OCA - Oceania Group - retirement villages

[winner69]

Received offer document yesterday.

Undecided if will bother applying - just from an admin perspective, and likely only to get a small portion.


Probably Oceania would rather not have a SPP as well with the cost of admin and all the hassles.

Quicker to go cap in hand the instos and get it over and done with in a few days and stuff the small investors .....but heck that ain’t very fair is it.

[dibble]

Awful lot of Adern-haters spraying this thread with their toxins. I dont recall National being much use on housing either, anyone remember nick Smith's promise of a "total overhaul" that quietly disappeared?

Housing is predominantly a supply and demand issue.Tax is messing at the periphery and no party seems prepared to really treat it as such. So I doubt prices will drop to any great degree from the latest tinkering, but I do expect a whole lot of ranting and steam from vested interests, as is already well evident.

Taking it further, is the retirement sector directly correlated to the price fluctuations of the general market? To a degree, yes of course, but our aging population ensures demand for a scarce and premium product on a graph whose trend is forever upwards so long term Im not worried. Who would have guessed craft beer would go up $2 in a recession. Human behaviour is not linear.
Input costs are probably a bigger story than house price fluctuations for OCA.

That said I dont think I will be taking up the offer, sentiment might take the SP lower than 1.3 over the next 3 months.

[owl]

Can anyone help explain or link to how the scaling calculation works? E.g. for the retail offer, if $30M shares are applied for and they scale to $20M: do they try to give each shareholder the minimum of a) what they applied for, or b) some common % of their holding as of record date (everyone gets the same %)? I.e. the amount you apply for doesn't impact scaling.

[peat]

Craigs rating :

Supplementary
Hold.

Craigs divide their covered stocks into Core, Supplementary and Niche. Larger portfolios can extend into stocks rated Supplementary and even Niche once the Core stocks are held at the appropriate level.

RYM and SUM are both Core and Most Preferred.

[Bjauck]

Can anyone help explain or link to how the scaling calculation works? E.g. for the retail offer, if $30M shares are applied for and they scale to $20M: do they try to give each shareholder the minimum of a) what they applied for, or b) some common % of their holding as of record date (everyone gets the same %)? I.e. the amount you apply for doesn't impact scaling. Any scaling takes into account the size of your original shareholding.

[Bjauck]

Awful lot of Adern-haters spraying this thread with their toxins. I dont recall National being much use on housing either, anyone remember nick Smith's promise of a "total overhaul" that quietly disappeared?

Housing is predominantly a supply and demand issue.Tax is messing at the periphery and no party seems prepared to really treat it as such. So I doubt prices will drop to any great degree from the latest tinkering, but I do expect a whole lot of ranting and steam from vested interests, as is already well evident.

Taking it further, is the retirement sector directly correlated to the price fluctuations of the general market? To a degree, yes of course, but our aging population ensures demand for a scarce and premium product on a graph whose trend is forever upwards so long term Im not worried. Who would have guessed craft beer would go up $2 in a recession. Human behaviour is not linear.
Input costs are probably a bigger story than house price fluctuations for OCA.

That said I dont think I will be taking up the offer, sentiment might take the SP lower than 1.3 over the next 3 months. I don’t have any investor real estate, but I dislike broken promises and false demonisation. If these tactics are used vis a vis one type of investment, might they be used against the retirement sector tax situation too?

Tax implications are a determinant in investment decision making/pricing.

[Waltzing]

"sentiment might take the SP lower than 1.3 over the next 3 months."

1 day.

[bull....]

"sentiment might take the SP lower than 1.3 over the next 3 months."

1 day.

timber comes to mind. 1.30 was big support

[Blue Skies]

SUM & RYM both up over 1% in contrast to OCA down over 1%.
Govt policy changes don't appear to be cause of any negative sentiment in retirement sector, must be other factors.

[winner69]

SUM & RYM both up over 1% in contrast to OCA down over 1%.
Govt policy changes don't appear to be cause of any negative sentiment in retirement sector, must be other factors.

ARV and RYM down 4%, SUM 6% and OCA 7% since govt announced changes re housing ...NZX up 1% in same time

Maybe govt policy has actually impacted sector sentiment

[dibble]

Tax implications are a determinant in investment decision making/pricing.

Wouldnt disagree, imputations spring to mind. But if tax is the key factor in someone's investment decision I'd say it's not the most sustainable investment strategy. Tax settings change regardless of what you think is fair and property investment has been a hot topic for countless elections so comes with risk. And all politicians bend truths/break promises, everyone knows that, trust them at your peril.

[Blue Skies]

ARV and RYM down 4%, SUM 6% and OCA 7% since govt announced changes re housing ...NZX up 1% in same time

Maybe govt policy has actually impacted sector sentiment


Agreed, was just looking at today's SP's where both SUM & RYM up.
Lots of conflicting predictions from various quarters & I guess will take a while for sentiment to shake out both in house price inflation expectations and impact on retirement sector.
While rents might increase, so should home ownership and we are still thousands of dwellings short.

[Scrunch]

Any scaling takes into account the size of your original shareholding.

And even if over subscribed there may be no scalling as oca has kept the option open of accepting oversubscriptions.

[Balance]

Deleted deleted

[Lease]

Surely the new housing policy will put downward pressure on property prices, and this is the aim of Government policy.

The retirement village sector will be hit given the fact it's highly correlated to property prices, but it should be a chance to accumulate more shares as the sector will prosper in the long-run.

[Blue Skies]

Surely the new housing policy will put downward pressure on property prices, and this is the aim of Government policy.

The retirement village sector will be hit given the fact it's highly correlated to property prices, but it should be a chance to accumulate more shares as the sector will prosper in the long-run.


Think a bit more complex than a single aim. The aims of the govt policy include, 1) take the heat out of dangerously high house price inflation. 2) increase home ownership rates which have been diminishing as First home buyers being outbid by investors. 3) strongly incentivise investment towards new builds & away from existing housing to increase NZ housing stock.

When we read of the frenzy of speculators treating our housing stock like gambling chips, paying a million dollars for homes in Mangere & South Auckland, & saying this is better than Bitcoin, we've heading towards an economic as well as a social disaster.

Since we can't magic up overnight the 80,000 new homes needed to balance supply and demand, govt had to pull other levers & remains to be seen how effective new policies will be but anything which stops housing stock being treated like Bitcoin got to be good!

Since I think the govt is showing they are incentivising construction & new builds, I can't see them doing anything to hurt the Retirement sector which have shown they are very proficient at construction projects & adding to housing stock.

[Curly]

You only need to look at RYM and SUM share price today. Since inception the SP has continued to increase during periods of little or no capital growth in property values. Certainly nothing like the property increases over the past two years yet SP continued to climb. Its about supply and demand. All healthcare facilities have done their research and it is widely known that there will be a wall of retirement age people wanting and needing their facilities and services in the next decade. OCA’s plan is in place and they are growing their income and asset base. The patient will be rewarded. To much emotion, “game changer, tide has turned” and government bashing. We are seeing knee jerk reaction to recent government actions which will have little impact long term.
Time will tell.

[Baa_Baa]

Since I think the govt is showing they are incentivising construction & new builds, I can't see them doing anything to hurt the Retirement sector which have shown they are very proficient at construction projects & adding to housing stock.

Completely agree and they’ll be cautious about bashing retirement regulations as well, they can see the tsunami coming and the costs to government that come with that. They need retirement companies to be successful building supply and the intake to be able to sell their properties and afford to move into the next phase of their lives.

This attachment to property market is relevant but over stated imo, the current surprise will blow over and investors will settle back into thinking long term

[Baa_Baa]

You only need to look at RYM and SUM share price today. Since inception the SP has continued to increase during periods of little or no capital growth in property values. Certainly nothing like the property increases over the past two years yet SP continued to climb. Its about supply and demand. All healthcare facilities have done their research and it is widely known that there will be a wall of retirement age people wanting and needing their facilities and services in the next decade. OCA’s plan is in place and they are growing their income and asset base. The patient will be rewarded. To much emotion, “game changer, tide has turned” and government bashing. We are seeing knee jerk reaction to recent government actions which will have little impact long term.
Time will tell.

Another insightful post, thank you. Some people buy the company, others buy the market. Or sell it. This is not a traders stock, it is a position in a company for a long term prosperity. The ups and downs are largely irrelevant unless it helps one build a larger stake

Imho

[Waltzing]

Policies that are brought to the market with speed indicate a behaviour that may repeat.

To invest without a view to likely policy changes by government is investing without fore thought (surely something like this was in everyones mind, we expected something).

I think we have always stated here that a 10 year view or more for retirement stocks is probably realistic for a defensive investment sector.

It only the last 5 -7 years that this sectors growth has accelerated at a high pace than in the early 2000's.

Once the market settles down to its new policies it may tread back its pre 2012 averages as housing supply slowly ramp up over the next 2 to 4 years.

The economic benefits of a demographic that is not mired in debt is good for the whole economy.

The US is not NZ but its housing demand is increasing.

https://edition.cnn.com/2021/03/29/success/when-will-housing-market-cool-off-feseries/index.html

[Maverick]

You only need to look at RYM and SUM share price today. Since inception the SP has continued to increase during periods of little or no capital growth in property values. Certainly nothing like the property increases over the past two years yet SP continued to climb. Its about supply and demand. All healthcare facilities have done their research and it is widely known that there will be a wall of retirement age people wanting and needing their facilities and services in the next decade. OCA’s plan is in place and they are growing their income and asset base. The patient will be rewarded. To much emotion, “game changer, tide has turned” and government bashing. We are seeing knee jerk reaction to recent government actions which will have little impact long term.
Time will tell.
I must say I'm finding the last 4-5 posts by Blue Skies , Curly and Baabaa rather refreshing!
Agree-The Govt NEED retirement companies to build stuff, they are so good at it. They will not be even close to their gun sights. These recent policies are openly not designed as tax grabs, or some sort of tall poppy punishment.
Agree-Retirement villages DO NOT rely on housing prices rising to increase profits. (although I calculate it is necessary to get a CAGR over 15%)

Its been a nearly a week now since the tax changes and its become apparent down here in little olé Wanganui nobody give a rats arse anymore. That stuck boat thingy was far more exciting. The good folk down here have moved on with impressive ambivalence. But lets face it, their opinions do actually count as they are the actual house buyers/owners. I take this as a positive sign that the sky isn't about to fall just yet.
FWIW we had the highest price growth with Gisborne the last couple of years so we have become quite property nutty like the rest of NZ.

So just maybe property doesn't crash for now and maintains from here with just rises inline with wages . A CAGR of 18-22% is still most likely IMO with OCA.

[Waltzing]

Not Selling our small OCA position. Looking to increase if the market settles down profits build. If they dont ....well its market and selling is only a key stroke away.

[justakiwi]

I must say I'm finding the last 4-5 posts by Blue Skies , Curly and Baabaa rather refreshing!

Me too!


Agree-The Govt NEED retirement companies to build stuff, they are so good at it. They will not be even close to their gun sights. These recent policies are openly not designed as tax grabs, or some sort of tall poppy punishment.
Agree-Retirement villages DO NOT rely on housing prices rising to increase profits. (although I personally consider it is necessary to get a CAGR over 15%)

Its been a nearly a week now since the tax changes and its become apparent down here in little olé Wanganui nobody give a rats arse anymore. That stuck boat thingy was far more exciting. The good folk down here have moved on with impressive ambivalence. Lets face it , their opinions do count as they are the actual house buyers/owners. I take this as a positive sign that the sky isn't about to fall just yet.

So just maybe property doesn't crash for now and maintains from here with just rises inline with wages . A CAGR of 18-22% is still most likely IMO with OCA.

Thank you as always for your ‘breath of fresh air’ perspective.

[Antipodean]

That's quite the SPH notice for end of day. Got a bit excited before I took the sales off the purchases.

[Zaphod]

correct beagle people should read this news report on what happened in the UK from similar decisions

In the UK property prices went up less than inflation after the introduction of similar policies
rents never spiked higher
there were the same bunch of people whining in the UK as in NZ that the opposite was to happen

https://www.newshub.co.nz/home/politics/2021/03/housing-tax-changes-what-happened-when-the-uk-tried-the-same-thing-and-how-we-re-doing-it-differently.html

Apparently they didn't go as far as we did.

https://www.msn.com/en-nz/money/homeandproperty/what-happened-when-the-uk-changed-landlord-tax-rules-and-how-we-re-doing-it-differently/ar-BB1f0orx?ocid=entnewsntp

[Waltzing]

while the social outcomes may be what the population as a whole wants as of the last election.

The discussions in ACA's offices this morning under 40 years of age was one of WHAT THE ......

Its the precedence it sets for "Out of what field?"

However as we were expecting something like this and thank goodness as anything that might divert money into the share market is what we like.

DISC: dont hold rental property.

Hold some OCA:

[Waltzing]

Stats for years new dwelling which many may already track..

New residential Houses not something we track from NZ Stats but will NOW.

https://www.interest.co.nz/property/109751/fewer-apartments-stand-alone-houses-and-retirement-village-units-were-consented

[Beagle]

Looks like retail investors might get an advantage over the institutions in the recent placement. Shares issued in the retail offer are at the lower on the institutional placement ($1.30), or a 2.5% discount to the volume weighted average price in the 5 trading days leading up to and including the closing date (12 April). If for example that VWAP price was today's closing price of $1.28 the new shares issued to retail investors would be at 0.975 x $1.28 = $1.248. If my memory serves me correctly NAV (NTA + all work in progress and some other minor stuff) was $1.24 as at the interim report date of 30/11/2020.

I will follow the share price action and volumes as I think they could be fair buying, (notwithstanding the recent tax bomb) for those taking a long term perspective at around NAV of $1.24 and make a decision right on the final deadline date.

[dabsman]

Looks like retail investors might get an advantage over the institutions in the recent placement. Shares issued in the retail offer are at the lower on the institutional placement ($1.30), or a 2.5% discount to the volume weighted average price in the 5 trading days leading up to and including the closing date (12 April). If for example that VWAP price was today's closing price of $1.28 the new shares issued to retail investors would be at 0.975 x $1.28 = $1.248. If my memory serves me correctly NAV (NTA + all work in progress and some other minor stuff) was $1.24 as at the interim report date of 30/11/2020.

I will follow the share price action and volumes as I think they could be fair buying, (notwithstanding the recent tax bomb) for those taking a long term perspective at around NAV of $1.24 and make a decision right on the final deadline date.

Also maybe less jumping on so less scaling :) I'm in for more

[Cyclical]

Indeed, pointed my mate at London School of Ecomics to this thread (and a couple of others. He’s always after raw material for his Behavioral Ecomics students to study.

He thanked me and commented that our Jacinda seems more hated than their Boris

Lol! There are certainly plenty of pretty upset people out there at the moment, and rightly so if you ask me. Still their policies over the last year have been very accomodating for some of us capitalists out there. I guess we all needed a big reminder that they are supposed to be left, just in case we’d forgotten. Some of us will be looking at old Winnie in a different light after last week’s bombshell.

[Scrunch]

Looks like retail investors might get an advantage over the institutions in the recent placement. Shares issued in the retail offer are at the lower on the institutional placement ($1.30), or a 2.5% discount to the volume weighted average price in the 5 trading days leading up to and including the closing date (12 April). If for example that VWAP price was today's closing price of $1.28 the new shares issued to retail investors would be at 0.975 x $1.28 = $1.248. If my memory serves me correctly NAV (NTA + all work in progress and some other minor stuff) was $1.24 as at the interim report date of 30/11/2020.

I will follow the share price action and volumes as I think they could be fair buying, (notwithstanding the recent tax bomb) for those taking a long term perspective at around NAV of $1.24 and make a decision right on the final deadline date.

As at 30 November 2020 net assets inclusive of $10m of intangibles were $652.1m. There were 626.3m shares on issue. That is not an NAV of $1.24. Its a net assets per share of $1.04 (or $1.02 per share if the intangibles are deducted). Work in progress is already part of a net assets calculation, but yes the future development margin (future profits) on the WIP will not yet be reflected in this balance.

[Beagle]

As at 30 November 2020 net assets inclusive of $10m of intangibles were $652.1m. There were 626.3m shares on issue. That is not an NAV of $1.24. Its a net assets per share of $1.04 (or $1.02 per share if the intangibles are deducted). Work in progress is already part of a net assets calculation, but yes the future development margin (future profits) on the WIP will not yet be reflected in this balance.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/366547/339147.pdf See page 22.
I'll probably get more dislikes for this but I wouldn't be entirely surprised to see it down at NTA of $1.02 again. The shares would be very sound buying for the long term at that level. I think that's unlikely but once a downtrend is in place, (which clearly it is now from $1.60), you never know...the downtrend is not over until it is over, (as confirmed as far as I am concerned with a break up through the 100 day MA).

Those practicing selective hearing from their mates will hear what they want to hear but the independently reported anecdotal evidence is already there and building (literally by the day) that fresh investor money coming to the market has reduced substantially and as another feedback example the CEO of Mike Pero was on TV 3's breakfast show this morning talking about market appraisals by investors looking to sell as being at a "significantly increased" level. One good thing he did mention was that its likely the market will stratify more. You classic investor first home / investor unit will be significantly more affected than other segments of the market.

I remain very cautious on the near term share price prospects for this sector.

[Bjauck]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/366547/339147.pdf See page 22.
I'll probably get more dislikes for this but I wouldn't be entirely surprised to see it down at NTA of $1.02 again. The shares would be very sound buying for the long term at that level. I think that's unlikely but once a downtrend is in place, (which clearly it is now from $1.60), you never know...the downtrend is not over until it is over, (as confirmed as far as I am concerned with a break up through the 100 day MA).

Those practicing selective hearing from their mates will hear what they want to hear but the independently reported anecdotal evidence is already there and building (literally by the day) that fresh investor money coming to the market has reduced substantially and as another feedback example the CEO of Mike Pero was on TV 3's breakfast show this morning talking about market appraisals by investors looking to sell as being at a "significantly increased" level. One good thing he did mention was that its likely the market will stratify more. You classic investor first home / investor unit will be significantly more affected than other segments of the market.

I remain very cautious on the near term share price prospects for this sector. I have a large holding in OCA. I hope not but I fear we are still on another downhill undershoot section of this SP rollercoaster...I have hung on (luckily) before without jumping off.

[mike2020]

I have a large holding in OCA. I hope not but I fear we are still on another downhill undershoot section of this SP rollercoaster...I have hung on (luckily) before without jumping off.

While Mr B is right about where we are I think it is entirely sentiment and he is a prime example. No dislikes here Mr B I understand where you are at completely and no one knows what comes next. Id buy again if it goes under a dollar but I have a smaller long term hold and my biggest mistakes have been exiting rather than holding.

[Beagle]

Thanks mike but I think its more than sentiment. Without the DTB, (dirty tax bomb), its clear house prices would have accelerated at a much faster pace but now, at best we will see a significant moderation in the rate of growth which undermines the future pricing of OCA units and materially impacts their development and resale margins and ability to grow earnings in the medium term. That's what the market is in the process of repricing, (the lower growth prospects), not just sentiment.

If we start to see market evidence of average house prices reducing, (first full month of impact will be April and reported in early May) that could further exacerbate concerns in this sector regarding earnings growth expectations. I doubt many investors are in this purely for the quite modest unimputed dividend yield...but at ~ $1 the yield isn't too shabby.
For calendar year 2021 (at least), I expect this to underperform the market so remain with a very modest 3% portfolio allocation.

[Rawz]

Wow Beagle $1 sp?? Tell me that is an April fools joke.......

[Beagle]

Wow Beagle $1 sp?? Tell me that is an April fools joke.......

https://www.sunlive.co.nz/blogs/15487-the-three-little-property-investors.html?fbclid=IwAR0hd7xoiL-pXDoKpi-ylTmEhKKQJIdXO3z38NYiznru12R3geA37r80LbE

https://www.oneroof.co.nz/news/39190

[bull....]

timber comes to mind. 1.30 was big support

timber. tried but couldnt get back above the 1.30 now big resistance ..... timber timber

[Beagle]

Tide seems to have turned against this sector. Real prospect of house price decreases leading to lower development and resale margins in addition to care costs increasing much faster than the rate at which the Govt will fund them. Reduced further today. Now down to ~ 2% portfolio allocation. The possibility of a $1 share price in due course as house prices turn south is not an April fools joke.

[Entrep]

$1 has always been a magnet for this share

[Bjauck]

Tide seems to have turned against this sector. Real prospect of house price decreases leading to lower development and resale margins in addition to care costs increasing much faster than the rate at which the Govt will fund them. Reduced further today. Now down to ~ 2% portfolio allocation. The possibility of a $1 share price in due course as house prices turn south is not an April fools joke.
Thanks for your post. Over Easter I am going to assess my exposure to this sector, whose risk profile is/has now changed.

If as you say the government grants do not keep up with costs, I am wondering how the government will fund any shortfall in the cost of rest home/hospital accommodation if the retirement companies can no longer afford any cross-subsidies and reduce their provision of care services. Whether that will be an unintended consequence of their recent changes and whether further “new” taxes will be needed.

[justakiwi]

As I said before, if you really feel this sector is "done" and OCA is heading on a downward spiral, why are you still invested? Looks to me like you're hedging your bets in case you're not as clever as you think you are. You do my head in.


Tide seems to have turned against this sector. Reduced further today. Now down to ~ 2% portfolio allocation.

[winner69]

Tide seems to have turned against this sector. Real prospect of house price decreases leading to lower development and resale margins in addition to care costs increasing much faster than the rate at which the Govt will fund them. Reduced further today. Now down to ~ 2% portfolio allocation. The possibility of a $1 share price in due course as house prices turn south is not an April fools joke.

Sent ARV to the dog box as well?

I’m hanging in there

[Waltzing]

Aus house prices surging increasing fastest since 2015.

Still a shortage of houses in NZ which is supposed to be sorted shortly.

Where have we heard this before.

[Baa_Baa]

Sent ARV to the dog box as well?

I’m hanging in there

Imagine that, under $0.40 in 2020 and around $1 in 2021 (if it happened) .. what a gift for value investors. Unbelievable. Sometimes while I appreciate all the insights, I have to tune out of the momentum traders views in case I do something stupid like sell on a whim and incur a whopping trading fee and an obscene traders tax bill .. on a company I've patiently accumulated into my long term investment portfolio.

[Greekwatchdog]

Root Cause is Supply Demand. We simply cant build these things fast enough or cheap enough. Would be better if we had more pre fab homes being made. I see one of the Akl has concerns about quality there. So much crap going on and tax grabs to try and fix solutions. All I can say is we just had a record month of job acceptances/work going out and quotes flying in at ridiculous levels. New builds everywhere in CHCH.

[Beagle]

As I said before, if you really feel this sector is "done" and OCA is heading on a downward spiral, why are you still invested? Looks to me like you're hedging your bets in case you're not as clever as you think you are. You do my head in.

The future is always uncertain and a wise person makes a sober assessment of their ability to predict it. Most professional investors tend to underweight or overweight various sectors and various companies within those sectors. I am now seriously underweight with less than a tenth of the shares I was holding. I think that's a very bold and decisive call.
I don't find it helpful to think in completely black or white terms but I am certainly inclined towards taking serious steps to protect my capital when there's a major regulatory or economic challenge that threatens it. Sorry my approach seems to get under your skin. Maybe best if you tune out as Baa Baa is inferring or if you can't do that, put me on ignore.

[Habits]

Imagine that, under $0.40 in 2020 and around $1 in 2021 (if it happened) .. what a gift for value investors. Unbelievable. Sometimes while I appreciate all the insights, I have to tune out of the momentum traders views in case I do something stupid like sell on a whim and incur a whopping trading fee and an obscene traders tax bill .. on a company I've patiently accumulated into my long term investment portfolio.

Why do you think you would "incur ... a traders tax bill"? Either you bought with the clear plan / intention to resell or you have a pattern of doing that. If someone realizes a company is underperforming and they have lost faith in the directors, thats a valid reason to sell in my opinion.

[Beagle]

$1 has always been a magnet for this share

It certainly has. Fact is its hard to reach escape velocity from that magnetism when there's been no growth in eps since this listed in early 2017 nearly four years ago and very modest prospects for eps growth in the year ahead, All we have so far is "talk" and plans for business transformation and "hope" the plan works. Has anyone noticed how they never show you a bar graph of the huge wage cost increases every year ? That's the most impressive growth of all and what's eaten up all the rewards from the changes in their business model since they listed, and then some more for good measure.
Maybe we finally, after all that time see some modest eps growth by FY23 or will it be FY24 ?...I doubt there will be much in FY22. I had a decent amount of hope for this one before last weeks dirty tax bomb...now, not nearly as much.

[Beagle]

Why do you think you would "incur ... a traders tax bill"? Either you bought with the clear plan / intention to resell or you have a pattern of doing that. If someone realizes a company is underperforming and they have lost faith in the directors, thats a valid reason to sell in my opinion.

The Govt with a major regulatory change to change the laws of interest deductibility that have stood the test of time ever since the Income Tax Act 1961 (60 years ago) and probably before that but that predates my university studies, has fundamentally undermined the growth prospects for this sector. People who bought with the intention of holding long term for growth are entitled to take steps to protect their capital as a result of the Govt not just shifting the goal posts, but collapsing them on top of investors. That's how I see it. If anyone has any tax case law that suggests otherwise please PM me with the details.

Disclaimer (This post is not to be misconstrued in any way as being professional advice in regard to your individual investment circumstances and as always if you are in any doubt whatsoever with your tax obligations please consult with your professional advisor).

[Cyclical]

Article here showing month on month house prices had declined 4% as of 20th March off the back of the LVR changes. That's one of the things I don't get, they barely gave that one a chance to kick in and consider the affects, which to me really begs the question just how much forethought and advice seeking did actually go into last week's "new" tax?

https://www.odt.co.nz/star-news/star-lifestyle/star-home-and-gardening/lvrs-put-brakes-housing-market-prices-drop-4

Oh well, I'm out of OCA for now...capital preservation. Gonna sit back with the popcorn and wait for the dust to settle.
For those that keep sticking knives into Beagle, get over it. I think it's bloody great that he wares his heart on his sleeve and tells it as he sees it. Whether you choose to heed his advice or not is entirely up to you. He's a trader at heart and if you're that way inclined, it pays not to get too emotional about stocks. He's been having reservations about the company's ability to contain costs and grow profits for some weeks now. The government's bombshell last week was just the final straw...that was material change right there and you can't blame anyone for taking steps to minimise their exposure to such an outrageous policy change.

[justakiwi]

Good idea. Done.


.... put me on ignore.

[Beagle]

Good idea. Done.

Anyone else who finds my posts irksome is most welcome indeed to do the same.

Thanks Cyclical for your post.

[nztx]

Article here showing month on month house prices had declined 4% as of 20th March off the back of the LVR changes. That's one of the things I don't get, they barely gave that one a chance to kick in and consider the affects, which to me really begs the question just how much forethought and advice seeking did actually go into last week's "new" tax?

https://www.odt.co.nz/star-news/star-lifestyle/star-home-and-gardening/lvrs-put-brakes-housing-market-prices-drop-4

Oh well, I'm out of OCA for now...capital preservation. Gonna sit back with the popcorn and wait for the dust to settle.
For those that keep sticking knives into Beagle, get over it. I think it's bloody great that he wares his heart on his sleeve and tells it as he sees it. Whether you choose to heed his advice or not is entirely up to you. He's a trader at heart and if you're that way inclined, it pays not to get too emotional about stocks. He's been having reservations about the company's ability to contain costs and grow profits for some weeks now. The government's bombshell last week was just the final straw...that was material change right there and you can't blame anyone for taking steps to minimise their exposure to such an outrageous policy change.



One Answer .. Not much advice / research or listening done

What was to be expected from a Govt who ignored the RB advices then had them magically produce
money from out of the hat & from nowhere, creating huge State sanctioned inflation (ie instantly
billions pumped into a balloon overnight against the same real goods & assets in the market)

Everyone's notional value of money devalued .. they wonder why RE, Shares, Businesses etc etc
get whipped upwards in value by the market trying to maintain value for money and better
returns than the miserable pittance of rates that the banks & money markets currently pay .. ;)

In the current state of things RRE wise - if the problem was really pressing urgent then any participants in helping out
may have been viewed as beneficial, but no - the directed vendetta from Princess & the band of ignorants
overrode that completely - we know what the result will likely be down the track .. Twyford Pt II
more bull dust and attempts to pass the buck & blame .. ;)

Let's see if the similar blissfully ignorant scenario plays out with the Rest Home Corporates .. ;)

Govt's have such fine track records in meddling in business .. what could possibly go right ? ;)

The current lot's endeavours at shooting from the hip at a drop of a hat while the RB is merrily
pouring more petrol on the flames really says a good deal about the quality of the talent (or lack thereof)
that we have parked up in the pews at the Beehive, along with their direct lines to their spinning machines
to try to spin notions there could be any sort of justification for their knee jerk decisions .. ;)

[Waltzing]

GFC 2008... best year was 2018-2019 dividends returns were outstanding.

let me see... 2027? Should be returning to good dividends returns in time for the new 45% tax rate.

[Cyclical]

GFC 2008... best year was 2018-2019 dividends returns were outstanding.

let me see... 2027? Should be returning to good dividends returns in time for the new 45% tax rate.

OMG, are you implying they'll get a 4th term?!

[Waltzing]

Sorry about that, nearly spilt my easter instant morning coffee, who wrote that!!!

Forget the hard stuff terrible for your health. Green tea is better apparently. Dont forget your greens.

Houses prices are going to have to drop a to reduce the profit on builds and they might. Next few months auctions will be interesting.

The sentiment is certainly going to be on costs going up for builds and wage pressures accruing.

The government will squeeze this sector hard that is our bet.

Show me one minister who has run a business. They dont care about profits in this sector when they have every health board and education insto banging on the table.

RBNZ doesnt want to have to hold the long end down for years.

The numbers arnt adding up even if only 4 B deficit. Its the debt thats building. Squeeze might not be the word for it. Flatten it more likely.

Why not tap the investor community for the costs of running these retirement companies.

Actual US stocks that will benefit from the 2 T rebuild might be where the action is. Get your hatch account moving.

Its time to move back to OE markets years sooner than we ever imaged.

Until Mav's model starts to deliver its just NOT an over weight.

[Cyclical]

Until Mav's model starts to deliver its just NOT an over weight.

This is the thing, right. Mav may have good reason to suggest residential property prices shouldn't have a big impact on the sector's bottom line, and justifiably so, but for most of us less astute, there would appear to be an inextricable link and it will be sentiment that reigns above all else. At best I see RPP flattening out for a couple of years or so, worst case a retraction of sorts. Couple that with political uncertainty (weren't they doing a review of how the retirement sector treats capital gains?) means in my view the likely direction of the SP in the short to medium term is more to the downside than up. This new quarter will be telling as we see how the RP market plays out...maybe some volatility in the meantime with opportunities for the traders that are brave enough.

[Beau]

How come a lot of this isn’t getting a mention on the other resthome pages well very little considering Rymans and Summerset are tilted more towards the development side of it than care side.

[bottomfeeder]

Usually when anything booms, the first thoughts a government has is to tax it. When house prices started to boom they should have introduced a stamp duty, with an exemption for commercial, first home buyers and you guessed it, retirement villages. Even though for the latter you mostly don't buy the unit, you buy a licence to occupy.

Retirement villages need to reprice their licences to reflect the supply and demand and not attach themselves to any residential statistics. I see this sector still going to boom for a while yet. I may look at it simply, but you cant get bogged down in too much detail. I am way overweight in OCA and have put in for my 50 k in the issue. Just hoping that the SP drops and stays low for a few weeks yet.

[Baa_Baa]

Why do you think you would "incur ... a traders tax bill"? Either you bought with the clear plan / intention to resell or you have a pattern of doing that. If someone realizes a company is underperforming and they have lost faith in the directors, thats a valid reason to sell in my opinion.

Precisely, it's the pattern of behaviour that trumps the actual event. It doesn't matter whether you write in your investing diary every time you buy a share that you intend to hold for the long term, when every share you buy you end up selling, for whatever reason, and bank the capital gain.

Anyway, I suppose a long term investor in a company isn't going to necessarily agree with the motivations or reasons of someone who decides to sell at any given point in time. Or whether they are liable for capital gains tax if they do sell, for whatever reason.

[Maverick]

How come a lot of this isn’t getting a mention on the other resthome pages well very little considering Rymans and Summerset are tilted more towards the development side of it than care side.

That's a very astute observation. Of all participants, OCA should be the least affected by property price changes being more health focused. For comparison I've put a quick spread sheet below. (I'm hoping it will format ok on the forum). The dates I've picked are the steady patch in FEB when all SPs where settled and at their respective highs. Then 24th March which is 1 day after the tax change announcements and OCA trading halt lifted. Then yesterday.(sad emoji here)

Interpret the numbers how you like but my thinking is firstly, ARV and OCA have been spanked more harshly that the 2 big boys. Secondly OCA has been spanked 10% even harder again than all of them which I put fully down to the oversupply of new shares in the current capital raise process.
Where to from here?...seems apparent the selling is overdone and an easy SP climb of 10-13% just to realign the rest of the players when the new shares have bedded in.





Mid Feb .
SP mostly settled at highs for a few weeks

24 March-
1 day after tax announcement and OCA acquisition

1.April 21
Total over all fall
since mid FEB


SUM

$13


-7.08%


$12.08


-1.08%


$11.95


-8.08%



RYM

$15.75


-3.43%


$15.21


0.20%


$15.24


-3.24%



ARV

$1.84


-9.78%


$1.66


-0.60%


$1.65


-10.33%



OCA

$1.57


-15.29%


$1.33


-5.26%


$1.26


-19.75%

[Beau]

That's a very astute observation. Of all participants, OCA should be the least affected by property price changes being more health focused. For comparison I've put a quick spread sheet below. (I'm hoping it will format ok on the forum). The dates I've picked are the steady patch in FEB when all SPs where settled and at their respective highs. Then 24th March which is 1 day after the tax change announcements and OCA trading halt lifted. Then yesterday.(sad emoji here)

Interpret the numbers how you like but my thinking is firstly, ARV and OCA have been spanked more harshly that the 2 big boys. Secondly OCA has been spanked 10% even harder again than all of them which I put fully down to the oversupply of new shares in the current capital raise process.
Where to form here?...pretty easy to see the selling is overdone and an easy SP climb of 10-13% just to realign the rest of the players when the new shares have bedded in.





Mid Feb .
SP mostly settled at highs for a few weeks

24 March-
1 day after tax announcement and OCA acquisition

1.April 21
Total over all fall
since mid FEB


SUM

$13


-7.08%


$12.08


-1.08%


$11.95


-8.08%



RYM

$15.75


-3.43%


$15.21


0.20%


$15.24


-3.24%



ARV

$1.84


-9.78%


$1.66


-0.60%


$1.65


-10.33%



OCA

$1.57


-15.29%


$1.33


-5.26%


$1.26


-19.75%






Thanks Maverick puts in in perspective. Then we get a few on this site with none or little skin in the game setting out to drive shares even lower makes me wonder why they aren’t doing it on other resthome sites with the conviction they are doing it on this one.

[Waltzing]

"Retirement villages need to reprice their licences to reflect the supply and demand and not attach themselves to any residential statistics. I see this sector still going to boom for a while yet. I may look at it simply, but you cant get bogged down in too much detail. I am way overweight in OCA and have put in for my 50 k in the issue. Just hoping that the SP drops and stays low for a few weeks yet."

you have to hope the instos and retail investors agree with that.

The point in this views favour is "TINA"

if you dont buy one of these where are you going to go.

I know a few mums who have moved to NZ after hubby passes away in UK or Europe and back in with the children.

[macduffy]

Retirement villages need to reprice their licences to reflect the supply and demand and not attach themselves to any residential statistics.

Yes - and No. Most aspiring residents of retirement villages need to sell their own houses. The price of occupancy licences must therefore reflect the state of the housing market in some respect.

[Beau]

Good to read Rymans offering Ministry Of Health to run their own COVID vaccination programme by fully trained nurses to help out with their enormous task hopefully other resthomes offer as well.

[BlackPeter]

...

For those that keep sticking knives into Beagle, get over it. I think it's bloody great that he wares his heart on his sleeve and tells it as he sees it. Whether you choose to heed his advice or not is entirely up to you. He's a trader at heart and if you're that way inclined, it pays not to get too emotional about stocks. He's been having reservations about the company's ability to contain costs and grow profits for some weeks now. The government's bombshell last week was just the final straw...that was material change right there and you can't blame anyone for taking steps to minimise their exposure to such an outrageous policy change.

Fully second that. While I do not always agree with beagle, I always appreciate to learn about his normally well founded views.

One thing some posters don't seem to get is that the share market is not simply following physical laws - i.e. there is not one easy and infallible formula to calculate what's happening given a certain set of input criteria. And there is no simple right or wrong in determining the future development of a share (well, you could say that all predictions are wrong, but this is a different subject).

While the laws of physics do apply, more important are often the rules of psychology, behaviorism and chaos theory.

To get a somewhat better handle on what's happening we all need to hear differing views from our own, otherwise we end up in an echo chamber and stop learning.

It is the beagles of this world who make it worthwhile to follow forums like this ...

As far as I am concerned ... I don't think that the recent tax changes will, given the supply / demand situation, significantly cut house prices (which would be bad for OCA), but they are likely to curb future price growth. I don't see that they would justify a significant drop in OCA's share price, but obviously - if that's what the market thinks, it is what the market does.

I do see a future $1 SP as a possibility (hey, didn't they sell OCA last year for 40 cents - so what is all the excitement about - this is what share prices do, they go up and down), but obviously - nobody knows in advance where this current downtrend will bottom out :):

Long term I think OCA will thrive, and I see them at this stage as cheaper than the competition.

FWIIW - I did rebalance my portfolio somewhat when OCA came close to $1.60 (it was at that stage just too much OCA in my portfolio), which was a good idea in hindsight. Wondered whether the current CR might be an opportunity to refill, but given the current trend not yet sure ... but pretty sure that I will keep my holding and will refill at some stage.

[Bjauck]

GFC 2008... best year was 2018-2019 dividends returns were outstanding.

let me see... 2027? Should be returning to good dividends returns in time for the new 45% tax rate. Lol.

As today is a bittersweet holiday my prediction for 2027 is :- Labour will have lost the 2023 & 2026 elections, as home owners and investors would have voted in National; GST would be at 20 or 25%; median NZ house price would be at $1,750,000; OCA, SUM and RYM would only be listed on the ASX as NZers capital has been sucked up by direct investment in NZ real estate.

[Getty]

Amen to all of that .#8567

[Beagle]

I think the timing of the capital raise was "unfortunate" for OCA. Announced the day before, and institutional placement book build done on the same day the Red team showed the true extent of their socialist agenda.

As Cyclical suggested, its a great shame the socialist team (that have never been in business), didn't give the market more time for the already radical uplift in investor deposit requirements to 40% to filter its way into the market and didn't attend to the obvious issue of interest only mortgages before bringing out their sledgehammer to bludgeon Mum and Dad's long established rights to fair tax play.

The clear risk here is their extremist socialist approach may not be finished yet and new restrictions around interest only loans may be forthcoming shortly. Add that to higher deposit requirements, a capital gains tax (let's just call the 10 year Brightline test what it really is), and the egregious undermining of fundamental principles of fair play with deductibility of mortgage interest on top of all the tenancy law reform, lack of ability to claim depreciation and so on, the flow of new investment money to this sector will literally dry up overnight.

I put it to you folks the market has already changed and we are in for a dark winter ahead. The momentum is clearly downward and where that ends remains to be seen.

To Mav's point above about OCA being hit more than others. OCA's core care services lose a LOT of money every year and frankly OCA are far more heavily dependent on development and resale profit to subsidise the cost of running their heavily care focused business model than the others.

In a booming real estate market for the last few years since OCA listed, at a time when they have delivered on some really high value developments (The Sands and Meadowbank) to date their underlying eps is less than when they listed four years ago. They can't seem to break escape velocity from the ~ $50m underlying profit figure despite very favorable economic and house price tailwinds and that's in no small way because their annual wage bill has increased a whopping $30m per annum since they listed.

They don't have the benefit of very much in the way of high value development sell-down's in FY22 and they appear set to face headwinds in the real estate market compared to tailwinds in the past. Yes we get some benefit in FY22 from the gradual transformation of their business model with more DMF annuity but the pace at which their gradual snowball is growing is painfully slow and could easily be overcome by ongoing excessive wage cost pressures and real estate headwinds. My sense is they are going to be stuck around the ~ $50m per annum underlying profit level for some time to come. All I am suggesting is that eps growth to date has been non existent after 4 years and the wait for anything meaningful to eventuate is getting painfully slow, really painful and frankly quite exhausting and makes me wonder if this should be priced on non growth forward PE metrics until such time as they can prove their model actually works and does generate growth ?

Put a no growth PE of 11 x annualized underlying earnings of say 9 cps this year and we get ~ $1. Average analyst view is for 9 cps again in FY22 but those estimates will be before the very recent dirty tax bomb and its lingering effects https://www.marketscreener.com/quote/stock/OCEANIA-HEALTHCARE-LIMITE-103506268/financials/. I am certainly not the only one expecting yet another no growth year for FY22 which will make it 5 years since they listed with no growth in eps and we are in a market that's clearly reached a point of inflection where house prices are on a tipping point which doesn't bode especially well for future years profits going forward from FY22. Its all pretty sobering stuff. If wages keep going up at 7.3% per annum or close to that like they have in recent years its clear staff are going to continue to enjoy the lions share of the growth from this company and shareholders will just get the more of the same in terms of stagnant earnings. The new CEO has a big job on his hands and its clear that Earl was not best in class at controlling operational and wages costs. Too kind ?

Maybe our new man (ex Jarden Investment banking director) is cut from the same much tougher cloth as Julian Cook (ex investment banker) ?
I'm calling it, its time for more shareholder focus with this company, if their sole focus is on residents and looking after staff and carbon reduction and other ESG nonsense...it won't be long before I extricate myself from this completely and head off for greener pastures.

For what its worth the last time I caught up with senior management and showed one analysts eps projections out to FY25 I didn't get any confidence that the growth rate was achievable. The sense I got that they're heading in the general direction of underlying eps growth but the growth rate itself, management didn't leave me with much confidence. It was shortly after that meeting I halved my position and have reduced a lot further since then. I think a certain person at OCA knew that ongoing wage cost pressure will continue to suck a lot of the forward growth rate out of this business going forward and that might make CEO incentive package targets a tough ask to beat and therefore a competitors offer of employment was a better option for his family. Suppose we can't blame him for that as a ~ $520K base salary with little prospect of long term incentives being meaningfully in the money isn't all that attractive compared to what other CEO's are earning.

[Bjauck]

..
It is the beagles of this world who make it worthwhile to follow forums like this ....... Well said BP. It is a privilege to read Beagle's, Maverick's and your posts, amongst others too.

[Curly]

Meanwhile, Market Screener continue to rate OCA a buy with a target price of $1.70.

[Beagle]

I doubt any of the analysts have revised their target prices and eps growth projections since last weeks dirty tax bomb and given the proximity to FY21's reporting date next month they may not review them until after that. Food for thought...should we be worried that they're doing a significant capital raise in the month immediately just before FY21's result is announced ? What if FY21 is a bit of a disappointment ?

I do like the new acquisitions but the timing is...well...lets just call it "interesting". Investing $50K into a rapidly declining share price trend...Hmmm

FWIW the 5 day VWAP capital raise share price measurement period starts from Tuesday next week and runs to Monday 12th April.
Follow the VWAP and volume for each day, take off 2.5% and you'll get the issue price for the new shares under the retail offer. Trouble is Computershare need the completed application and cleared funds by 5.00 p.m. on 12 April 2021 so in practical terms you'll not get the full 5 day look at what the VWAP will be but we should have a pretty good idea by close of business on Friday 9th after 4 of the 5 trading days in the measurement period are done and dusted.

Whatever the price of the retail offer is after the 2.5% discount, whether that is likely to be the new new low water mark is the real question to ponder. Hmmm

[BlackPeter]

Meanwhile, Market Screener continue to rate OCA a buy with a target price of $1.70.


I doubt any of the analysts have revised their target prices and eps growth projections since last weeks dirty tax bomb and given the proximity to FY21's reporting date next month they may not review them until after that.

Actually - two of the three stock market analysts monitoring OCA did lift their target prices only end of March (i.e. after the governments surprise announcement) which brought the consensus up from $1.61 to $1.70. This does mean that at least these two analysts reviewed the target price after the announcement and both of them choose to increase their target price.

Having said that - analysts are only humans as well, and Ben Grahams rule "nobody is able to predict future stock prices" fully applies.

While I do check these consensus prices as well (given that they are as well a useful input into the current market mood) did I find them in the past hardly correlated with the stock prices eventuating. Analysts hit rate of future stock prices is roughly comparable with the hit rate of people throwing darts while being blind folded and without any other information about the location of the target.

[Baa_Baa]

Meanwhile, Market Screener continue to rate OCA a buy with a target price of $1.70.

Interesting and that's a revision from $1.66 March 23rd to $1.70 March 28th, unchanged March 31st. Maybe they don't read the news or Sharetrader? I'm more interested in whether Forbar revise their $1.70 target now that the sky is falling.

Actually, all joking aside, my take on the SP's weakness recently across the sector is more related to the recent Retirement Commission recommendations taking a poke at the sector. Interesting article today citing John Ryder's take on that (https://www.stuff.co.nz/business/124727793/veteran-retirement-industry-businessman-john-ryder-takes-aim-at-the-retirement-commissions-recommendations-for-change). This as far as investor risks go imo is way more significant than whether residential property prices wobble around a bit in the near to medium term.

[Beagle]

LOL, ouch that's a little bit harsh on the professional analysts BP. Thanks for pointing out the analyst changes...I have ben too busy recalculating my own forward growth projections and despairing and reacting to the result.

Its interesting to note that analysts are projecting wage cost growth to broadly go up in line with MOH funding in the future, about 3% per annum, i.e. they believe Earl Gasparich's previous assurances whereas quite clearly I am deeply skeptical and will believe wage cost growth moderation when I see it and not before ! That and house price inflation going forward are the two key variances between how the average analyst sees it and my revised outlook.

[Greekwatchdog]

Baa Baa, This was issues a day after they announced CR. Apart from that the only item time that they looked into say a decline in 1% from memory.

Oceania Healthcare
Good Acquisition, But Why the Extra Money?


OUTPERFORM
Oceania Healthcare (OCA) has undertaken an NZ$100m equity raise at a fixed offer price of NZ$1.30 (representing a 6.5%
discount to the last close price of NZ$1.39) to fund the purchase of two new sites in Auckland. (1) NZ$60m for Waterford on
Hobsonville Point — a 100 unit (64 villas and 36 apartments) village with two development zones to add ~60 units/care suites,
and (2) NZ$17m for a new Franklin site that currently has 2 hectares of leased land and 4.1 hectares of additional land, the
land adjacent to the site offers a further ~215 units and care suites to OCA’s development pipeline. The total acquisition price
of NZ$77m leaves an additional ~NZ$20m to help support further growth opportunities.
What's changed?
What are the balance sheet and earnings impacts?
Waterford village transacted at ~20x annuity EV/EBITDA multiple; a relatively attractive price
At face value, we view the Waterford village as an attractive transaction for OCA and estimate it will contribute ~NZ$3-4m per
annum in annuity EBITDA, predominately arising from increased deferred management fees (DMF) albeit we expect resale gains to
become a bigger part of the picture as the village matures (we understand there was only 1 resale in FY20). An ~NZ$3-4m annuity
EBITDA contribution implies a ~20x EV/annuity EBITDA multiple which is relatively attractive in our view and below where the
market is currently valuing the aged care stocks.
Raising equity to buy land and accelerate development raises a few questions
In addition to the c. NZ$60m raised for the acquisition of the Waterford village, OCA raised an additional c. NZ$40m to buy a new
land site (for NZ$17m) and to provide "capacity to consider future growth opportunities". Future plans are light on detail but we did
not consider OCA over levered prior to the equity raise and expect more details on its accelerated development pipeline at its FY21
result in May.

[Biscuit]

..........

While I do check these consensus prices as well (given that they are as well a useful input into the current market mood)......

I find them in the past hardly correlated with the stock prices eventuating. Analysts hit rate of future stock prices is roughly comparable with the hit rate of people throwing darts while being blind folded and without any other information about the location of the target.

Your statements are contradictory BP. Either it is true that analysts forecasts are in some way useful in predicting market movement or they are comparable to throwing darts. Your statements cannot both be true.

[Greekwatchdog]

Posted on the 27th Match from For Bars view on sector.

This is what For Bar had to say on "Aged Care Sector" after last weeks events. They still have as outperform $1.70


Potential significant impacts to the Aged Care sector
This announcement is likely to have the most significant near term impact on the Aged Care sector through three vectors. Firstly,
expectations with regards to long term residential house price inflation is likely to moderate. Secondly and related, significant
uncertainty with regards to near term house prices may result in increased lead times for selling residential homes, and by
implications lead times to settle on acquired aged care units. Finally, looking at fundamentals, versus a counterfactual of no tax
change there is likely to be more modest price increases put through by the aged care operators in the near term. We estimate that
a 1% change in unit price growth impacts sector annuity EBITDA by c.1%.

[Beagle]

Interesting and that's a revision from $1.66 March 23rd to $1.70 March 28th, unchanged March 31st. Maybe they don't read the news or Sharetrader? I'm more interested in whether Forbar revise their $1.70 target now that the sky is falling.

Actually, all joking aside, my take on the SP's weakness recently across the sector is more related to the recent Retirement Commission recommendations taking a poke at the sector. Interesting article today citing John Ryder's take on that (https://www.stuff.co.nz/business/124727793/veteran-retirement-industry-businessman-john-ryder-takes-aim-at-the-retirement-commissions-recommendations-for-change). This as far as investor risks go imo is way more significant than whether residential property prices wobble around a bit in the near to medium term.

Sharing of capital gains would in my opinion have the impact of radically altering the business model. The simple truth is that the weekly fee that many residents pay often does not cover the full cost of the services residents enjoy and certainly does not provide an acceptable return on capital for all the community facilities they enjoy. Unfortunately after last weeks serious fiasco its clear the inexperienced socialists in charge have no real understanding of the implications of the radical changes they're making and appear to be initiating populist politics and the consequences be dammed. The result of this is surely a radical increase in weekly fees for villages going forward but what of existing license to occupy contracts and fixed for life weekly fees of existing residents ? Its not as though the Govt have been "kind" to existing residential investors have they so maybe existing license to occupy contracts fall under their new socialist agenda of capital gain sharing too and retirement village operators are left carrying the baby with fixed low weekly fees for life ?

If John Ryder is worried then we should all be deeply concerned too. One wave of Cindy's magic socialist wand and the fundamental's of investment are changed. It couldn't happen again ?, surely not... or does their recent radical bludgeoning of rental property investors rights to fair and reasonable investment terms actually make an overhaul of the retirement sector by extension, frankly, quite likely ? :eek2: Its not like we can depend upon this lot to have an understanding of fair and equitable principles for business investment is it !

Yet another SERIOUS risk to this sector to consider....Hmmm

[macduffy]

Too true, Beagle. Until the blatant fiddling with the tax - deductibility of interest on borrowings by certain businesses, I was sure that no govt would be stupid enough to interfere with the retirement industry business model and risk having the state being left to pick up the mess. Now, I don't know!

[Beagle]

Too true, Beagle. Until the blatant fiddling with the tax - deductibility of interest on borrowings by certain businesses, I was sure that no govt would be stupid enough to interfere with the retirement industry business model and risk having the state being left to pick up the mess. Now, I don't know!

We all have good reason to be worried about what happens as the next wave of their socialist wealthy redistribution ideology hits.
Tony Bowker tells it like it really is and doesn't hold back https://www.nzherald.co.nz/business/troy-bowker-labour-tax-changes-broken-promises-and-a-socialist-agenda/6Z2ZXTXSG3O6T5TGWLXE5FHMJA/ Paywalled - Excerpts
A pattern is emerging of a Labour government with a major chip on its shoulder against property investors in New Zealand. One could be excused for reaching the conclusion these sustained attacks on property investors are driven by socialist wealth redistribution ideology rather than genuine, well-intentioned, well thought out and properly considered reforms. Property investors who borrow pay interest. Interest payments are a cost of doing business like any other cost. That is not a "loophole". It has been part of tax law for more than 100 years. These tax changes not only constitute a brazen breach of promises made by Labour during the last election campaign, they have been rushed out without being properly considered or debated and against the advice of the IRD. If this does not constitute an abuse of power then I'm not sure what does.

Emphasis added. Wealth distribution ideology.. Hmmm...pretty sure that's another expression for Communism :eek2:

I reckon $1 for OCA is very much on the cards as sentiment in the housing sector turns really sour this winter.

[Ggcc]

We all have good reason to be worried about what happens as the next wave of their socialist wealthy redistribution ideology hits.
Tony Bowker tells it like it really is and doesn't hold back https://www.nzherald.co.nz/business/troy-bowker-labour-tax-changes-broken-promises-and-a-socialist-agenda/6Z2ZXTXSG3O6T5TGWLXE5FHMJA/ Paywalled - Excerpts
A pattern is emerging of a Labour government with a major chip on its shoulder against property investors in New Zealand. One could be excused for reaching the conclusion these sustained attacks on property investors are driven by socialist wealth redistribution ideology rather than genuine, well-intentioned, well thought out and properly considered reforms. Property investors who borrow pay interest. Interest payments are a cost of doing business like any other cost. That is not a "loophole". It has been part of tax law for more than 100 years. These tax changes not only constitute a brazen breach of promises made by Labour during the last election campaign, they have been rushed out without being properly considered or debated and against the advice of the IRD. If this does not constitute an abuse of power then I'm not sure what does.

Emphasis added. Wealth distribution ideology.. Hmmm...pretty sure that's another expression for Communism :eek2:

I reckon $1 for OCA is very much on the cards as sentiment in the housing sector turns really sour this winter.
Don’t really mind where it goes to as I have a longterm view on OCA. Summerset and many other retirement shares had short term concerns and people including myself not happy and sold only to find that longterm it kept going up in price. What do you think OCA price will be in 10 years?

[Beagle]

Don’t really mind where it goes to as I have a longterm view on OCA. Summerset and many other retirement shares had short term concerns and people including myself not happy and sold only to find that longterm it kept going up in price. What do you think OCA price will be in 10 years?

10 years is anyone's guess. For what its worth I think you are overlooking the fact that RYM and SUM had strong underlying earnings growth from the get go and with this we're talking about a much more intensive care model that means we're staring down the barrel of the first five years with no underlying eps growth. I think there are key differences to their business models. I guess where I have arrived with this after nearly 4 years since listing is show me the money...all I see and foresee in the near future is growth for other people, namely the employees.

There will come a day when eps grows...which year that's going to start in any meaningful way is the key question ? FY23 at the earliest in my opinion, potentially significantly further out if the custard hits the fan with real estate. Its not like the pretty modest unimputed dividend yield helps with ones patience but good on you, Mav and others having absolutely heaps of patience. Beagles are no good at trying to have truly enduring level's of patience...get bored too easily and go looking for easier and bigger feeds elsewhere.

[HCR20]

10 years is anyone's guess. For what its worth I think you are overlooking the fact that RYM and SUM had strong underlying earnings growth from the get go and with this we're talking about a much more intensive care model that means we're staring down the barrel of the first five years with no underlying eps growth. I think there are key differences to their business models. I guess where I have arrived with this after nearly 4 years since listing is show me the money...all I see and foresee in the near future is growth for other people, namely the employees.

There will come a day when eps grows...which year that's going to start in any meaningful way is the key question ? FY23 at the earliest in my opinion, potentially significantly further out if the custard hits the fan with real estate. Its not like the pretty modest unimputed dividend yield helps with ones patience but good on you, Mav and others having absolutely heaps of patience. Beagles are no good at trying to have truly enduring level's of patience...get bored too easily and go looking for easier and bigger feeds elsewhere.

This is such a big turnaround. Are you sure you're not simply a trader who engages in post hoc reasoning to justify largely emotionally informed views that are more or less influenced by recent price momentum??

[Waltzing]

Yes rode past the hounds while out hill climbing today and they looked ready for hunt alright..

never herd of a hound that doesnt hunt...

[Waltzing]

"We all have good reason to be worried about what happens as the next wave of their socialist wealthy redistribution ideology hits."

DTB.....

The look on the faces of the young ACA turks this week....

It almost hilarious and really they waited decades for the moment to pounce..

Image how full of the glee the cabinet feel. I bet they popped a few after that one.

The great thing about Financial Markets is you can move to where the money is going to be.

You can even move it OFFSHORE and never bring it back....YOU can then fly to where the money is...

well soon anyway, next year.

If you cant leave then sing along to Beagle Hymn...

"There will come a dayyyy when earnings grow"

I dont think MR B is emotional at all. He just sees debits and credits in a profit and loss and its wider implications. All accountants in the country may well now have to hire professional business councillors for their investor clients mental health....:eek2:

[winner69]

No doubt guru UBS analysts beavering away to produce a new report and do away with their BUY - they did say 'We see potential to double underlying NPAT over the next four years' only a few months ago

[Bjauck]

...
A pattern is emerging of a Labour government with a major chip on its shoulder against property investors in New Zealand. One could be excused for reaching the conclusion these sustained attacks on property investors are driven by socialist wealth redistribution ideology rather than genuine, well-intentioned, well thought out and properly considered reforms. Property investors who borrow pay interest. Interest payments are a cost of doing business like any other cost. That is not a "loophole". It has been part of tax law for more than 100 years. These tax changes not only constitute a brazen breach of promises made by Labour during the last election campaign, they have been rushed out without being properly considered or debated and against the advice of the IRD. If this does not constitute an abuse of power then I'm not sure what does.... I too disagree with the change to interest expensing and the way these policy changes have been introduced. However I think they may smack of desperation in the face of the (unintended*) consequence of their Covid-response, which added more fuel to blazing property prices.

As far as I have calculated from this article relating to last parliament up to 2020 https://www.newshub.co.nz/home/politics/2020/08/the-number-of-properties-owned-by-new-zealand-mps-revealed.html 29 Labour Party MPs had interests in more than one property: 15 MPs had interests in one property and just 2 had no property interests. Unfortunately I cannot find a more recent list relating to this parliament.

However I imagine the current parliament too would see Property owners more than fairly represented in the Labour Party caucus. That is even before the interests of National MPs would be taken into account. I very much doubt the march to land nationalising communism or collectivism will come from this Labour Party - or parliament. I am open to being corrected though.

Has anyone got a link to the current MPs pecuniary and property interests?
https://www.parliament.nz/en/mps-and-electorates/mps-financial-interests/mps-financial-interests/2020-current-register-of-pecuniary-and-other-specified-interests/

*However Ardern has sad Kiwis expect steadily increasing residential property prices...

[Waltzing]

Im of no doubt that this is the Cullen tax like a phoenix rising from the flames.

No members of the labour cabinet are in the business of property development and rentals.

They are more like hobbyists and never imaged they would also get caught in the net.

Its a Clement Attlee policy imported by Cullen...:eek2:

[Beagle]

"We all have good reason to be worried about what happens as the next wave of their socialist wealthy redistribution ideology hits."

DTB.....

If you cant leave then sing along to Beagle Hymn...

"There will come a dayyyy when earnings grow"

I dont think MR B is emotional at all. He just sees debits and credits in a profit and loss and its wider implications. All accountants in the country may well now have to hire professional business councillors for their investor clients mental health....:eek2:

But when will it be, that's the $64,000 question ? Folks please feel free not to read this if you want to filter out my genuine disappointment.

In 2017 when this listed we were told of their 6 year business transformational program that promised to deliver real growth. Taking average analyst forecast for 2022 of underlying eps of 9 cps (issued before last weeks dirty tax bomb) as Gospel, lets have a wee look at projecting how they might be going 5 years into this radical business transformation program.
In May 2022 they are forecast to deliver underlying earnings of 9 cps 5 years through this program (according to average analyst forecasts).
In July 2017 they announced their maiden listed profit for the year ended 31/5/17 of $45m underlying earnings which based on the number of shares at the time was...drum roll please...9.14 cents per share.

Oh my goodness surely this cannot be right ? I am afraid it is all there in its naked and ugly truth, 5 years into a 6 year business transformation program there is no growth in earnings !! Surely not !!. Have patience I can hear the baying in my head they say. Why should I ? Does this super high care model even work in terms of delivering earnings growth ?

To answer this question one must consider the most extreme opposite, very light care model of Summerset and examine how they performed in their first 5 years as a listed company.
They listed in late 2011 at $1.35 if my memory serves me correctly and in February 2012 reported underlying earnings of $8.08m, 35% ahead of prospectus forecast which amounted to 3.4 cps for the 2011 year. NTA was $1.09.

In February 2017 for the year ended 31 December 2016 they reported underlying earnings of $56.6m for underlying eps of 22.7 cps and NTA of $2.50 per share.
SUM grew underlying earnings 567% in their first 5 years and OCA are forecast to have contracted underlying earnings by 1.5% in their first five years. WOW...just WOW. I am pretty sure if I went back far enough and ran the same analysis on RYM's first 5 years I would get a pretty similar result to SUM.

Does OCA's model even work when it comes to underlying earnings growth and with no earnings growth forecasted after 5 years why should we take it on faith and hope any longer ? Isn't one's money simply better off in a business model that does grow earnings ? Aren't OCA just a no growth company until they can prove otherwise and why should they command a growth PE when there hasn't been any ? A no growth PE of 11 on next years 9 cps suggests fair value of just ~ $1 and with all the political risk and interference I am really struggling to see any reason to subscribe for shares at anything above that value. I have done well out of OCA due to buying when fear ruled the market last year and the market believing the growth story.

Mav and others can project out eps growth further into the future, 2023, 2024 and beyond if they like but 40 years of bean counting tells me the most likely predicter of the near future is the most recent past and the further out your projections go the degree of reliability in them drops exponentially. I see this really struggling in the current political environment (with a serious blow torch being applied to real estate investors), to achieve meaningful earnings growth any year soon. Oh dear, it pains me greatly to say that. Plain fact is I was closest to the mark with estimating FY20's underlying earnings and again closest by a wide margin with predicting 1H FY21 underlying earnings. Not intended to be skiting just putting it on record I am pretty comfortable with my own ability to forecast out earnings for this one as compared to some others consistently very optimistic forecasts so if I am pessimistic I will leave it to others to decide for themselves what weight they put on that, if any.

I really would have expected to see results in terms of eps growth 5 years into a six year transformational plan. Its a real case of what the heck happened and of course with the $30m annual wage cost increase the answer lies right there. I don't have infinite patience, that's not me and not how I am wired up and I can't change that. This hound must hunt, I cannot sit still indefinitely and eat miserably small unimputed dividend feeds, its not in my nature.

I need to see the eps numbers growing and it isn't happening and isn't likely to happen in the foreseeable future so I can't hold onto hope indefinitely, (there are quite obviously other investment opportunities out there). The model hasn't worked in terms of achieving growth and is unlikely to work in the near future because its handicapped by massive human resource cost inflation sucking all the wind out of the sails. Justakiwi and her mates and the residents are all doing very well out of this but nothing left over for earnings growth for investors is a very sad state of affairs. I'm afraid in yachting terms the boat has come down off the foils and with no decent tailwinds anytime soon will struggle to get going again. I think I'm getting out completely, there's much easier ways to build wealth where the growth is something much more tangible than empty promises, fancy transformational plans and false hope.

Occupational hazard of being a bean counter I suppose is that when all the fancy on trend ESG and development talk has been all said and done it all comes down to the bottom line which really isn't that impressive at all. Happy to leave all the ESG and save the planet zero carbon emissions nonsense to others, I want eps growth.

Very high level's of high quality late stage care and eps growth do not appear to be obviously congruently achievable outcomes.

[Greekwatchdog]

So if thats the case according to you why have you pumped this up so frequently?

[nztx]

We all have good reason to be worried about what happens as the next wave of their socialist wealthy redistribution ideology hits.
Tony Bowker tells it like it really is and doesn't hold back https://www.nzherald.co.nz/business/troy-bowker-labour-tax-changes-broken-promises-and-a-socialist-agenda/6Z2ZXTXSG3O6T5TGWLXE5FHMJA/ Paywalled - Excerpts
A pattern is emerging of a Labour government with a major chip on its shoulder against property investors in New Zealand. One could be excused for reaching the conclusion these sustained attacks on property investors are driven by socialist wealth redistribution ideology rather than genuine, well-intentioned, well thought out and properly considered reforms. Property investors who borrow pay interest. Interest payments are a cost of doing business like any other cost. That is not a "loophole". It has been part of tax law for more than 100 years. These tax changes not only constitute a brazen breach of promises made by Labour during the last election campaign, they have been rushed out without being properly considered or debated and against the advice of the IRD. If this does not constitute an abuse of power then I'm not sure what does.

Emphasis added. Wealth distribution ideology.. Hmmm...pretty sure that's another expression for Communism :eek2:

I reckon $1 for OCA is very much on the cards as sentiment in the housing sector turns really sour this winter.


Dead right there .. NO LOOP HOLE

(but for Robertson's Socialist creativity in attempting to change the rules & suggest there was a LOOP HOLE )

Pull the other one Grant -- you may look less stupid that way .. ;)

His father probably had more Business balls & Accountant's clues before he got put away / locked up
for certain 'other' deeds .. ;)

A bit of credit to old Cullen .. at least he didn't screw around with things he didn't understand...
well at least no in his term(s) even if later watches are no bare on what to do, that they try drawing
circles between the lines on well outdated past use by reports .. ;)

but of the current incumbents .. see problem .. magnify problem.. make even bigger shambles to make problem
look larger .. find target to blame for total shambles in large vendetta .. solve nothing .. larger problem still there .. ;)

Beware folks -- House Fly has morphed into Large Blow Fly and sits poised above ready to swoop down and *** all over
your favourite pet projects in an instant, if he feels that way inclined .. ;)

[Curly]

So if thats the case according to you why have you pumped this up so frequently?

There seems to be a pattern of pumping the stock while holding mega shares and then devaluing with doom and gloom once off loaded?

[Beagle]

So if thats the case according to you why have you pumped this up so frequently?

Some people don't seem to understand that last weeks dirty tax bomb is a gamechanger for the tailwinds in this sector. Take the tailwinds away, replace them with serious headwinds and the growth rate shrinks substantially and with it the appropriate PE multiple. Surely you understand these basics ? A company with a forecasted eps growth rate of say on average 15% for the next 5 years shrinks it's growth rate substantially and you think the forward PE or DCF valuation remains the same ? Surely you are not that naïve ?

You either can foresee it or you can't, the implications of last weeks radical socialism on the housing market and future development profits and resale margins for OCA. I cannot make it any clearer than that. In one word its a "gamechanger" New investor money coming to residential property will dry up like the Sahara desert, mark my words there are serious implications for the housing market.

I get it that some people are frustrated by the dramatic Govt socialist bomb. I am too. I'm already down tens of thousands of dollars in my portfolio thanks to their broken promises and socialist extremism. I'm taking steps to stop the bleeding, that's what separates me from some others.

[Beagle]

There seems to be a pattern of pumping the stock while holding mega shares and then devaluing with doom and gloom once off loaded?

Please try and make a meaningful contribution to the subject at hand than making repeated personal attacks.

[nztx]

https://www.stuff.co.nz/business/124727793/veteran-retirement-industry-businessman-john-ryder-takes-aim-at-the-retirement-commissions-recommendations-for-change

Veteran retirement industry businessman John Ryder takes aim at the Retirement Commission's recommendations for change

Sorry Baa Baa - A repeat I know but worth a read

What sort of message are Govt sending out of this - maybe 'we dont want so many people in Rest Homes' ?

Really ? - where else will they go ? Live on the street where many many more homeless will likely
be headed when the ill thought initiatives of the past week fail to deliver on a timely basis
or simply fail -

say lack of materials - timber .. lack of trades people available etc etc (like Kiwi-FAIL before it) ? ;)

or as simple as Twyford's famous House Costing Co*k-Up - Rerun Part II ?

How many bare basic 4 walls of houses (aka newly painted 1950's style State Housing; will $3.9 Bills see ?

Perhaps just a few hundred in the next 5 years ? or less ? ;)

Where are the Costings ? or is Miss Muppet still sorting out costing issues ?
or not even done before shooting off their mouths to the Spin artists ? ;)

Just enough for displaced or unsuccessful Rest Home entrants ? .. what about the homeless ?

What about the Trades people deciding too difficult, too busy- sick of being shafted by a Labour Govt
that still cant get it's act together sufficiently to manage anything meaningful to make slightest
impression in the desired direction .. ? ;)

[dubya]

A sensible rebuttal from John Ryder. Especially regarding the 'capital gains' nonsense.

https://i.stuff.co.nz/business/124727793/veteran-retirement-industry-businessman-john-ryder-takes-aim-at-the-retirement-commissions-recommendations-for-change

[Waltzing]

Some recent buyers arnt expecting any large change in house prices.

https://www.stuff.co.nz/business/property/124729393/dont-vilify-homebuyers-just-get-on-and-build-more-houses

If this scenario then some bargain prices for retirement stock not just OCA might not be long lasting if at all.

The auctions will soon tell the real story.

This is the trending thread.

[tim23]

Some people don't seem to understand that last weeks dirty tax bomb is a gamechanger for the tailwinds in this sector. Take the tailwinds away, replace them with serious headwinds and the growth rate shrinks substantially and with it the appropriate PE multiple. Surely you understand these basics ? A company with a forecasted eps growth rate of say on average 15% for the next 5 years shrinks it's growth rate substantially and you think the forward PE or DCF valuation remains the same ? Surely you are not that naïve ?

You either can foresee it or you can't, the implications of last weeks radical socialism on the housing market and future development profits and resale margins for OCA. I cannot make it any clearer than that. In one word its a "gamechanger" New investor money coming to residential property will dry up like the Sahara desert, mark my words there are serious implications for the housing market.

I get it that some people are frustrated by the dramatic Govt socialist bomb. I am too. I'm already down tens of thousands of dollars in my portfolio thanks to their broken promises and socialist extremism. I'm taking steps to stop the bleeding, that's what separates me from some others.

I recommend you read Janine Starks article in Dompost B8 today "Landlords bluster in the face of tax reform" , a balanced opinion unlike some of the emotional stuff on this forum.

[Gunner]

So if thats the case according to you why have you pumped this up so frequently?

Pre Covid it was all doom and gloom before he bought in and then it was "cant get enough" when he bought and now its doom and gloom like a light switch. He will now bash this for the next year at every opportunity and then like a switch, this will be golden again.

The new tax rules will impact the sector but the long term this is a winner.

[tim23]

Pre Covid it was all doom and gloom before he bought in and then it was "cant get enough" when he bought and now its doom and gloom like a light switch. He will now bash this for the next year at every opportunity and then like a switch, this will be golden again.

The new tax rules will impact the sector but the long term this is a winner.

Nicely put, I'm a holder and intend to participate in new issue, just means I'll probably get more shares that I thought, good news for long term holders.

[Waltzing]

"or as simple as Twyford's famous House Costing Co*k-Up - Rerun Part II ?"

some of the funniest comments ive read in ages...

sometimes policy has unexpected outcomes as modelling economies is always prone to variables having numeric variances that have a wider range than first expected.

The best models of men and mice.

The next 12 months FA reporting for this sector will be much anticipated.

Mr B has stated the reasons for rebalancing and by doing so has added to the views expressed and the rebalancing is based on profit and loss modelling.

[BlackPeter]

Your statements are contradictory BP. Either it is true that analysts forecasts are in some way useful in predicting market movement or they are comparable to throwing darts. Your statements cannot both be true.

Have another think about it. My statements describe two very different outcomes.

The current mood is likely to influence short term movements ... and to predict these I think the price targets are a useful indicator. Obviously - there is always the question - what was first, the egg (price target) or the chicken (market mood) and who is influencing whom?

However - the price targets are supposed to predict the share price in a years term, and for that I found them basically useless. Just have a try with them yourself, Just note down some hundred target prices, monitor the prices over a year and measure the outcome; I did, and the hit rate (i.e. SP is at least once in a 12 month window at or above the target price for shares where analysts predicted a SP rise) is depending on the general market mood typically between 40 and 60%. Not very useful as a prediction - you could as well flip a coin :);

[Beagle]

Pre Covid it was all doom and gloom before he bought in and then it was "cant get enough" when he bought and now its doom and gloom like a light switch. He will now bash this for the next year at every opportunity and then like a switch, this will be golden again.

The new tax rules will impact the sector but the long term this is a winner.

I have acted for hundreds of landlords in my 40 year career and I believe I am in a very good position to read the current state of mind of these people. This tax change breeches a fundamental right to fair play and claiming of legitimate business expense that goes back over 100 years and represents a wild and ill considered lurch towards an Orwellian society.

The house price reaction to Covid confounded everyone, nobody predicted it and in essence house prices were blown higher on the back on 100 year lows in interest rates causing rampant tailwinds and speculators jumped on board. That was a great time to be an investor in OCA. Nobody predicted this wild lurch to the left, its truly another bolt from the blue. Going forward the strong tailwinds have become strong headwinds. I've called it how I see it and contribute a lot to this forum, unlike some people.

I'm a numbers man plain and simple and this materially undermines their near term growth prospects. I see no growth in eps for the fist five years of a companies life that is supposed to be a growth company. I am exhausted and out of patience with this one and have no stomach to get run over by extremist socialist ideals.

Long term you will be alright but have you got the patience for another few years of no earnings growth ? If you do that's fine, all power to you. $1 is where I see fair value in the new environment going forward. If others want to pay more then good luck to them. I've called it, its going to be a long cold winter for real estate in N.Z.
If I'm wrong I'll be pleased and the economy will be doing better than I expected which will boost other companies share prices I own.

The early anecdotal evidence is already in that open homes and auctions are seeing vastly lower numbers of interested parties. Some choose to believe you can't go wrong with real estate. We will see...

The bigger concern now is where will the socialism stop ?
After reform of rental properties then greedy retirement companies are next so that capital gains are shared but who is next after that ?

[Waltzing]

MR B has stated his view.

His view was also expressed in meetings last week with ACA under 40's.

Its not a matter of "Come What May" but " What May Come".

Business does not like policy uncertainty because as you all know the market is uncertain.

Business investors want policy stability because they are always willing to except market risk but will demand a higher premium for policy and market uncertainty.

Mr B's model of investing prefers policy risk reduction to mitigate market risk volatility and hence his ROI premium is higher when policy risks are higher.

[davflaws]

I dont think MR B is emotional at all.

Ya what?? If that's not one thoroughly stirred up Beagle, it will do until a real one turns up.

And that may only be a problem for old lefties like me who have had a lifetime of never quite trusting a right wing argument /analysis advanced with passion and vehemence. As with Balance - I respect Roger's analytical ability, wisdom and knowledge, but (as also with Balance), I suspect at least some of his conclusions are at very least shaded by his visceral politics.

Mine certainly are, and I suspect my decision to exit my holding in SUM and put the $s into OCA had at least a little to do with a desire to support a"care" model.

[Habits]

Hi Beagle
As an equity investor, what would you rather have ... a full-scale capital gains tax regime proposed by cullen that includes all sectors of the property mkt as well as shares and collectibles .... OR the combination brightline and non-allowable interest deductions on resi investments and second homes. The latter surely. As a property investor myself and even though its Hobsons choice I think I prefer what we have now. The brightline is a narrow tax and the lack of int deductions effectively pushes up the cost of interest by half to only around 4.5 percent. Both avoidable

House prices rises were so off the scale for the last nine months that the govt hand got forced to do something radical. 9 months ago last June we were happy that prices were not falling out of bed, so it should not be terrible if these much higher prices plateau or take dip even. I may not agree with the govt approach but I do agree with the necessity and sentiment of cooling the housing market.

[sampson]

There's no doubt that the recent OCA share price has taken a beating. I must admit that I'm only holding about 1/3rd of what I was a month or two ago, not because I doubt the long term future of it, but because I may need to use the money in the next year or two for housing so am in capital preservation mode.

Long term OCA will be fine and I was reminded of this during the week when I was cleaning out the scrap paper in the cupboard and found an old BUY order for RYM at $1.99. OCA is a solid long term play and I even recall a prominent momentum trader pumping RYM/SUM some years ago that they were a great buy despite the absence of property inflations at that time. "RYM continued to increase underlying EPS during the GFC" yadda yadda. There is no evidence yet that property prices will drop from the interest deductibility change (and no I'm not an emotional denier - I would love them to drop despite holding plenty of retirement stocks) and will take quite a drop to undo recent gains - but valuation has apparently suddenly changed from mid $1.60's (maybe even $2 wasn't it Beagle?) to ~ $1 - classic stuff.

[Beagle]

Habits. I will say this. They never really explored serious curbs around the extent of interest only lending to investors. The problem is if you can borrow at 2.5% interest only and the gross yield on some properties is as high as 6% people are going to "have a go". If you make them pay a P & I loan the cash flow isn't nearly as attractive after all expenses are taken into consideration.

Limiting on banning interest only loans to investors would have been a pragmatic and reasonable step, not upending the foundational principles of the income tax system.
Consider this. Cindy says its closing a loophole because home owners can't claim mortgage interest. Okay if we're going down that socialism rat hole to make this a level playing field again and seeing as residential property investors have to pay tax on the rent they receive them homeowners should be taxed on the market value of the free accommodation they receive so as both groups are treated the same. When you go against the RBNZ and IRD and introduce new egregiously unreasonable legislation taxpayers can be expected to react to that. Its unfair and undoes more than 100 years of foundational taxation legislation. The basic principle of a business expense necessarily incurred to earn business income can never be allowed to be attacked. Its one of the key foundations upon which the entire tax system is built. Open that door, what's next ? Lets do away with the imputation system shall we because greedy capitalists are claiming tax credits, money they didn't pay. Lets close that "loophole" so everyone pays their fair share... Where does the socialism end ?

That's the thing with valuations sampson, its a double whammy. Once you start winding back future years eps and the DCF of that one must also wind back what is an appropriate PE for a much lower growth, if any, company. The combined effect of that can give startlingly different results. We are seeing exactly this situation being played out at the moment with ATM. Wind back the growth expectations and the PE and the result is some very serious pain and likely plenty more to come. OCA is however underpinned by its NTA of $1.02. You say its classic stuff, we'll see. I've made plenty of bold calls before and got plenty of them right, (not all of them by any means).

I'm calling it where I see it in this new high risk operating environment. To deny its high risk now is to wear blinkers. The chances of the Govt adopting more populist policies that appeals to the lefties is very high and to try and imagine there is no risk that the Govt will make retirement companies share capital gains is to simply live in denial of this new naked socialism that's reared its ugly head. The risk has gone up and with it the required rate of return.

I get it that some people think $1 is unlikely but there is a strange magnetism to that price with this company. What I am suggesting is the reason for that is there's no growth from eps of 9 cps and hasn't been for years and isn't likely to be in FY22 so the point of magnetism is fueled by a no growth PE of 11 being right for a company with that level of earnings. Sticking with that analogy I would suggest the only way to permanently escape that magnetic field is to prove the company can grow earnings beyond 9 cps. That might be FY23, or maybe not if the real estate market starts a new downward trend.

Lots and lots and lots of patience will be required with this one. Hope you guys are up for the challenge. Beagle doesn't do "infinite patience" especially in a hostile socialist environment.

Just a comment on emotion since several have brought it up. Of course I am grumpier than normal...attacking foundational principles of what's fair and reasonable of the tax system I have worked with for 40 years...costing me tens of thousands since this wild lurch to the left, who wouldn't be grumpy...yeah I am stirred up and more barky than normal, so what, get over it.

[winner69]

Seems I’ve called it right for years -

1) OCA objective seems to be to sell heaps more units and make no more (profit) and

2) going down the care path is flawed strategy because there’s no money to be made in care.

[Waltzing]

"Ya what?? If that's not one thoroughly stirred up Beagle"

classic!!!

Well the local hounds can get a bit excited waiting for the next hunt i have notice as i cycle past them on a lovely antipodean autumn day.....


His model requires a greater ROI if risk entails more than just market risk.

Mr B knows his clients are going to be going Ballistic and that consultant for handling upset clients is not yet on the payroll.

Although one ACA firm recently hired a marketing consultant who looks to me like she dresses at HLG!

Very summer dress code ...........looked right off MR B's favourite fashion website!!!!

[Waltzing]

"old lefties"

well NZ might only be starting the move to the left!!! So everyone else belt up and hold on tight.

[Beagle]

Seems I’ve called it right for years -

1) OCA objective seems to be to sell heaps more units and make no more (profit) and

2) going down the care path is flawed strategy because there’s no money to be made in care.

Yeah, I am happy to concede you were right. Rampant wage cost inflation has sucked all the growth out of this company and is likely to suck A LOT of the growth out of it going forward. "Wages will go up in line with MOH funding going forward" Earl Gasparich. Yeah Right !

If the brokers rework their DCF's with zero house price inflation for the next few years and wages costs going up at 7.3% per annum they'll get a very much lower DCF valuation to $1.70 !

If Cindy makes companies share the capital gains we could see the 70 part of that without the dollar in front :eek2:

[Waltzing]

"we could see the 70 part "

if that happens we better load up a ton or 2 on ARG and wait for you all to want some...

[Beagle]

Been backing up the truck on ARG this week.

[Scrunch]

The bigger concern now is where will the socialism stop ?
After reform of rental properties then greedy retirement companies are next so that capital gains are shared but who is next after that ?

Or if this isn't effective to stop rising prices, will they start to deny deductions for other expenses on the pretext that this is also a "loophole"?. What about rates, insurance and repairs and maintenance. These expense types have the benefit of catching every property investor, not just those with a mortgage on the property or who have recently purchased (or intend to purchase). If prices rise by another 5-10% in the next year, I'd be very worried about losing deductions beyond just interest.

So the policy risk around rental investment has just gone through the roof. In all likelihood if prices increase there's going to be another negative policy change implemented. If prices decrease, you are losing money. The chances of stable to very low growth (sub 3% pa?) has got to be small.

And back directly to retirement companies, the risk of amended taxation rules on retirement company profits has just increased, how much I'm not sure but it has increased. If net surplus's were to fall by 28%, what impact would that have on share prices? Would the ability to provide imputated dividends mitigate some of this impact?

The facts being:
>Retirement companies pay a very low effective tax rate (near zero %).
>Sometimes a social benefit argument has been used around why this situation will remain
>Sometimes the argument is used that its non-taxable under existing tax principles and these principles are embedded tax law developed over centuries

But the government has just confirmed that it doesn't respect:
>existing tax principles
>the social benefit argument either because property landlords provided housing to people who couldn't afford or didn't want to buy houses. If they didn't do this the government would need to step in and provide more social housing. Property landlords have just been hit with altered tax laws despite the fact they provide a socially desirable service.

[dompf]

Nicely put, I'm a holder and intend to participate in new issue, just means I'll probably get more shares that I thought, good news for long term holders.

I’m picking up my allocation as well; it’s a long plan 5+Years for OCA more people retiring with money it’s still a good sector to park up in. I can’t help but think Earl rolled out at a good time, without all the noise being listed; sure same industry but I reckon APVG got a steal on that deal.

[winner69]

.....

That's the thing with valuations sampson, its a double whammy. Once you start winding back future years eps and the DCF of that one must also wind back what is an appropriate PE for a much lower growth, if any, company. The combined effect of that can give startlingly different results. We are seeing exactly this situation being played out at the moment with ATM. Wind back the growth expectations and the PE and the result is some very serious pain and likely plenty more to come. OCA is however underpinned by its NTA of $1.02.


......

Seems OCA share price going down the ATM share price path ...ouch

Underpinned by a NTA of 1.02 — a 10% revaluation downwards of 10% of investment properties etc would wipe about 14 cents off that

[Beagle]

Or if this isn't effective to stop rising prices, will they start to deny deductions for other expenses on the pretext that this is also a "loophole"?. What about rates, insurance and repairs and maintenance. These expense types have the benefit of catching every property investor, not just those with a mortgage on the property or who have recently purchased (or intend to purchase). If prices rise by another 5-10% in the next year, I'd be very worried about losing deductions beyond just interest.

So the policy risk around rental investment has just gone through the roof. In all likelihood if prices increase there's going to be another negative policy change implemented. If prices decrease, you are losing money. The chances of stable to very low growth (sub 3% pa?) has got to be small.

And back directly to retirement companies, the risk of amended taxation rules on retirement company profits has just increased, how much I'm not sure but it has increased. If net surplus's were to fall by 28%, what impact would that have on share prices? Would the ability to provide imputated dividends mitigate some of this impact?

The facts being:
>Retirement companies pay a very low effective tax rate (near zero %).
>Sometimes a social benefit argument has been used around why this situation will remain
>Sometimes the argument is used that its non-taxable under existing tax principles and these principles are embedded tax law developed over centuries

But the government has just confirmed that it doesn't respect:
>existing tax principles
>the social benefit argument either because property landlords provided housing to people who couldn't afford or didn't want to buy houses. If they didn't do this the government would need to step in and provide more social housing. Property landlords have just been hit with altered tax laws despite the fact they provide a socially desirable service.

Excellent post containing a number of very good points. Once you let the socialism Genie out of the bottle almost anything is possible under the auspices of the greater good for all.
You could be right about denial of ability of claiming rates, insurance, repairs and maintenance as deductible because home owners can't claim them so this must be a "loophole" right ?...and the roars of approval from the "cheap seats" would only get louder. Leaving aside the huge new risk to the retirement sector for a second, if OCA can't grow earnings on a rapidly rising housing market how on earth will they grow earnings on a declining property market ?

Surely its just a matter of time before Cindy gets the sledgehammer out again to knock greedy retirement companies into shape to save poor old mum's and dad's from being "exploited" ? If they have no qualms about attacking one of the foundational principles of the tax system that was established more than a hundred years ago legislating to overturn a binding ruling regarding the tax treatment of financial arrangements for licenses to occupy in retirement villages which has only been around for 25 years or so will be a mere trifling matter of little consequence by comparison. Closing another tax "loophole" and the crowds in the cheap seats will cheer again !

Where this ends is anyone's guess...hopefully at the next election.

[Beagle]

Seems OCA share price going down the ATM share price path ...ouch

Underpinned by a NTA of 1.02 — a 10% revaluation downwards of 10% of investment properties etc would wipe about 14 cents off that

Good point Winner. NTA is only good if the property market holds and with some leverage involved if it doesn't the effect is magnified.

[winner69]

Good point Winner. NTA is only good if the property market holds and with some leverage involved if it doesn't the effect is magnified.

And with more than 10% more shares on issue eps and NTA could go down if things don’t go to plan.

But they did say the acquisition is eps accretive - that’s good

Sometimes hard to prove things are actually eps accretive ...but always sounds good

[allfromacell]

Don't forget the recent property rises haven't been accurately reflected in the NTA and hardly into the unit pricing, OCA has quite a bit of headroom.

I also suspect FHBs will help add support to the property market and plenty of 'amature' investors will look to buy as kiwis just can't help themselves when it comes to property.

[Habits]

Seems OCA share price going down the ATM share price path ...ouch


Quote from ATM thread posted today:
"Still holding on and believe ATM will follow XRO in their footsteps"

Quite uncanny

[winner69]

Looks like Harbour Asset / Jardens bought 13 million plus shares in the placement

Jeez - they buying heaps of My Food Bag and Oceania lately

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/369970/343377.pdf

[Maverick]

Firstly, I applaud all of Beagles opposing ideas of mine and others.It is most healthy to question everyone's assumptions. I have the greatest respect for him and his contributions on ST.

What is not healthy though is just how much frequency and volume we are currently experiencing to one mindset thumping a message home to such dominance on this thread. So much so that anybody without a strong grasp on their own OCA opinions would assume his opinion “you must surely be right”, therefore leading to selling out.

I don't want to make this a pissing contest. Again, I fully respect Beagles enormous value that he brings to the thread but I feel I must respond to his many and lengthy posts to bring some form of balance.

“This is a no growth company, you either see it or you don't”
I strongly disagree. Oca is expected to deliver growth 2022 (the FY we are currently in as of last week) by ALL analysts including myself. Note these estimates are before the tax changes last week:
UBS project underlying profit of $66m . Up 33.3% from their FY21.
Forsyth project underlying profit of $61.1. Up 22.7% from their FY21.
Credit Suisse project underlying profit of $56. Up 30.7% from their FY 21.
I project underlying profit of $66. Up 32.2% from my FY21.

So we are ALL seeing significant growth working its way through the P+L of around 30%. My own patience is not as great as Beagle credits me for, it's just that I and ALL the analysts can see within the numbers that large underlying profit rises are already in play and happening.

“Continuing out of control Health care costs will always eat any other profit gains away.”
Not true. Health care profits are on the rise steadily from 1HY21, this is proven and will continue to rise linearly according to Earl`s statement and my workings.
Large health worker cost rises have been well discussed ad-nauseum on this forum about a year ago and fully anticipated as part of the redevelopment programme.

"If HPI stops rising then that's a head wind and will seriously effect profitability."
Rising HPI is only one tailwind of the sector. After the recent tax changes and the possibility of falling house prices since I have run an extreme case of zero growth HPI senario through the spreadsheets of the next 7 years, and writing off this year's HPI of 20% increase.
While I don't personally believe shifting out property investors for new house buyers is going to crash the market at the top end I would be foolish not to entertain the idea.
With HPI running at my own expectations of 2.5% including this year , my CAGR for 7years is 19%.
With HPI running at 0% including this year, my CAGR for 7years is 14%.

The Share price could possibly fall to $1
Anything is possible but I don't see this even remotely possible.
The share price has fallen 20% from its February peak. Circa 3 times as much as SUM and RYM.
One will note OCA turnover since 24th (tax change and acquisition announcement day) has roughly tripled while the other players are steady.
I've thought hard about this oddity;
Possibility 1... People hate the acquisition and are getting out.
Possibility 2... Beagle has had enough and is getting out.
Possibility 3... Bear with me here, it's a bit complicated….
Part1-Dumping $80m of new shares into the market the day after the tax change is a recipe for loose , non OCA believers, to sell out . New owners were able to flood the market with their newly acquired $1.30 shares from 29th March, either initially for a quick stag profit and thereafter possibly in fear of the new tax legislation or simply just moving on from what now seems a dud opportunity.
Now remember many of these new share owners won't have any understanding of OCA as they are not necessarily existing OCA holders, just Jarden / MAQ clients.
Part 2- Buyers are simultaneously sitting on their hands GUARANTEED the shares will be the same $1.30 price at worst or even cheaper in a week. The only reason an existing OCA owner would buy on market over the last and next week is fear of scaling of their offline final allocation.

I think OCA`s tokenism of throwing a small portion ($20m) of shares to existing shareholders at a guaranteed lower price ( 2 weeks later than the $80m) has temporarily messed the rational market function up here.

So the imbalanced market of significantly more sellers and simultaneously less buyers one may understand why the current SP falling like it has.
It is a smaller , far more harmless rerun of the COVID situation after MAQ dumped $300m last year followed up 2 weeks later by Covid.
The SP being 20% down is way out of whack from its peers and I personally expect it to quickly recover soon after 12th April.Frankly I think a existing shareholder can beat the big boys this time.

There you have it….
I'm saying I see this is a fantastic time to BUY, ( perhaps the next week will be even uglier but will quickly head north again post 12th of April when the window of guaranteed cheap shares closes).

Beagle is saying its a terrible time to buy.

Both of us could well be right over different time frames but the point of this lengthy post is not to cause a bun fight with Beagle, again, who I deeply respect, but just to outlay my own thoughts in order to offer a balancing case.

DISC . I'm buying as many as I can get, admittingly having to wring blood out of a stone to do it.

[Dlownz]

I think there's a bit of scaremongering going on. Houses prices at OCA villages have increased since Feb/March on average they have gone up 40k and in all honestly they still seem reasonable cheap. The village I was at are still showing strong inquirys and sales as well on unfinished referbs and new builds. The new build prices will go up on any unsold once completed.

[value_investor]

I'd be a huge buyer at $1.00 if it gets there again.. gosh I don't know whats happened here but I don't think the new rules will move prices that much lower. I still see stable increases in the low single digits still being a thing(the days of this unsustainable price increase are gone). The issue of supply isn't going away, then there's the issue once you get supply in the market, some people choose to just sit on their houses. The 2018 census confirmed this with 195k houses said to be unoccupied.

There's also the issue of the scarcity of land, and the practice of land banking being rife in New Zealand. I can't see a land tax being administered by the current government or future governments but the cost of land is really a big driver to house prices. I just don't see these current changes having a material impact on people getting out of investing in property in New Zealand.

On the share price, I still think the property revaluations will drive up prices from the last one and the NTA to grow over time. I think OCA have shown that they can build units at scale and at appropriate costs. A share price of $1-$1.10 represents great value if it gets there, the retirement sector is not going anywhere and the care side of the business will continue to grow. This still has great growth potential over the next few years, and the sector as a whole is a solid investment over time. I would load up the truck at that price.

[allfromacell]

Fantastic post Maverick as always, thank you.

I also want to add that a lot of the significant covid-19 costs won't be as prevalent in the next 12 months (touch wood). If there is no growth in underlying EPS this current FY (started 1st April) I'll be very disappointed. Don't forget the acquisition settlement is also just around the corner.

[RupertBear]

Firstly, I applaud all of Beagles opposing ideas of mine and others.It is most healthy to question everyone's assumptions. I have the greatest respect for him and his contributions on ST.

What is not healthy though is just how much frequency and volume we are currently experiencing to one mindset thumping a message home to such dominance on this thread. So much so that anybody without a strong grasp on their own OCA opinions would assume his opinion “you must surely be right”, therefore leading to selling out.

I don't want to make this a pissing contest. Again, I fully respect Beagles enormous value that he brings to the thread but I feel I must respond to his many and lengthy posts to bring some form of balance.

“This is a no growth company, you either see it or you don't”
I strongly disagree. Oca is expected to deliver growth 2022 (the FY we are currently in as of last week) by ALL analysts including myself. Note these estimates are before the tax changes last week:
UBS project underlying profit of $66m . Up 33.3% from their FY21.
Forsyth project underlying profit of $61.1. Up 22.7% from their FY21.
Credit Suisse project underlying profit of $56. Up 30.7% from their FY 21.
I project underlying profit of $66. Up 32.2% from my FY21.

So we are ALL seeing significant growth working its way through the P+L of around 30%. My own patience is not as great as Beagle credits me for, it's just that I and ALL the analysts can see within the numbers that large underlying profit rises are already in play and happening.

“Continuing out of control Health care costs will always eat any other profit gains away.”
Not true. Health care profits are on the rise steadily from 1HY21, this is proven and will continue to rise linearly according to Earl`s statement and my workings.
Large health worker cost rises have been well discussed ad-nauseum on this forum about a year ago and fully anticipated as part of the redevelopment programme.

"If HPI stops rising then that's a head wind and will seriously effect profitability."
Rising HPI is only one tailwind of the sector. After the recent tax changes and the possibility of falling house prices since I have run an extreme case of zero growth HPI senario through the spreadsheets of the next 7 years, and writing off this year's HPI of 20% increase.
While I don't personally believe shifting out property investors for new house buyers is going to crash the market at the top end I would be foolish not to entertain the idea.
With HPI running at my own expectations of 2.5% including this year , my CAGR for 7years is 19%.
With HPI running at 0% including this year, my CAGR for 7years is 14%.

The Share price could possibly fall to $1
Anything is possible but I don't see this even remotely possible.
The share price has fallen 20% from its February peak. Circa 3 times as much as SUM and RYM.
One will note OCA turnover since 24th (tax change and acquisition announcement day) has roughly tripled while the other players are steady.
I've thought hard about this oddity;
Possibility 1... People hate the acquisition and are getting out.
Possibility 2... Beagle has had enough and is getting out.
Possibility 3... Bear with me here, it's a bit complicated….
Part1-Dumping $80m of new shares into the market the day after the tax change is a recipe for loose , non OCA believers, to sell out . New owners were able to flood the market with their newly acquired $1.30 shares from 29th March, either initially for a quick stag profit and thereafter possibly in fear of the new tax legislation or simply just moving on from what now seems a dud opportunity.
Now remember many of these new share owners won't have any understanding of OCA as they are not necessarily existing OCA holders, just Jarden / MAQ clients.
Part 2- Buyers are simultaneously sitting on their hands GUARANTEED the shares will be the same $1.30 price at worst or even cheaper in a week. The only reason an existing OCA owner would buy on market over the last and next week is fear of scaling of their offline final allocation.

I think OCA`s tokenism of throwing a small portion ($20m) of shares to existing shareholders at a guaranteed lower price ( 2 weeks later than the $80m) has temporarily messed the rational market function up here.

So the imbalanced market of significantly more sellers and simultaneously less buyers one may understand why the current SP falling like it has.
It is a smaller , far more harmless rerun of the COVID situation after MAQ dumped $300m last year followed up 2 weeks later by Covid.
The SP being 20% down is way out of whack from its peers and I personally expect it to quickly recover soon after 12th April.Frankly I think a existing shareholder can beat the big boys this time.

There you have it….
I'm saying I see this is a fantastic time to BUY, ( perhaps the next week will be even uglier but will quickly head north again post 12th of April when the window of guaranteed cheap shares closes).

Beagle is saying its a terrible time to buy.

Both of us could well be right over different time frames but the point of this lengthy post is not to cause a bun fight with Beagle, again, who I deeply respect, but just to outlay my own thoughts in order to offer a balancing case.

DISC . I'm buying as many as I can get, admittingly having to wring blood out of a stone to do it.



Fabulous post thanks Maverick :) really appreciate you taking the time to share your extensive well considered thoughts with us.

[Beagle]

Note these estimates are before the tax changes last week:
UBS project underlying profit of $66m . Up 33.3% from their FY21.
Forsyth project underlying profit of $61.1. Up 22.7% from their FY21.
Credit Suisse project underlying profit of $56. Up 30.7% from their FY 21.
I project underlying profit of $66. Up 32.2% from my FY21. Maverick
I have a lot of respect for the work and analysis you put in too mate but I just want to highlight four key things about the headline growth numbers you've posted above.
Firstly, as you've pointed out all these forecasts were in the market before last weeks bombshell announcement. Its inevitable they will be revised as they are predicated upon rising house prices.
Secondly FY21 is just 10 months and FY22 is 12 months so the growth shown is artificially exaggerated by 20% simply due to the longer financial year in FY22.
Thirdly FY21 included lockdown periods in Auckland (where OCA have substantial numbers of villages), in August 2020, February and March 2021 so if FY22 proceeds without lockdowns the unhampered trading period difference is more like 25%, 12 months in FY22 v approx 9 clear trading months in FY21. This further distorts the headline growth percentages you note
Fourthly - All the brokers are accepting at face value Earl's outlook statement regarding their wages costs growing from FY21 in line with MOH care fee increase when the company has a 4 year history of them growing at 7.3% v about 3% annual increments in the ministry of health care fees. My experience tells me that reigning in wage cost inflation is much easier said than done and if wages costs go up by just 2-3% per annum more than what the brokers are modelling (historically more than 4% higher) that eats away a substantial part of the profit growth.

I think the fortunes of OCA's share price will be dictated by the real estate market this year, just like it was last year. My guess for the near future is that the real estate market will correct downward and take OCA's share price with it.


I think OCA`s tokenism of throwing a small portion ($20m) of shares to existing shareholders at a guaranteed lower price ( 2 weeks later than the $80m) has temporarily messed the rational market function up here. Maverick The share price was $1.39 on the evening before the tax bomb was dropped. It closed on Thursday at $1.26 a drop of 9.4%. I think that's quite a rational early response to such a major policy change especially when that change opens the real prospect of further reform.

[Vee Vee]

Frankly I think a existing shareholder can beat the big boys this time.


Yay! A win for the little guy for a change.

Disc: Still salty about KMD cap raise.

Also disc holding.
Also also happy to buy more at $1.
Not convinced the property market is doomed and ruined forever. Remain convinced OCA can make money, even if Beagle did some of the convincing.
For clarity thanks Beagle, Mav et al for the input, good to maintain a weather eye on the potential down sides.

[Waltzing]

Some long reads here from the BMW team (Beagle, Mav, Winner).

Is it time to actually dig out the financials and have another look?....

Time to create some small models on this? its just most of us are busy and we have accounting models to maintain and software to test.

We are working our way through creating some broking platform software and therefore the BMW team lead the debate here.

Some very very interesting points presented by all and we will have to go back to read the financial again.

It obvious through the last year that SUM outperformed and that really it is the company that should have got a lot of attention model wise from local investors.

We are more defensive commercial, retail, travel , entertainment and banks.

Retirement villages have never been on our radar until now.

The question is which if you dont buy a village spot, where are you going to retire too. Even if house prices go back 25% SUM will still be making good profits?

If so we have all been looking at the wrong company for short (1 to 3 years) term investment profits.

"horror scenario and hope it never happens"

Some administrative changes to capital gains taxes on retirement home villages profits ? Why not whose going to notice that?

https://www.interest.co.nz/property/109795/overall-sales-rate-61-auckland-auctions-77-bay-plenty

[winner69]

Maybe there is profits in Aged Care

Annual and Interim Reports segment reporting show Care Segment profits increasing pretty solidly (H1 EBITDA up 16% on pcp)

Key metric EBITDA per Care Bed showing healthy upwards trend

All in spite of the huge wage increases problem... and covid stuff

[Mudfish]

"Possibility 3... Bear with me here, it's a bit complicated….
Part1-Dumping $80m of new shares into the market the day after the tax change is a recipe for loose , non OCA believers, to sell out . New owners were able to flood the market with their newly acquired $1.30 shares from 29th March, either initially for a quick stag profit and thereafter possibly in fear of the new tax legislation or simply just moving on from what now seems a dud opportunity.
Now remember many of these new share owners won't have any understanding of OCA as they are not necessarily existing OCA holders, just Jarden / MAQ clients.
Part 2- Buyers are simultaneously sitting on their hands GUARANTEED the shares will be the same $1.30 price at worst or even cheaper in a week. The only reason an existing OCA owner would buy on market over the last and next week is fear of scaling of their offline final allocation.

I think OCA`s tokenism of throwing a small portion ($20m) of shares to existing shareholders at a guaranteed lower price ( 2 weeks later than the $80m) has temporarily messed the rational market function up here.

So the imbalanced market of significantly more sellers and simultaneously less buyers one may understand why the current SP falling like it has.
It is a smaller , far more harmless rerun of the COVID situation after MAQ dumped $300m last year followed up 2 weeks later by Covid.
The SP being 20% down is way out of whack from its peers and I personally expect it to quickly recover soon after 12th April.Frankly I think a existing shareholder can beat the big boys this time." Mav's Post
Thanks for your post Maverick. I needed to read it several times, with coffee, to get my head around it and well worth the effort it is. Awesome Job. I have a large mount of these shares and am a happy long term holder, however, I certainly am not enjoying the present dip in SP of course. I have nothing of any value to add to your well thought out post but am fascinated by the part I have highlighted above. If this is correct, and it makes absolutely logical sense to me, we should see more SP pain next week but the following week should be the beginnings of SP growth back to where it should be. This 20% SP drop is presenting a real buy opportunity here. I am very tempted to snatch a few more though I probably won't as I have loads already. However, I'll be watching carefully to see how the next few weeks plays out. What fantastic insight. I see this as a 2 week cricket match where we will likely take a hiding next week then turn the game on its ass the following week. I hope so. Cheers.

[winner69]

Goodness gracious - the much revered Tony Alexander best guess is that property prices on average will fall about 10% and will bottom out some time after the middle of the year

[Waltzing]

"Key metric EBITDA per Care Bed showing healthy upwards trend"

by (BMW)

some nice tables with proper heading is needed highlighting the profitable and non profitable areas.

Companies like HLG are so easy to invest in because the PL is easy to read at a glance.

Well Winner if 10% is all they are going to get the Busy Bees in the Beehive will have to have another look in the brown fields and look deep for the Honey to put in the Tax Payer Pot.

[tim23]

Ya what?? If that's not one thoroughly stirred up Beagle, it will do until a real one turns up.

And that may only be a problem for old lefties like me who have had a lifetime of never quite trusting a right wing argument /analysis advanced with passion and vehemence. As with Balance - I respect Roger's analytical ability, wisdom and knowledge, but (as also with Balance), I suspect at least some of his conclusions are at very least shaded by his visceral politics.

Mine certainly are, and I suspect my decision to exit my holding in SUM and put the $s into OCA had at least a little to do with a desire to support a"care" model.


Well stated - plenty of irrational panic statements since new policy announced, wait for dust to settle.

[Waltzing]

"plenty of irrational panic statements"

we dont see anything irrational about every ACA in the country recalculating of Tax due for there property investing clients out 5 years.

Its not a model they have built into there platforms with cortana voice control.

Its something to think about though.

MR B is thinking outside the box here and the trip wires are sending out loud alarm bells.

Sometimes when the dots point in a direction thats where the paint hits the canvas.

[winner69]

The share price was $1.39 on the evening before the tax bomb was dropped. It closed on Thursday at $1.26 a drop of 9.4%. I think that's quite a rational early response to such a major policy change especially when that change opens the real prospect of further reform.

.

On average sector down 5.5% v NZX50 up 1.3% since that housing policy

ARV -4,6% OCA -9.4% RYM -4.2% and SUM -5.1%

Maybe OCA down more than other three because of capital raise?

[winner69]

"plenty of irrational panic statements"


MR B is thinking outside the box here and the trip wires are sending out loud alarm bells.

Sometimes when the dots point in a direction thats where the paint hits the canvas.




Very 'poetical' of you

Maybe its all a lot of noise that will as noise does subside and we'll all say what happened back then

I think that's what Tim just said!

[Waltzing]

What you are getting from MR B is a sound bite from the little offices where investment decision get there final stamp of approval.

Those investor balance sheets are not unlike any other business balance sheet.

The investors balance sheets purchased a class of assets.

The noise level equates to the total +- purchases of an asset class.

It might well be that those assets are re priced and that would be the repricing of a lot assets.

That sound like a lot of drums being banged on to us and its making a lot of loud sounds in every ACA office in the country.

That blaring sound is the sound of the klaxon as the helm goes hard a port.

[macduffy]

I guess that must mean something? Or not?

:sleep:

[winner69]

I guess that must mean something? Or not?

:sleep:

Suppose we shouldn’t do jokes about accountants but -

An accountant is someone who solves a problem you didn't know you had in a way you don’t understand

[Beagle]

Hugely experienced Tony Alexander weigh's in https://www.oneroof.co.nz/news/39190 Excellent synopsis of the situation, in my opinion.

[Waltzing]

Mr B is alerting to a problem in the ROI at the desks he and other are sitting at.

That desk is where the money is put down and decisions are made as to which direction it flows in the market.

The long faces last week of that very class of professional was evident in the room. I think in posts above from MR B and ourselves have clearly stated the obvious already and its no joke.

It asks the question as to the products and land that make up a construction unto which you can lease for the purpose of housing is now an Asset class that is placed on a balance sheet for the purpose of investing as a business.

This is obvious , and its why Mr B has sounded the klaxon ," residential property assets in order to pursue social goals and effectively make private owners of residential property part of the state’s housing provision network."


"The characteristics of residential property as an asset in one’s portfolio have changed. That does not mean there is about to be a wholesale dumping of this asset. But it does suggest a slow repricing over time."

[winner69]

Mr B isn't a very famous accountant because he hasn't had a tax loophole named after him

[winner69]

Part of long post

In July 2017 they announced their maiden listed profit for the year ended 31/5/17 of $45m underlying earnings which based on the number of shares at the time was...drum roll please...9.14 cents per share.



This 9.14 cents EPS seems to be the basis of many of your discussions and that they ar doing worse now - had me puzzled.

Thing is Underlying Profit in year to May 2017 was $34.0m (not your $45m) - and EPS of 5.6 cents (on 610m shares)

So EPS performance hasn't been as bad as you have made out. Didn't look too bad up to Nov 19 but Covid put paid to that

Even after covid issues EPS at Nov20 was 19% higher than May 17 - not as good as the +58% as Nov 19 though

Here's a chart I posted a while ago - Rolling annual Underlying Earnings EPS

Pretty sure my numbers are correct

[Beagle]

Thanks, looks like a tired overworked bean counter chose the wrong reported profit figure from 2017. Easy enough mistake to make I suppose when they report profit so many different ways. Annual underlying eps has been downhill from May 2018 though when it was 8.54 cps. I need to get more rest and sleep, its been a long and very sad week for reasons I won't expand upon.

The fact remains that the tremendous growth in human resource costs has sucked the eps growth out of OCA to date and whether this changes going forward remains to be seen. justakiwi and her mates have certainly enjoyed good growth in their incomes. Not much money in providing high level's of high quality care. I can almost hear Mav in my head reminding me that they're building a lot of apartments as opposed to care suites in the next few years. Maybe some eps growth will eventually happen for those with heaps more patience ? Mav's probably got more patience than I have...good luck to him I reckon. One is best to work with their strengths, whatever they are.

On the other hand maybe the retirement sector review will throw up some real problems for this sector. The socialist risk premium has certainly escalated that's for sure !! Might keep my remaining shares just for interest seeing as they're free.

[Waltzing]

Team (BMW) posts again and we simply cant imagine why we would do a model of this stock.

The next underlying profit will be the last before the new rules start to come into effect.

It could be 12 months before the effects of this will start to be known for sure.

Therefore the next stats wont mean much as they will be under the old market models.

Any drum rolls will be almost meaningless.

"Mr B isn't a very famous accountant because he hasn't had a tax loophole named after him"

oh he must be an honest one then....

[Mudfish]

I have sent in my request for shares through the capital raise thing. Now I'm keen on SP pulling back. 5 day ave less 2.5%., no fees. A chance to hook a few at a brilliant price then the real possiblity of growth the following week as 'normal' trading renews due to offer being closed. What's not to like.

[Blue Skies]

Don't know why everyone's (well many here anyway) worried, National's David Bennett assures everyone 'investors haven't pulled out of the market,...that's just not true'.
So as you were, ignore all the naysayers, rampant house inflation price to continue. :confused:

https://www.newshub.co.nz/home/politics/2021/04/housing-national-s-david-bennett-knocks-down-labour-over-rubbish-investor-claims.html

[Bjauck]

Hugely experienced Tony Alexander weigh's in https://www.oneroof.co.nz/news/39190 Excellent synopsis of the situation, in my opinion.

Thanks. Tony's view from 1 April 2021 is worth a read too. Apologies if this link has been posted before.

http://www.tonyalexander.nz/publications.php

[Grimy]

I have sent in my request for shares through the capital raise thing. Now I'm keen on SP pulling back. 5 day ave less 2.5%., no fees. A chance to hook a few at a brilliant price then the real possiblity of growth the following week as 'normal' trading renews due to offer being closed. What's not to like.

Hi MF. Have you put in for as many as you actually want, or a higher amount that you feel may be scaled (I know there's no way of knowing the % at present) back to what you want, or the maximum you can apply for?
I will be applying, but probably for an amount between the two first options. Which I know is only guessing.

[Blue Skies]

Thanks. Tony's view from 1 April 2021 is worth a read too. Apologies if this link has been posted before.

http://www.tonyalexander.nz/publications.php


A much needed, sensible, dispassionate perspective.
The recent hyperbole, emotive, irrational lets jump straight to worse case possible scenarios commentary on this thread is a bit surprising & seems to be running away with itself.
Seriously, were Retirement village profits always previously predicated on 20% annual house price increases ?
With income to debt ratios getting out of hand, homeownership levels falling, dangerously high debt levels by borrowers, investment money pouring into the housing stock instead of job creating wealth producing NZ businesses, was the govt supposed to do nothing?
I know a large business owner who wonders why he has all the worry of running a business, a 7 day a week job, looking after a large number of employees, when he could make just as much money without all the worry by buying a few houses and sitting on them. Where's the incentive now to start up or run a business?
And are corporate property landlords really a credible source of neutral commentary, of telling it like it is, or possibly they have a vested interest in maintaining the status quo.
And they might be wonderful people but anyone who worked for Lehman Brothers & HSBC in the past, well these haven't exactly been shinning corporate citizens.
And no this govt is not anything like a socialist govt or interested in redistributing wealth, anymore than or perhaps a lot less than Lehman or HSBC or many other merchant banks or corporate law firms. Our top tax rate kicking in at income over $180,000 is still lower than many other OECD countries including Australia & although the National Govt's Brightline tax has new been extended to 10 years, Adern has ruled out introducing any new capital gains taxes, and there has been zero mention of any changes to taxes around Retirement companies.
With latest bank deposit rates falling to 1% or less, others like myself are still looking at buying houses as an attractive investment & I can't see there's going to be a rush for the door by property investors crashing the market.
So excuse my little rant for the day, I really do respect and very much appreciate everyone's opinions on here & its easy to get caught defending a position or being labeled or pigeon holed which is always a lazy way of thinking as things are always much more complex & shades of grey than black & white, but just felt I had something to say.

[Cyclical]

Goodness gracious - the much revered Tony Alexander best guess is that property prices on average will fall about 10% and will bottom out some time after the middle of the year

What was it someone said the other day with regards to economists, blindfolds and dartboards?

[Waltzing]

The comments regarding the social side effects of high housing prices to income may not be what we have been commenting on.

Its the technical properties of the remedy and its wider aspects.

For a % of the population that are accountants and business investors its the wider technical aspect of the remedy that is the problem not the outcome.

Economists are not trained accountants and sometimes are like science researchers using any number of algo's that are not as practical as the original practitioner, Muḥammad ibn Mūsā al-Khwārizmī.

[winner69]

Waltzing - there’s a new breed of professionals these days - accountonomist

They meld the best of accounting and economic thinking.

I think beagle is on the path to becoming a top rate accountonomist

[Waltzing]

"accountonomist"

ok can you please tell us how to correctly pronounce this.

Sounds very like an Anatomist.

I do think you may be on to a new science.:confused: :eek2:

[winner69]

A year ago beagle said this about OCA - The best analogy I can come up with is being invested in this company is analogous to driving a car with the handbrake on, (with that handbrake quite clearly being the intensity of the care services provided and the rapidly increasing cost of doing so).

Seems the handbrake is still well and truly on ...and the engine seems to losing oomph as well.

[Greekwatchdog]

Then he buys a bucket load to him ramps it up..Go figure

[Beagle]

A year ago beagle said this about OCA - The best analogy I can come up with is being invested in this company is analogous to driving a car with the handbrake on, (with that handbrake quite clearly being the intensity of the care services provided and the rapidly increasing cost of doing so).
Seems the handbrake is still well and truly on ...and the engine seems to losing oomph as well.
Still seems like a great analogy. They were great buying at 70 cents in May 2020 though.

[winner69]

Still seems like a great analogy. They were great buying at 70 cents in May 2020 though.

You got that recreational vehicle yet?

[Waltzing]

who would not buy at 70 cents, you had to be Barking Mad not too.:eek2:

and then rebalance when what might be the biggest change in tax assets classification in NZ business investment history.

[winner69]

Waltzing ...you go out for a ride in the hills today?

[Beagle]

You got that recreational vehicle yet?

Went to the Caravan and motorhome show a couple of weekends ago and the place was an absolute mad house. Every man and his dog seemed to be desperate to get into a new hobby. Full retail, no negotiation, just hand over you money and get in the queue which is out well into 2022 for popular models now. Not sure what to do now...

[Beagle]

who would not buy at 70 cents, you had to be Barking Mad not too.:eek2:

and then rebalance when what might be the biggest change in tax assets classification in NZ business investment history.

Thanks, that sums the situation up perfectly.

[Greekwatchdog]

Actually they were better buying at $0.40 for those who captured..

[Beagle]

Yeah, for those that had the kahuna's to buy in the furnace of fear when most thought Covid would have extremely grave consequences, well done !

[Mudfish]

Grimy, I have gone for as many as my spare cash will allow. If I could I would ask for the full 50k. As I understand it, if scaled allocation will depend on amount already held. So, unknown what you will actually end up with.

[Greekwatchdog]

It was going to be as good as the reaction. Thankfully we have a lot of ocean around us to protect. There was way too much "panic". Great for those who had the guts too play long and buy at all time lows.

[Bjauck]

Actually they were better buying at $0.40 for those who captured.. "Coulda shoulda woulda"....that was at a stage when there was fear that Covid was preparing to rip through NZ retirement villages making them akin to mini Chernobyls...then they abruptly turned out mostly to be little oases for the residents.

Of course Covid did rip through retirement homes overseas with an horrendous death toll and suffering.

[Cyclical]

Thanks. Tony's view from 1 April 2021 is worth a read too. Apologies if this link has been posted before.

http://www.tonyalexander.nz/publications.php
Indeed, yep, this is a really good balanced write up from Tony, offering great perspective. Well worth a read for those of you that haven't. To sum up, the sky's not about to fall.

[tim23]

"plenty of irrational panic statements"

we dont see anything irrational about every ACA in the country recalculating of Tax due for there property investing clients out 5 years.

Its not a model they have built into there platforms with cortana voice control.

Its something to think about though.

MR B is thinking outside the box here and the trip wires are sending out loud alarm bells.

Sometimes when the dots point in a direction thats where the paint hits the canvas.




People will adjust, investors won't be running for the exit.

[Grimy]

Grimy, I have gone for as many as my spare cash will allow. If I could I would ask for the full 50k. As I understand it, if scaled allocation will depend on amount already held. So, unknown what you will actually end up with.

Thanks for that MF. Will be interesting to see how the price goes this (short) week.

[James108]

Yeah, for those that had the kahuna's to buy in the furnace of fear when most thought Covid would have extremely grave consequences, well done !

I don’t think you had to have huge kahunas, just an unemotional and logical assessment of risk/reward. What’s that saying? Be greedy when others are fearful.

[Bjauck]

It was going to be as good as the reaction. Thankfully we have a lot of ocean around us to protect. There was way too much "panic". Great for those who had the guts too play long and buy at all time lows....and we had Ardern as PM and not a Johnson or a Trump?

[Habits]

Went to the Caravan and motorhome show a couple of weekends ago and the place was an absolute mad house. Every man and his dog seemed to be desperate to get into a new hobby. Full retail, no negotiation, just hand over you money and get in the queue which is out well into 2022 for popular models now. Not sure what to do now...

156 used motorhomes in auckland right now some late model... better to buy appreciable beach-house maybe? I know where you can get them on the cheap and 1 hour from Auckland

[nztx]

156 used motorhomes in auckland right now some late model... better to buy appreciable beach-house maybe? I know where you can get them on the cheap and 1 hour from Auckland


or buy all 100 then wait until the Covid storm is well passed .. ;)

the way things are likely headed, Govt will be needing to rent & hire anything
that even looks like it has a spot for resting heads .. ;)

Even bunks installed in porta-loos may be forced onto the desperate list .. ;)

[winner69]

OCA had an Exec LTI plan .... the hurdle for them to get rich was Underlying Earnings to grow at 35% pa from 2017 (eps 5.6 cents) through to May 2020.

Implied target for May 2020 therefore was eps of 13.8 cents --- they achieved 7.0%

Big fail - achieved 7.7% pa v target of 35% pa. Hope no incentives were paid out for trying hard and doing ones best

They have a new LTIP in place - growth from F20 blah blah - but they won't tell me what the hurdle rate is

[Waltzing]

"People will adjust, investors won't be running for the exit."

We dont care where they run too or from what.

We care about a system that technically starts to break down.

Image you have clients with millions to invest. Then you start realise your not just some hobby investor but a professional looking after the capital of dozens of trust and dozens and dozens of investment portfolio companies and the size of the technical multiples.

In those small and large offices the numbers are being re run.

Mr B knows the situation and the size of coming reallocations and it start's soon; you wont see it and you wont hear about it on this forum.

[winner69]

I don't know what to make of it - Earl and Beagle bailing at the same time

That's spooky eh possums

[850man]

I have one of those commonwealth games commemorative dollar coins too

[Beagle]

I have one of those commonwealth games commemorative dollar coins too

They're really cool. Nice and weighty and an excellent coin to flip when you're feeling ambivalent ;)

[dabsman]

Not concerned in the slightest about the next few years. Property market goes up the build margin goes up and resale margin increases. Property prices go down new land purchases are cheaper. All the while more units are completed. Who cares in the long run?

[bullfrog]

Pulled this table out the database just for you Beagle - OCA unit selling prices relative to median house prices

Of course it doesn't reflect the so called 'mix' impacts Oceania talk about

Maybe a story or two in the numbers

I have highlighted the new care suite numbers - that is where I believe all the action is (most sales) and is the future

https://www.sharetrader.co.nz/attachment.php?attachmentid=12376&d=1615512768

Great table W69, tried to copy it again, #8191 for those who want to check it out.

It would appear that OCA have some headroom in their pricing, especially in their care suites priced at below 40% of the median house price. The insto investors who brought $80m of stock at $1.30 would have done a fair bit of due diligence into where their money is going, which is property development. Risks as I see them:

1. Can OCA build them. Apparently now is the best time to be a property developer, with District Plans relaxing consent conditions, and the RMA under review. Contractors and building supplies may be a risk though.

2. Can they sell them. In this market, selling off the plans is common place, and with baby boomers having a huge ramp up in their property value, they'll have a lot more money to spend on care suites and apartments when they sell the family home. It's a product that people need.

3. Will prices fall. Well, according to some, house prices will fall due to landlords selling to FHB due to losing the tax breaks on interest payments. I'm not buying this argument, with FHB cashing in their Kiwisavers that have done very well, money will keep flowing from stocks and into property. Also, the more property owners the better IMO as they're more likely to spend money improving the property than landlords, and buying more stuff is good for the economy so I've been told.

As an aside, I'm surprised how people react to government changing the rules, all democracies are periodic dictatorships. I believe it's widely accepted that the government needed to do something to cool the market, and all those insto investors at $1.30 would have factored into their valuation a cooled market. Any long term investor would surely have considered macro effects on a company's value, such as static house prices, and not be too concerned when it actually happens.

All in my opinion of course!

[Bjauck]

My support for this new issue has become equivocal too. The environment for this company has changed.

[Brain]

Maybe we should lighten the mood here.

"I was offended" by Steve Hughs is good for a laugh

https://youtu.be/ceS_jkKjIgo

[Lease]

Maybe we should lighten the mode here.

"I was offended" by Steve Hughs is good for a laugh

https://youtu.be/ceS_jkKjIgo

Good on you, Brain.

Yes, being rational rather than emotional is the key for investing successfully.

[Brain]

Deleted .......thought better of it.

You can post it we won’t be offended

[Baa_Baa]

On an optimistic positive note, the chart (https://invst.ly/ud3mr) is oversold, the closing price Thursday is on a horizontal support, it is also bang on the 200MA support, and on the 61.8% Fib retrace support. Looking for an SP bounce here.

[Blue Skies]

On an optimistic positive note, the chart (https://invst.ly/ud3mr) is oversold, the closing price Thursday is on a horizontal support, it is also bang on the 200MA support, and on the 61.8% Fib retrace support. Looking for an SP bounce here.


Excellent!
That would cheer us all up. Hope everyone's had a very Happy Easter.

[James108]

“Potentially actionable” your honour someone was mean to me on an online forum.

Aaaaaaanyway most opinions are welcome and add a different point of view to consider. If you don’t agree with one of beagles just wait 6 months (or 48 hours...?).

[Beagle]

Unfortunately there is a long and well entrenched pattern of behavior...

Anyway..back to OCA. Very hard to predict eps for FY22 when FY21's result is such an open question. If it sticks around the current price of $1.26 then the retail offer price will be $1.26 x 0.975 = $1.228.

[Rawz]

What a great few days on the OCA thread. Some very good points raised for and against. I thoroughly enjoyed reading everyone's contributions and even re-read some of the longer posts so that the content was fully absorbed.

Aren't we lucky to have this website!!

For me personally I will continue to hold and will be applying for more this week via the retail offer. Nobody can predict where share prices will go in the short term. One thing I am confident in, is that the share price in the long term will be considerably higher than what it is today. Purely due to NZ's ageing population and the wave of demand that this country will have for quality retirement villages.

[forest]

Often it is said that the amount of cash generated by a company is very telling on how the company is doing.
So I decided to relook at the most recent half years report operating cash flow numbers, up over 30% compared to the previous comparable period.
That to me seems positive.

Looking back at the operating cash flow since 2017 tells a trend,
2017 $33m, 2018 $82m, 2019 $89m, 2020 $99m and 1H21 $75m.

The most recent past might be a clue the direction OCA is going in future years. :)

[winner69]

On an optimistic positive note, the chart (https://invst.ly/ud3mr) is oversold, the closing price Thursday is on a horizontal support, it is also bang on the 200MA support, and on the 61.8% Fib retrace support. Looking for an SP bounce here.

Love Fibs - nature tells us a lot

Wheres the 50% Fib

Could be a good week for OCA

[Baa_Baa]

Love Fibs - nature tells us a lot

Wheres the 50% Fib

Could be a good week for OCA

Cool eh, the 50% fib (is not actually a real fib number) but it is on the chart, had five days of action right on $1.32, then folded. Fibonacci was a great mathematician, imagine figuring out naturally recurring numbers in otherwise random mass events. Spooky

[Curly]

Beagle v Rupert Bear would be laughed out of Court and costs awarded against Beagle for wasting the Courts time.
Does show a Beagle character trait though.

[Gotagiggle]

It just keeps getting better. Another negative rep vote telling me the post below needs to be deleted. I already edited out the apparently slanderous sections. I am not deleting what’s left.

As a new poster. But long term reader, all I can say is a number of you gave the so called Scarsies group a hard time. This **** I’m reading here, doesn’t happen in the sharesies group.
Whilst I appreciate most of your expertise with analysis, I can’t say I enjoy this threatening litigation against one another.
Grow up boys.
Show some respect, everyone’s watching, keep calm and carry on!

[thegreatestben]

I suspect a lot here are (much) older than me but a few of you are acting like children.

[porkandpuha]

This would be a psychologists dream. Its quite sad how one can throw there tantrums at people but cant take it when its thrown back. Sort of reminds me of the crap on ATM thread and we lost a very useful poster because of it.

Well said. I can't go to the threads of any of my holdings without Beagle ruining the mood of the room. Oops, better lawyer up now... :lol:

Anyhow, after reassessing the situation I am happy to hold OCA, and contemplate adding more. Nothing has materially changed the long term outlook in my mind.

[Joh13]

Hi all, great to see some back and forward about pros and cons with OCA. Im glad that it's not all one sided, we need to see balanced discussions. Beagle, Maverick love your work I hope that I can be as knowledgeable as both of you one day. I really do value this forum and everyone that contributes.

With recent goings on I think that OCA got a pretty decent deal with the acquisitions and I'd rather they used equity to fund these first acquisitions than increase their debt levels so that they can use debt in the future.

The recent SP decrease is interesting and think it has been over done as the SP usually is with perceived risk, but thats to be expected with pretty bad timing of things occurring, New tax laws, CEO leaving, Equity Raise, White papers, Bond Yields increasing and a lot of talk about residential property prices reducing... all have worked against OCA's SP so really it shouldn't be a surprise to anyone that the SP has reduced. How low will it go i'm not to sure, I do note that Baa_Baa has shown a chart with support around the 200MA and 61.8% Fib i'm not entirely convinced it will shoot up from here in the short term as it isn't showing a couple of other TA signals I like to use. But I am confident about the future growth of the company in the long term and will be trying to get as many shares that I can through the retail offering.

For those interested, although not OCA directly I think this article covers a lot of things that have been spoken about on this thread and is pretty appropriate to OCA https://seekingalpha.com/article/4396045-ryman-healthcare-compounder-low-historical-valuation#comments Happy Easter all

Just noticed this on OCA's Facebook page. I like the direction... is Brent making his mark already? https://fb.watch/4GIH5-Igh7/ Seems website has been updated as well.
'Believe in Better'

[tomg]

Bunch of wee babies

[nztx]

Suppose we shouldn’t do jokes about accountants but -

An accountant is someone who solves a problem you didn't know you had in a way you don’t understand



Just watch for the bill followed by the Tax bill you didn't realise you'd be getting too .. ;)

Quite a few Accountants here - huh :)

Try not to be too harsh - the best Accountants make many Winners .. ;)

[nztx]

Back on OCA .. wish I had the glowing enthusiasm for this one

Sure - rode out of the depths of Covid with Rest Home stocks until OCA pulled the lower result late last year
based mostly on lower revaluations .. that brings on another valid point Most of the Reported Profit is
if not mistaken Revaluation Gains, very little tax if any paid & no Imputation credits attached anywhere..

Reporting Obscene profits and paying little or no tax *must* be attracting prying eyes of the tinkering Socialist
ignoramus brigade eager to plug horrendous gaping holes in their fiscal agendas by any means - surely ? ;)

For my money it looks like almost time to pull the chocks out from under the sub $0.80c pile and let them loose
on the market .. I think safer bets elsewhere or dare I say it - the lowly sub 1.00% deposit account while the market
looks for direction following end of the March - April dividend season.. bound to be more surprises and steals
coming into view in coming months .. ;)

and disappointments

and Govt prescribed craziness too

and burst bubbles (just a matter of time .. let's not kid ourselves - a matter 'when' not 'if' ..)

and revelations on just who the stayers and gainers through their fiscal astuteness really are .. ;)

and of the pretenders and others not meeting the mark, also coming through..

[winner69]

Often it is said that the amount of cash generated by a company is very telling on how the company is doing.
So I decided to relook at the most recent half years report operating cash flow numbers, up over 30% compared to the previous comparable period.
That to me seems positive.

Looking back at the operating cash flow since 2017 tells a trend,
2017 $33m, 2018 $82m, 2019 $89m, 2020 $99m and 1H21 $75m.

The most recent past might be a clue the direction OCA is going in future years. :)

Yes forest, always good to look at cash flows

Operating cash flows only counts what they sell stuff for - it doesn't count the cash used in building stuff.

Free Cash Flows have been been negative, like 2017 59m / 2018 48m/ 2019 64.5m / 2020 37m and H121 positive 14m (positive because they had to stop building)

So cash burn (if you want to call it that) from 2017-2020 has been 209m - and in addition they've paid shareholders 63m so you could say they've consumed 272m cash in those 4 years.

Should look at that 272m in the context of Equity (Book Value)only increasing by 130m in that period

[James108]

I’ve always liked the cash generating aspect of the retirement villages. It’s a pretty good business model where you get to build a building, get a large chunk of the cash back within a year or two of completion AND retain ownership of it.

As winner has pointed out you don’t get all of the cash back, and the cash outflows will be higher when building is increasing.

[forest]

Yes forest, always good to look at cash flows

Operating cash flows only counts what they sell stuff for - it doesn't count the cash used in building stuff.

Free Cash Flows have been been negative, like 2017 59m / 2018 48m/ 2019 64.5m / 2020 37m and H121 positive 14m (positive because they had to stop building)

So cash burn (if you want to call it that) from 2017-2020 has been 209m - and in addition they've paid shareholders 63m so you could say they've consumed 272m cash in those 4 years.

Should look at that 272m in the context of Equity (Book Value)only increasing by 130m in that period

I agree Winner that there is more to understanding OCA than the operating CF numbers.
So it is good to look at other expenditure and understand the reason for it.
We know that OCA are still in a process of conversion of many of their villages so it is good to see that even before the process has come to an end operating CF's are going in the right direction.
Soon investment expenditure will reduce and efficiency in the operating of the villages increase.

[Habits]

I’ve always liked the cash generating aspect of the retirement villages. It’s a pretty good business model where you get to build a building, get a large chunk of the cash back within a year or two of completion AND retain ownership of it.

As winner has pointed out you don’t get all of the cash back, and the cash outflows will be higher when building is increasing.

I dont know if the model is that good... the cashflow yield is not much better than renting out the same asset and after 3 or 4 years the retiree occupant gets to live there for freeeeee! ...For the rest of their lives.

[dobby41]

Times must be getting tougher - a lot of full page ads in the paper for the sector.
Usually Ryman but OCA with a front page wrap in the Herald.
Sign of a more difficult market?

[winner69]

Image you have clients with millions to invest. Then you start realise your not just some hobby investor but a professional looking after the capital of dozens of trust and dozens and dozens of investment portfolio companies and the size of the technical multiples.

In those small and large offices the numbers are being re run.

Mr B knows the situation and the size of coming reallocations and it start's soon; you wont see it and you wont hear about it on this forum.[/COLOR]

So all these experts / professionals / gurus are making a lot of guesses

Probably keep changing the inputs until they get the answer their gut feel says is right

Often these guru's suffer from motivated reasoning - esp when playing with other's cash

[Vince]

Folks,

On topic please and enough of all the other BS.

Thanks

[Habits]

Judging from the smiling faces of the retirees on the telly, they will be very happily living in a wonderful self care retirement unit for many many years. Perhaps the ones on the adverts are those who have passed 4 years occupation .... saying to themselves 'Im freeeee!'. And ... 'what would I do with the capital funds anyway when TDs are sub 1 percent'. You know they would not be investing in retirement companies

[James108]

I dont know if the model is that good... the cashflow yield is not much better than renting out the same asset and after 3 or 4 years the retiree occupant gets to live there for freeeeee! ...For the rest of their lives.

Habits, have another think about this, if you build a unit for $1m and sell the ORA for $0.9m (not sure what the exact margin for the village are as this is a far more complicated issue than the reported development margin, which does not include the cost of communal assets, would have you believe) is your yield calculated on the $1m or $100k, or do you need to do some fancy DCF thing to work it out. its definitely the latter but I would imagine better than rental..

I also quite sure that oceania employs at least one person that knows a bit about statistics so that the chance of someone "living for free" is simply a cost of doing business and included in the ORA.

[Waltzing]

Sticking to some facts not other stuff..

the sell side today is heavier than the buy.

The market seems to want to take profits today. Lets see how it ends today and the next 2 weeks.

[Habits]

Habits, have another think about this, if you build a unit for $1m and sell the ORA for $0.9m (not sure what the exact margin for the village are as this is a far more complicated issue than the reported development margin, which does not include the cost of communal assets, would have you believe) is your yield calculated on the $1m or $100k, or do you need to do some fancy DCF thing to work it out. its definitely the latter but I would imagine better than rental..

I also quite sure that oceania employs at least one person that knows a bit about statistics so that the chance of someone "living for free" is simply a cost of doing business and included in the ORA.

I'm sorry i cant understand your numbers or they dont add up. Do you mean 900k not 100k?

[James108]

No, 1m minus 900k equals 100k. I.e the amount of money still tied up in the building (in this example).

[Habits]

No, 1m minus 900k equals 100k. I.e the amount of money still tied up in the building (in this example).

Ok I could have explained it better but still this is not complex. You do say in the first post ... "if you build a unit for $1m and sell the ORA for $0.9m"

That is a 100k shortfall on the development cost. So yes there is 100k after taking away 900 ORA fee from the 1 million build cost. Not profitable and wont be in business long on your figures

[Gunner]

Insiders have been buying up large

[850man]

OCA directors / senior staff putting their money where there mouths are https://www.nzx.com/announcements/370170 (https://www.nzx.com/announcements/370170)

[Bjauck]

…and after 3 or 4 years the retiree occupant gets to live there for freeeeee! ...For the rest of their lives. ...Apart from the village fee and loss of use of the original ORA purchase price (inc. interest and dividends foregone).

Buying an ORA and moving into a village may never have been more appealing. With Current crazy house prices and interest rates at a point of inflexion, there may be fewer house market capital gains to miss out on! So given the impressive way villagers were/are being cared for during covid, retirement village units are looking even more appealing.

[Bjauck]

OCA directors / senior staff putting their money where there mouths are https://www.nzx.com/announcements/370170 (https://www.nzx.com/announcements/370170)
Interesting. Some big insider purchases.

[forest]

Insiders have been buying up large

Good to see confirmation that some insiders seem to like the cash flow statements enough to purchase more shares. ;)

[Snow Leopard]

Ok I could have explained it better but still this is not complex. You do say in the first post ... "if you build a unit for $1m and sell the ORA for $0.9m"

That is a 100k shortfall on the development cost. So yes there is 100k after taking away 900 ORA fee from the 1 million build cost. Not profitable and wont be in business long on your figures

Fortunately OCA are not currently 'selling' ORA on new builds for less than the attributed cost of building.

With my long-term outlook hat on ( has a wide brim all round it ) I see the current share price has good value.

Pity I have my full portfolio quota already.

[BlackPeter]

OCA directors / senior staff putting their money where there mouths are https://www.nzx.com/announcements/370170 (https://www.nzx.com/announcements/370170)

Wow - Greg Tomlinson buying another 3.4 million shares, and the other directors digging deep as well.

Wondering whether they didn't got the memo that share prices are supposed to crumble? Do they not read this thread :)?

[bull....]

directors buying has not been enough at this stage to propel the price back above the 1.30 resistance so ill stay on the dark side in regards to peoples opinion on the stock

[Greekwatchdog]

Well if thats not confidence going forwards then this all beats the heck outta me.

[BlackPeter]

directors buying has not been enough at this stage to propel the price back above the 1.30 resistance so ill stay on the dark side in regards to peoples opinion on the stock

to be fair ... markets had so far only 45 minutes to digest the news, and many of the professional traders are still in holidays. But sure - lets see how it pans out ;):

[Habits]

Wow - Greg Tomlinson buying another 3.4 million shares, and the other directors digging deep as well.

Wondering whether they didn't got the memo that share prices are supposed to crumble? Do they not read this thread :)?

Did GT buy these for cash or are they part of his remuneration package... same gies for the others

[peat]

Did GT buy these for cash or are they part of his remuneration package... same gies for the others

he bought them under the placement issue afai can see ... so paid 1.30 just like the institutions out of his own pocket I think.

[winner69]

Did GT buy these for cash or are they part of his remuneration package... same gies for the others
Tomlinson and Coutts and some of Stockton’s part of the capital raise

[winner69]

Directors buying big / Harbour and Jarden bought about 14m shares and no doubt other instos bought plenty

All good - onwards and upwards

No worries

[James108]

Fortunately OCA are not currently 'selling' ORA on new builds for less than the attributed cost of building.

With my long-term outlook hat on ( has a wide brim all round it ) I see the current share price has good value.

Pity I have my full portfolio quota already.

Are they not? Do you have a margin for the cash received from sale of ORAs vs total cost of a village including communal assets? Oceania don’t provide this, and I am genuinely curious but not enough to do my own calculations as I don’t have time at the moment.

Habits has misunderstood again as they still receive a DMF after so many years, 25% of $1m would represent a sizeable return on $100k.

I suggest that the accounts and cash flows are not well understood by many.

[Blue Skies]

Wow - Greg Tomlinson buying another 3.4 million shares, and the other directors digging deep as well.

Wondering whether they didn't got the memo that share prices are supposed to crumble? Do they not read this thread :)?


Reminds me of the story about the elderly chap driving up the motorway when his cell phone rings, his wife says 'be careful there's a story on the news about some nut case driving the wrong way up the motorway'.

Hell, he replies, it's not just one car, there's hundreds of them!

[Baa_Baa]

Directors buying big / Harbour and Jarden bought about 14m shares and no doubt other instos bought plenty

All good - onwards and upwards

No worries

Directors buying millions and hundreds of thousands of shares, that's encouraging! Always happy to see insiders buying into the company, a huge vote of confidence, and a couple of very large stakes at that.

[Blue Skies]

Directors buying millions and hundreds of thousands of shares, that's encouraging! Always happy to see insiders buying into the company, a huge vote of confidence, and a couple of very large stakes at that.


Couldn't agree more, esp after the hammering OCA has taken on this thread.

Interesting article in todays Stuff about the near hysteria being created by Prop Investors & landlord lobby groups to push back on the govt.

[Grimy]

OCA directors / senior staff putting their money where there mouths are https://www.nzx.com/announcements/370170 (https://www.nzx.com/announcements/370170)

Always a good sign.

[Waltzing]

looks like the if there was dip down 1.15 +- 5 would be a support level.

[Snow Leopard]

...so ill stay on the dark side...

Great song that:


https://www.youtube.com/watch?v=M-P4QBt-FWw

Disc: Nearly as good as Faded

[Bjauck]

Directors buying millions and hundreds of thousands of shares, that's encouraging! Always happy to see insiders buying into the company, a huge vote of confidence, and a couple of very large stakes at that.
A caveat for that is that The insiders would have subscribed to their new shares in the placement prior to the announcement of the bold new tax policy with respect to mortgage interest and bright-line for landlords.

[Brain]

Looks like Justakiwi is no longer a member . Maybe that was her decision after being threatened with legal action. I guess if that was done to me I possibly would decide to become an observer rather than a participant. Great shame as it was good to get someone’s opinion from the coal face.

[percy]

Looks like Justakiwi is no longer a member . Maybe that was her decision after being threatened with legal action. I guess if that was done to me I possibly would decide to become an observer rather than a participant. Great shame as it was good to get someone’s opinion from the coal face.

Hopefully Justakiwi will be back tomorrow.

[herbert240]

And Beagle?

[percy]

And Beagle?

I do not know.

[Blue Skies]

Here's a link to todays opinion piece in Stuff, on the intense heavy duty lobbying going on by the NZPIF (NZ property investors federation) attempting to scare the public & get the govt to reverse extending the Brightline test & ending interest deductibility for investors.

As an Otago Research Fellow says, the impression being given by investor commentary was the sky had fallen & a lot of catastrophising going on, and we certainly had some of that on this thread with baseless speculation about worse case scenarios almost being presented as a fait accompli, & the govt being framed as scary socialist, redistributing your wealth etc.

If there has been some heavy lobbying going on, it would explain how those representing the interests of property investors have been given such an overly pessimistic outlook on property valuations by their clients & even possibly how some of that ended up here.

That pessimistic commentary has almost certainly had an impact on the SP of OCA & other retirement companies.

One point I find interesting is the advantage investors had over owner occupiers, with investors being able to claim interest deductions against rental income but owner occupiers in the vast majority of cases unable to claim interest deductions against their income unless they had specially arranged their affairs in order to get around this. And why this should be.
The immediately obvious answer is one is a business, while the other is not, but in another sense we are all our own businesses with income & expenses.
Following the removal it is now an even playing field.

Also find it interesting & a bit disheartening to hear within days a few clever lawyers already confident they can find ways to rearrange affairs in order to get around the changes to policy.



https://www.stuff.co.nz/life-style/homed/housing-affordability/300267745/property-investors-almost-hysterical-over-housing-policy-change-economist-says

[850man]

Removal of interest costs as an expense against revenue attacks the very heart of business taxation that dates back a hundred years. Every business can and does offset interest costs of money borrowed to buy a capital asset against revenue earnt when working out profit for tax purposes. Every business except now that of residential property rental. This is not leveling the playing field, it is tipping it severely against one business type.

[nztx]

Removal of interest costs as an expense against revenue attacks the very heart of business taxation that dates back a hundred years. Every business can and does offset interest costs of money borrowed to buy a capital asset against revenue earnt when working out profit for tax purposes. Every business except now that of residential property rental. This is not leveling the playing field, it is tipping it severely against one business type.

Agree with that summary of things..

Where will similar munted political judgement strike next though ? ;)

but as with the generous Nearly everyone qualifies Covid Wage subsidies -- any smart Accountant with a few clues should be able
to drive any sized tractor (or a large fleet of tractors) through the gap quite happily .. ;)

The sign of the High Quality Politicians & Lawmakers currently in .. once again showing themselves up as totally
out of their depth, ignorant & inept .. and totally lost on what the original issue / problem needing solving was..

The smaller novice RE Investor bods with just one or two plots will be the ones that wear things .. IMO .. ;)

Why dont Govt just remove financing costs deductions for any sort of property transaction as a blanket move and wait
to see exactly what does for them .. ? ;)

Just about anyone could predict how well that is likely to go & the likely results .. ;)

[nztx]

Oh yes .. for the record I'm now an OCA spectator.. ;)

[Blue Skies]

Removal of interest costs as an expense against revenue attacks the very heart of business taxation that dates back a hundred years. Every business can and does offset interest costs of money borrowed to buy a capital asset against revenue earnt when working out profit for tax purposes. Every business except now that of residential property rental. This is not leveling the playing field, it is tipping it severely against one business type.


Talking about level as in level for both investors & owner occupiers now, not residential property rental V other types of business.

Don't you think when investors are given a strong advantage over owner occupiers, its tilts the field in their direction which is what we've been seeing with FHB'ers constantly being outbid by investors in the auction rooms ?
Im interested in others opinions.