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27-03-2021, 07:20 PM
#8421
Originally Posted by Maverick
Thanks for posting Greekwatchdog. The snippet about Forsyth predicting “a 1% change in unit price growth impacts sector annuity EBITDA by c.1%.” makes perfect logical sense. Of course I've obviously spent this week considering and reworking the implications and various scenarios for OCA`s model when considering a possible HPI fall.
I've already mentioned the 3 income streams OCA has;
Care Profit- this tax change affects nothing.
New build margins- This may be affected in the short term should new build sale prices fall but then country wide supply will shut off until the market rebalances and it's worth building again. So long term, no worries. Besides , new build prices are set by general wages not landlords.
DMF profit (this is the big one also at the core of OCAs growth strategy.) If one agrees with Forsyth, I certainly do, their correlation of 1% HPI fall = 1% fall in EBITDA then should a theoretical fall of say 20% HPI happen (you decide for yourself) then this will take years to fully materialise on the bottom line. That would have only unwound the current 20% HPI gain which has not yet even started to materialise yet as it also needs years to work through. These changes are realized by unit churn and backed up by charting Summersets performance during some sizable HPI rises over the last decade.
In this case of HPI possibly falling 20% from here the impact on the bottom line would be neutral and won't even cause a noticeable ripple to their bottom line.
OCA`s model is certainly enhanced by but not dependent on HPI increases. I know most believe retirement stocks are dependent on HPI rises but they simply are not. Consider RYM or SUM and their sizable CAGRs. The HPI rises, over whatever period you like, have always been significantly lower than the annual profit gains. Profit has always been mostly about the ORA`s and it seems people will never get that.
While HPI rises offer a great tailwind they are only a percentage of the story. While the HPI run has been incredibly rewarding for the sector, this logically had to end at some point.
HPI levelling or falling back from the unsustainable rise this year was inevitable in my opinion and expected.
This is not a game changer for me as a long term OCA holder. I personally have only ever factored in a HPI +2.5% long term anyway- including this year. Don't overlook that interest rate rises are still yet to come too which IMO is really what is going to hurt the HPI.
Onto the acquisition, remember that old topic? It seems logical. It's not OCAs normal style of purchase but where else can they buy old villages in high end areas any more? I suspect all the low hanging fruit is well gone by now. This is close enough to ticking most of the boxes for them and indicates their willingness to extend the pipeline. This bodes well for shareholders looking for growth 5-6 years out from here which is when they have indicated they will start the value add construction stuff to these purchases.
Once the new supply of $100m of fresh shares settles in and the current negative retirement sentiment inevitably fades once good numbers keep rolling through things will be back to upwards , with some catchup now to boot. ( I do acknowledge market sentiment is a powerful force to the share price in the interim).
While my confidence remains in the science of all this , the sentiment of the sector is anybody's guess and my own expectation is that it will only change from here when good numbers prove the story…..its already started at 1HY21 but still quite embedded to see, but the analysts do now. The bottom line numbers should get really nice for most who don't do the deep and very difficult analyst stuff on this company will see 1HY22 , about 8 months from now.
Disc, I'm a long term investor so any fancy ideas of getting out and back in before then is not something I'm interested in.
Epic post thanks Maverick
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27-03-2021, 07:46 PM
#8422
Originally Posted by Maverick
We can always count on you Winner for a tidy graph to save a lot of words.
I just want to clarify one point you obviously know yourself but in case others miss it.
Your graph demonstrates HPI vs share price reflects market sentiment. Whereas my calcs and personal Summerset graph reflect HPI vs underlying profit.
So regarding HPI changes , a trader would care more about the market sentiment aspect while an investor would care more about the profit affect.
Sorry to be a bit anal but it's a huge difference if others didn't pick it up. Nice graph as always Winner.
In other words traders (beagle included) sees share price decline as HPI falls and sell
But investors like you know that in a year or so the share price will be 3 bucks .....and that there will be a few dips along the way.
”When investors are euphoric, they are incapable of recognising euphoria itself “
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27-03-2021, 08:01 PM
#8423
Exactly. Which is precisely why anyone new to investing needs to be very mindful of what they read here. Before taking someone’s opinion as gospel, one needs to know whether that opinion is coming from a trading or investing point of view. If you are a longer term investor, take what someone who is primarily a trader, says, with a grain of salt. What they believe is right for them may not actually be right for you (and vice versa).
Originally Posted by winner69
In other words traders (beagle included) sees share price decline as HPI falls and sell
But investors like you know that in a year or so the share price will be 3 bucks .....and that there will be a few dips along the way.
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27-03-2021, 08:04 PM
#8424
Thank you Maverick! 👍🏽👍🏽👍🏽👍🏽👍🏽
Originally Posted by Maverick
Thanks for posting Greekwatchdog. The snippet about Forsyth predicting “a 1% change in unit price growth impacts sector annuity EBITDA by c.1%.” makes perfect logical sense. Of course I've obviously spent this week considering and reworking the implications and various scenarios for OCA`s model when considering a possible HPI fall.
I've already mentioned the 3 income streams OCA has;
Care Profit- this tax change affects nothing.
New build margins- This may be affected in the short term should new build sale prices fall but then country wide supply will shut off until the market rebalances and it's worth building again. So long term, no worries. Besides , new build prices are set by general wages not landlords.
DMF profit (this is the big one also at the core of OCAs growth strategy.) If one agrees with Forsyth, I certainly do, their correlation of 1% HPI fall = 1% fall in EBITDA then should a theoretical fall of say 20% HPI happen (you decide for yourself) then this will take years to fully materialise on the bottom line. That would have only unwound the current 20% HPI gain which has not yet even started to materialise yet as it also needs years to work through. These changes are realized by unit churn and backed up by charting Summersets performance during some sizable HPI rises over the last decade.
In this case of HPI possibly falling 20% from here the impact on the bottom line would be neutral and won't even cause a noticeable ripple to their bottom line.
OCA`s model is certainly enhanced by but not dependent on HPI increases. I know most believe retirement stocks are dependent on HPI rises but they simply are not. Consider RYM or SUM and their sizable CAGRs. The HPI rises, over whatever period you like, have always been significantly lower than the annual profit gains. Profit has always been mostly about the ORA`s and it seems people will never get that.
While HPI rises offer a great tailwind they are only a percentage of the story. While the HPI run has been incredibly rewarding for the sector, this logically had to end at some point.
HPI levelling or falling back from the unsustainable rise this year was inevitable in my opinion and expected.
This is not a game changer for me as a long term OCA holder. I personally have only ever factored in a HPI +2.5% long term anyway- including this year. Don't overlook that interest rate rises are still yet to come too which IMO is really what is going to hurt the HPI.
Onto the acquisition, remember that old topic? It seems logical. It's not OCAs normal style of purchase but where else can they buy old villages in high end areas any more? I suspect all the low hanging fruit is well gone by now. This is close enough to ticking most of the boxes for them and indicates their willingness to extend the pipeline. This bodes well for shareholders looking for growth 5-6 years out from here which is when they have indicated they will start the value add construction stuff to these purchases.
Once the new supply of $100m of fresh shares settles in and the current negative retirement sentiment inevitably fades once good numbers keep rolling through things will be back to upwards , with some catchup now to boot. ( I do acknowledge market sentiment is a powerful force to the share price in the interim).
While my confidence remains in the science of all this , the sentiment of the sector is anybody's guess and my own expectation is that it will only change from here when good numbers prove the story…..its already started at 1HY21 but still quite embedded to see, but the analysts do now. The bottom line numbers should get really nice for most who don't do the deep and very difficult analyst stuff on this company will see 1HY22 , about 8 months from now.
Disc, I'm a long term investor so any fancy ideas of getting out and back in before then is not something I'm interested in.
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27-03-2021, 08:12 PM
#8425
Originally Posted by winner69
In other words traders (beagle included) sees share price decline as HPI falls and sell
But investors like you know that in a year or so the share price will be 3 bucks .....and that there will be a few dips along the way.
A momentum trader will only occasionally align with a long hold investor, usually when the SP is going up. Otherwise the long hold just accumulates more when the SP gifts an asset at a low price while the momentum traders will be waiting for the TA signal to reload their position. The market is a great place, leveling the playing field creating opportunities for all types of investors. Long … is obviously a relative thing depending on ones horizon and investing goals,
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27-03-2021, 09:06 PM
#8426
Member
Thanks Maverick good to have post from investor with long term horizon unlike a few posters that seem to be hot and cold like the weather.and quick to run down when their financial position change .
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27-03-2021, 09:27 PM
#8427
Good to have opposing views Mav.
Its also good to keep an eye on what the brokers are thinking. https://www.marketscreener.com/quote...68/financials/
I note average analyst view (before the Govt dropped this weeks financial nuke) was for 10 cps this year, (must be annualized surely ?) and just 7 cps in FY22
Makes you wonder what they are seeing about FY22 that we're not foreseeing doesn't it I was thinking very little growth for FY22 (before this week) but brokers were thinking earnings decline ? Wonder what the real result will be for FY22 after this weeks events ? I really struggle to see what the catalyst is for OCA to break out of its correction ? It could be quite some time before this breaks back up through the 100 day moving average. A really long time if the housing market crashes.
Disc: I still hold a decent sized stake, (free carry off previous profits), in the hope (perhaps a little bit of desperate hope), that I am wrong and everything will be fine. Long term they should be O.K...or maybe we will have steep house price falls for a few years in a row and OCA continue to struggle to grow earnings like they have ever since they listed ? I for one am not convinced they can contain wage costs within the framework of the annual MOH care fee increase. I call B.S. on that, they have never even got close to it before.
So if wages costs continue on their rampant spiral and house prices decline OCA won't have much room to weather the increasing losses from their care services. The increased DMF fees gradually coming through from their business transformation could easily get eaten up by ongoing high wage cost inflation and a falling housing market and we could find OCA stuck in high single digit underlying eps for several more years. Couldn't happen, or could it ?
I am an old dog now and find it much easier to swim with the tide than against it...if that makes me a bad dog then so be it. I reckon this is on 16-17 times FY22 underlying eps as at Friday's $1.34 close and I think that's as good as its going to get for quite some time, (I backed that opinion up by selling tens of thousands more into Friday's closing price) until they really prove they can grow underlying eps above the 9 cps they had when they listed 3 years ago, (not just tell good stories about how they intend to do it at some stage in the future). I've reached a point with OCA where I am basically saying show me the money, prove you can grow underlying earnings before I'll invest more. (Count me out for the retail capital raise)
Last edited by Beagle; 27-03-2021 at 09:45 PM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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27-03-2021, 10:01 PM
#8428
You are no more than a trader who disguises himself as an Investor with all your trendy analysts. You have shot down over the years OCA, WHS,SUM, HGH and reinvested when it suits. This time last year you were saying the economy was in for a hiding yet it quietly defied your predictions as well as other so called economists. You turn the page like I read a Dan Drown/Terry Brooks Novel. Thankfully for me I never listened to your predictions or thou have valued your input at times. Thankfully for me I made my dosh on ATM and smile with Smug comfit with the dribble the so called "BBB" brigade put on the thread. I will back my analysis over yours any day like I play Black Jack and any other bunny that turns over like you do. Beagle 3 weeks ago before Earl left you were Bullish. He jumped ship big deal, it happens. He left for money. I am happy with moving on and who replaced him. This weeks Govt Tax grab will have minimal effect long term. See you a the winning post. Greg
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27-03-2021, 10:17 PM
#8429
I am very content with my portfolio performance, very content indeed and always happy to follow my own nose for a feed because it really works !
When a major event occurs I am proactive about protecting my capital.. I do this because I hate losses and risk management and loss mitigation is an essential part of achieving market outperformance.
There are no winners in Blackjack except the house, haven't you even worked that out yet
I sold ATM for $13 3 years ago...you think I might have made just a "few bucks" with the proceeds since then
The anecdotal market evidence is already really mounting up that this weeks "dirty tax bomb" will have a major impact https://www.nzherald.co.nz/nz/invest...OBU26UL3N2V4Q/.
https://www.nzherald.co.nz/business/...YSJ7FVZ4Q4SRU/ Paywalled Excerpt
Changes to the tax treatment of interest payments for investors, an extension of the bright-line test for treating capital gains as income (from five to 10 years) and another multibillion-dollar boost to encourage new building have already caused some very real ripples in financial markets.
Last edited by Beagle; 27-03-2021 at 11:19 PM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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28-03-2021, 12:36 AM
#8430
Originally Posted by Greekwatchdog
You are no more than a trader who disguises himself as an Investor with all your trendy analysts. You have shot down over the years OCA, WHS,SUM, HGH and reinvested when it suits. ...
I think that encapsulates this forum which is Share trader for investors! All long term investors are share traders when it comes to buying or selling their investment. Some companies shoot themselves, sometimes repeatedly...maybe Beagle just points that out.
I have invested in Oceania for the long haul. So with respect to my holding in OCA I am prepared to ride out the potential effect from the loss of a year's house price growth as a result of change in government policy. However it is an evolving situation, especially given that some of the change was unexpected and major. I am still prevaricating over whether I will apply for some new shares.
Sometimes events unfold rapidly affecting a company in either its short or long term prospects. I have found both Maverick's and Beagle's posts insightful from both long-term and shorter term points of view - and certainly with a depth of understanding exceeding my own.
Last edited by Bjauck; 28-03-2021 at 12:44 AM.
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