwards direction meaning lower returns.

So to even say that the aging population is a reason to buy is bad enough. But to say that it's the main reason is sheer madness and then to insinuate that due to this profound insight you don't need to know much of the nuts and bolts as it's just 'this simple' - having the same insight as everyone else and expecting this to be a reason to buy...

I see in another post, you made a comparison with Japan, i.e. what has happened to the Japanese population... So did you then conduct a study on how this affected the aged care industry there? Did you look back to a time when they were faced with the aging population coming on, and see how the demand was met? Did buying retirement companies back then lead to incredible returns, average returns or low?

Well hell this was enough for me to put down the Sheet which I was rebuilding and issue a pretty harsh response.

Come on people - you have to EARN that money that you're investing, don't do stupid $hit. Think how many hours that it takes AFTER tax to obtain that money and maybe spend that amount of time thinking about things before investing it.

Don't go to all the effort of getting money and then being like 'ohhh myyyy, duhhhh NZ population is aging, I'll buy OCA - its that simple duhhhh...

Sorry but come on.

Apology accepted Salior, but not necessary, like I said your right to your opinion and to express your view in the way you choose is respected.

I enjoy hearing the views of others, I personally learn a lot from other peoples opinions.

[Balance]

What did Warren Buffett said about EBITDA as a measure of profitability?

https://www.inc-aus.com/jim-schlecks...hould-too.html

[Toddy]

What did Warren Buffett said about EBITDA as a measure of profitability?

https://www.inc-aus.com/jim-schlecks...hould-too.html

Anyone with who knows anything about business doesn't need Warren Buffett to tell them that cash is king.

That's why I find all of this behaviour around OCA exhausting. As soon as you get into heated debates around valuation methods and accounting rules then it's time to run.

The valuation on my Auckland house looks terrible compared to a few years ago. But I don't go piling more and more money into it because I think it is undervalued. No, I invest in other sectors that are giving returns today.

My point is this, is OCA really worth spending hours on trying to work out if its a good investment or not, when clearly there are better investments out there.