OCA - Oceania Group - retirement villages

[mike2020]

Yes, all this talk about wrap around services for youth offenders and we don't even have "services". That alone affects peoples mental health.
The little old lady asking for aged care funding beats tina from turners hands down.

PS those talked about wrap around services are estimated at around 1B and where will they find the staff to do it? Pipe dreams.

[BlackPeter]

$1.9B on mental health and they don't even know where its gone. We're not making this up, its fact and we all should be very worried. The list is incompetence on a scale never previously seen. We all love our country and it's hard to watch TBH

I don't think this is true. My understanding is that we increased our mental health system by 7 (in words: seven) additional beds. Fair price - only something like $270m per bed.

Which brings me back to the thread ... maybe OCA should take this money and offer some mental health beds as super premium service funded by our government!

Anyway - we probably should move this discussion over to one of the political threads, shouldn't we?

[Balance]

I don't think this is true. My understanding is that we increased our mental health system by 7 (in words: seven) additional beds. Fair price - only something like $270m per bed.

Which brings me back to the thread ... maybe OCA should take this money and offer some mental health beds as super premium service funded by our government!

Anyway - we probably should move this discussion over to one of the political threads, shouldn't we?

Excellent suggestion - the private sector players like OCA or Ryman will run circles around the free wasteful spending bureaucrats, and deliver bang for bucks anytime.

[justakiwi]

With all dues respect, whether this particular government is terrible or not is irrelevant. Which is precisely the point I was attempting to make. The current aged care crisis has nothing to do with party politics. It is a long standing issue that has been looming for at least a decade. No political party has ever addressed it. Which is what Balance is unwilling to acknowledge. My comments are relevant to OCA. The continual hijacking of this thread, with never ending party politics ranting, is not.


Appreciate what you are trying to convey there JAK but this govt is terrible. 600 ml on merging broadcasting as an example, could house EVERY SINGLE CHILD LIVING IN A CAR PERMANENTLY. If they saw this behaviour while in opposition Labour would be screaming mad.

[bottomfeeder]

Does Oceania carry out revaluations in their interim accounts, or do they only do it at the end of the financial year. So next results may not be as telling as the full year results.

[winner69]

Does Oceania carry out revaluations in their interim accounts, or do they only do it at the end of the financial year. So next results may not be as telling as the full year results.

Revaluations done for half year ..... probably a desk top jobs ....update the data base and change the assumptions etc etc etc

[Maverick]

Hey Winner,
Would you mind sharing you opinion on todays announcement. ...

This notice relates to the grant of performance share rights (Share Rights)
which are convertible into fully paid ordinary shares in OCA should certain
vesting conditions and performance hurdles be met under OCA's Long Term
Incentive Scheme (Scheme).

Just twiddling my thumbs before Wednesday but from a corporate speak perspective;
Firstly , does this suggest these "performance hurdles being met " is a very positive statement or meaningless?
Secondly, surely stuff like this should come out after the HY report - not 2 days prior?

I haven't seen this early timing of these sort of announcements happen in past years.

BTW I've raised my upper band for HY underlying to now go between $31.5m - $33m after reworking with the ARV and RYM margins and resales stats.
I would love to see you get your $40m. They'll blow that out of the after next year when selling Helier and Windermere but cant see it this time mate.

.

[justakiwi]

I know nothing of course, but this seems like a positive announcement to me. Timing is odd, but perhaps they are just covering themselves so nobody can say they were not aware before the HY report is out. Some investors might want to take advantage of "good news" (if that's what it is), and add to their position before Wednesday. Without this announcement they would miss that potential opportunity?


Hey Winner,
Would you mind sharing you opinion on todays announcement. ...

This notice relates to the grant of performance share rights (Share Rights)
which are convertible into fully paid ordinary shares in OCA should certain
vesting conditions and performance hurdles be met under OCA's Long Term
Incentive Scheme (Scheme).

Just twiddling my thumbs before Wednesday but from a corporate speak perspective;
Firstly , does this suggest these "performance hurdles being met " is a very positive statement or meaningless?
Secondly, surely stuff like this should come out after the HY report - not 2 days prior?

I haven't seen this early timing of these sort of announcements happen in past years.

BTW I've raised my upper band for HY underlying to now go between $31.5m - $33m after reworking with the ARV and RYM margins and resales stats.
I would love to see you get your $40m. They'll blow that out of the after next year when selling Helier and Windermere but cant see it this time mate.

.

[winner69]

Hey Winner,
Would you mind sharing you opinion on todays announcement. ...

This notice relates to the grant of performance share rights (Share Rights)
which are convertible into fully paid ordinary shares in OCA should certain
vesting conditions and performance hurdles be met under OCA's Long Term
Incentive Scheme (Scheme).

Just twiddling my thumbs before Wednesday but from a corporate speak perspective;
Firstly , does this suggest these "performance hurdles being met " is a very positive statement or meaningless?
Secondly, surely stuff like this should come out after the HY report - not 2 days prior?

I haven't seen this early timing of these sort of announcements happen in past years.

BTW I've raised my upper band for HY underlying to now go between $31.5m - $33m after reworking with the ARV and RYM margins and resales stats.
I would love to see you get your $40m. They'll blow that out of the after next year when selling Helier and Windermere but cant see it this time mate.

.

Hey Mav .... I wouldn't read anything into the timing of the announcement

Hurdles are interesting


The Share Rights in each grant are divided between two performance hurdles;

– Share Rights will qualify for vesting on a straight-line basis, from 0%, where the total shareholder return (TSR) from
the commencement date to the measurement date is equal to the 35th percentile of the NZX50 Group, to 100%
where the TSR is equal to or greater than the 75th percentile of the NZX50 Group; and

– For the second performance hurdle, Share Rights will qualify for vesting if the Group’s annual growth in underlying
earnings (before interest, tax, depreciation and amortisation) per share (UEPS) from the commencement date to the
measurement date is equal to or greater than the target for growth in UEPS for that period.

So the TSR bit is all about being average and if not really bad (like losing the race) will get something .... pretty cool eh. I have asked what this 'NZX50 Group' is (probably other sector stocks' but they wouldn't disclose what it is.

I also requested what the earnings per share targets were but were told they were 'market sensitive' ..... in other words secret. Shareholders could be paying out millions but don't know in advance how much profit they trying to achieve (cynically probably only 5% growth). The AR did say Mr Pattison got Incentive payments that included a 10% earnings growth target amongst other thngs.

The only winners in these sort os schemes are the execs .... but we get comfort that their interests and ours are aligned. What a joke as a TSR of the 35% decile is not my expectations .... nor is a low earnings growth

Never mind its only money eh

As with a lot of such schemes the only winners are the recipients .... like for the Mar2022 year Mr Pattison got $292k STI and $252k under this Long Term Plan bringing hsi total rem to $1.2m

[ronaldson]

As to timing, I would suggest it's likely the outcome of a Board meeting late last week, ahead of the release of the half year result.

[winner69]

As to timing, I would suggest it's likely the outcome of a Board meeting late last week, ahead of the release of the half year result.

Agree with that

[winner69]

In 2017 they did disclose / tell me what the earnings target was for the LTI. Turned out a bit embarrassing I reckon

It was Base Year is F17 and Base Underlying EPS is 5.6 cents and a 35% CAGR over 3 years to F20 - ie an EPS of 13.8 cents in F20 (Underlying NPAT of $83m)

They reported F20 Underlying NPAT of $42.9m - v the target $83m .... bit short eh .... and nowhere near $83m even now .... let alone an eps of 13.8 cents

Maybe that's why they won't tell me the earnings targets this time around

Maybe Earl got the sack after all ... or told to go look for another job

But no doubt plenty of excuses for falling short of target and discretion was used and incentives were paid out anyway .... that's how it works isn't it

[Maverick]

Thanks for the thorough reply Winner.
Personally I have no problem paying people well, in fact even very well, who do a decent job. I too ran my own business under the old principle "dont muzzle the ox when treading the wine press". I think that is good long term business 101 and certainly served me well.

But what I dont like is how this all seems to be deliberately murky. I cant see how you asking about the deal as being somehow sensitive

Anyway, thanks for the response and you too Ronaldson. Only 2 more monsoons to go through now until report day.

[bull....]

looks like oca is doing it's usual thing

[Rawz]

looks like oca is doing it's usual thing

whats that?

[bull....]

whats that?

on a number of occasions it has rallied into announcements ( obviously on great expectations )
what happens after depends on the results

[justakiwi]

As are you.


looks like oca is doing it's usual thing

[Rawz]

on a number of occasions it has rallied into announcements ( obviously on great expectations )
what happens after depends on the results

this time is different. its all blue skies from here

im already counting the profits

[bull....]

this time is different. its all blue skies from here

im already counting the profits

lol you must be in mav and winner's expecting great things camp ... what was it $1.50 after results ?

[winner69]

lol you must be in mav and winner's expecting great things camp ... what was it $1.50 after results ?

The numbers are one thing but it’s the story Brent tells that’s key

The story has been a bit inconsistent of late …..they’ve got to get their act together and keep to the script

[bull....]

The numbers are one thing but it’s the story Brent tells that’s key

The story has been a bit inconsistent of late …..they’ve got to get their act together and keep to the script

exactly , must let everyone know there is no boiled cabbage shortage .....

[Rawz]

exactly , must let everyone know there is no boiled cabbage shortage .....

you'll be eating boiled cabbage when your short on OCA goes belly up come wednesday

[Mudfish]

Okay Winner and Mav, I've been scratching my head trying to get something useful out of this bonus rights issue thing. Last year, 6/9/21, same bonus announcement was made where bonus of 1,078,725 share were given. Today we see it is 1,430,150. That's another 351,425 bonus shares. Provided the 'hurdles' haven't been altered could this actually be a good sign that the growth we are all after is about to be realised? Of course I could just be dreaming stuff up?

[Mrbuyit]

What were the shares worth on 6/9/21? Probably more than today I suspect.

[percy]

What were the shares worth on 6/9/21? Probably more than today I suspect.

On 5/9/21 they closed at $1.52.
On 5/9/23 they should close at the same price..........................lol

[Mrbuyit]

So unless ~ twice the shares were offered up it's a bit of a haircut.

[Blue Skies]

I hate seeing shareholders money wasted, & knowing a thing for two about marketing, although the 'Creative' in the current TV ad with the elderly couple playing the piano in a Care Suite is lovely, it does absolutely nothing, zero, to drive sales. It doesn't even mention Oceania until a few seconds at the end, easily missed, or quickly forgotten.

Agencies love these 'general branding' type ads (& sell the idea to the client with a rationale for them, raise awareness, good for staff morale blah blah, ) because the results can't be measured, they get paid every time the ad is played, & general branding type ads need heaps of schedule & huge budget to make any impact at all.

Too many clients get sucked into these branding ads when its not their own money.
You find business owners who are spending their own money want to get & measure results straightaway.

If Oceania want to drive sales, the ad' warm fuzzy story's fine but they need to have an offer, something which makes people considering a RV pick up the phone and enquire.
Do we want years of gradually raising awareness & profile of the company through general branding, or do we want sales now ?

[ronaldson]

We need Tina from OCA - What do I like? Care Suites and Villas!

[Rawz]

Villas Villas Villas!

[BlackPeter]

I hate seeing shareholders money wasted, & knowing a thing for two about marketing, although the 'Creative' in the current TV ad with the elderly couple playing the piano in a Care Suite is lovely, it does absolutely nothing, zero, to drive sales. It doesn't even mention Oceania until a few seconds at the end, easily missed, or quickly forgotten.

Agencies love these 'general branding' type ads (& sell the idea to the client with a rationale for them, raise awareness, good for staff morale blah blah, ) because the results can't be measured, they get paid every time the ad is played, & general branding type ads need heaps of schedule & huge budget to make any impact at all.

Too many clients get sucked into these branding ads when its not their own money.
You find business owners who are spending their own money want to get & measure results straightaway.

If Oceania want to drive sales, the ad' warm fuzzy story's fine but they need to have an offer, something which makes people considering a RV pick up the phone and enquire.
Do we want years of gradually raising awareness & profile of the company through general branding, or do we want sales now ?

Not a marketing specialist ... however wondering, why you think that OCA has a problem selling their units.

Obviously - we will get an update tomorrow, but so far I didn't had the impression that too high vacancy rates are their problem ... i.e. whatever they are doing to sell, it seems to work.

[winner69]

No matter how good the numbers are tomorrow and no matter what our Brent spins I have the feeling the market won't have a bar of it

Share price could go down to 75 cents .... what happened to ARV was a precursor to tomorrow

[ronaldson]

I wonder if that is right. It is true that just today RYM is down 7.1%, SUM is down 3.2% and ARV is down 1.7%. These are particularly challenging numbers. But OCA has recovered recently from around 78-79c to close today at 82c and recent times have seen many trading days with over 1m shares turnover for OCA. So, yes there are sellers, but buyer support has also been evident.

OCA has a solid dividend yield so is it possible some are switching/rebalancing within the sector?

Anyway, I have already said I am holding for the result, so trying to remain positive and not be scared out. But tomorrow will tell a tale, in interesting times.

[justakiwi]

If that happens so be it. It will mean nothing. OCA is a great investment and those of us who see that, are happy to reap our rewards down the track. Long term investment for me, and if I ever manage to find any spare capital I'll take advantage of the market's stupidity.


No matter how good the numbers are tomorrow and no matter what our Brent spins I have the feeling the market won't have a bar of it

Share price could go down to 75 cents .... what happened to ARV was a precursor to tomorrow

[bottomfeeder]

I just cant work out why this sector has been oversold so much. The sector has shown good growth, good present and future demand and security of an inflation proof investment.

I think the sector is a victim of its own success and security. A very large proportion of the NZ market comes from overseas investment. In recent years when the NZ market was in favour, this sector was bought to the hilt by overseas investors. Now that the overseas investors need to repatriate their funds back to their home countries, the retirement sector has been suffering as the money is being withdrawn. There is just insufficient liquidity in NZ to take over the outflows. Hoping for the best result tomorrow for everyone. OCA deserves a much better SP than it has at the moment.

[winner69]

Numbers not so good but what the heck Brent tells a great story

Value of the company is all about the story so no worries

[justakiwi]

Something tells me you'll never be happy no matter what the numbers are.



Numbers not so good but what the heck Brent tells a great story

Value of the company is all about the story so no worries

[bull....]

saved by re-sales only , div decrease shows cashflow under pressure just like the others. there increase shown for margins next period is interesting

[alokdhir]

saved by re-sales only , div decrease shows cashflow under pressure just like the others. there increase shown for margins next period is interesting

Just FWIW ...if divvy reduced means actually good overall ...ie no camouflage going on like before ...only on this count I reckon future is good ...:D

[bull....]

Just FWIW ...if divvy reduced means actually good overall ...ie no camouflage going on like before ...only on this count I reckon future is good ...:D

oca holders be pleased with there little over 1c div lol after tax

[bottomfeeder]

Steady as she goes. Premium care units don't rely on Govt to be profitable. Retirement villages are never going to be a spectacular performer with abnormal highs and lows. Just a safe and secure investment, poised to proceed with future growth and stable demand in years to come.

[Ggcc]

Numbers not so good but what the heck Brent tells a great story

Value of the company is all about the story so no worries
I was thinking that. Lower than what people were mentioning on here

[justakiwi]

At last, someone who gets it.


Steady as she goes. Premium care units don't rely on Govt to be profitable. Retirement villages are never going to be a spectacular performer with abnormal highs and lows. Just a safe and secure investment, poised to proceed with future growth and stable demand in years to come.

[winner69]

I was thinking that. Lower than what people were mentioning on here

Much much lower than my considered guess and significantly lower than Mavericks calculations

[Gerald]

Right dog of a result. Not sure why they don't just use the funds from sales just to attack share count, far more accretive at a 40% discount to NTA then playing around burning money doing same old same old.

[bottomfeeder]

oca holders be pleased with there little over 1c div lol after tax
Very emotive language, but a little does not compare to just under 28% more than 1cent. That only applies to those in the 33% bracket also.

Will be interesting to see how the market perceives this result.

[winner69]

NPAT down $26m or 70% on pcp

Operating Cashflow $21m less or 40% on pcp

It's that cashflow bit that's a bit hmmmm

I don't think Maverick will be too impressed (like me)

[Rawz]

hmmmm doesnt look like a good result from what i can tell. sales down, comprehensive income down, op cash flow down.

[bull....]

Very emotive language, but a little does not compare to just under 28% more than 1cent. That only applies to those in the 33% bracket also.

no wonder they cut the div op cashflow down 40% on pcp

and relying on re-sales to achieve results next yr is risky i reckon.

boiled cabbage might help

[bottomfeeder]

no wonder they cut the div op cashflow down 40% on pcp

Seen it happen so many times before. When the market hammers your SP, dividend in monetary terms goes down. Company executives take very little responsibility for how the market treats the SP, but pays to shareholders the return the market expects.

[percy]

Some rather impressive figures on page 29 of the presentation.
Average development margin 32.2%
Average resale margin...........22.7%
Average resale gain per unit/care suite $99,613.

[alokdhir]

NPAT down $26m or 70% on pcp

Operating Cashflow $21m less or 40% on pcp

It's that cashflow bit that's a bit hmmmm

I don't think Maverick will be too impressed (like me)

So your prediction of 75 Cents on the cards then mate !! What Mr Orr can say to stop it ? I reckon he will only help it reach there

[winner69]

Some rather impressive figures on page 29 of the presentation.
Average development margin 32.2%
Average resale margin...........22.7%
Average resale gain per unit/care suite $99,613.

Slide 21 pretty impressive

EBITDA per Care Bed up again ..... getting close to $20,000

Hope govt doesn't see that

[Balance]

Seen it happen so many times before. When the market hammers your SP, dividend in monetary terms goes down. Company executives take very little responsibility for how the market treats the SP, but pays to shareholders the return the market expects.

Consensus dividend forecast - 5 cps for F23

Consensus NAB - $1.37

Both going backwards but with sp at current level, downgrades already priced in?

[winner69]

ASM all bulish saying first 2 months sales volumes up on corresponding period prior year

half year sales down 2% ...sales slowing down compared to last 4 months last year

[winner69]

Book Value increased to $1.35 per share

[ronaldson]

The dividend (half year) is actually down - 1.9cps when last year 2.1cps. The DRIP discount doesn't offset that. So current yield has declined. The fact that it is unimputed (as was the case before) isn't unexpected as there are losses to amortise.

But that won't help the share price get traction.

[Bjauck]

NPAT down $26m or 70% on pcp

Operating Cashflow $21m less or 40% on pcp

It's that cashflow bit that's a bit hmmmm

I don't think Maverick will be too impressed (like me) It looks like the big seller over the last few weeks had an inkling or got a whiff of the pong from the rotten headline figures? Although drilling down may not be all gloom.

A $17m (over 20%) increase in receivables. Would they be new Ora sales?

[bull....]

rangebound last week 78 - 82 which way will it break?

78c now
so a breakdown would imply 74c min ?

[Balance]

rangebound last week 78 - 82 which way will it break?

78c now
so a breakdown would imply 74c min ?

I have this down now to 70c after talking to a fund manager who liquidated their OCA position this year. More later.

[850man]

70c, not far from 50% discount to NTA! Takeover anyone?

[Balance]

70c, not far from 50% discount to NTA! Takeover anyone?

Thank goodness that Metlife was taken over!!!!!!!!

Best deal that ever happened for shareholders in a RV stock!

[bottomfeeder]

My SKT money going into OCA, even though I haven't actually received it yet. Might hit the 20 largest in the next Annual Report. Want to get in before ex date.

[bull....]

I have this down now to 70c after talking to a fund manager who liquidated their OCA position this year. More later.

probably lower as all RV stock's will go.

[Playa]

OCA any is too many

[davflaws]

No matter how good the numbers are tomorrow and no matter what our Brent spins I have the feeling the market won't have a bar of it

Share price could go down to 75 cents .... what happened to ARV was a precursor to tomorrow

You nailed it - damn you!

[Ggcc]

Much much lower than my considered guess and significantly lower than Mavericks calculations

I won’t be buying anymore in a hurry for now. It makes me think that even though you look at shares in depth we are all still guessing what the correct answer is in regards to calculating their profits

[bull....]

arv getting savaged today as well , oca rubbing off on them

[alokdhir]

arv getting savaged today as well , oca rubbing off on them

If whats happening to RV companies is realities of property market then RBNZ has almost done his job ...but its also due to labour shortage and wage inflation as they are labour intensive industry with requirements of some training too ...this maybe more about inflation and labour worries playing out ...becoming more and more difficult to keep your margins when input costs are rising so fast ...shud be case for all labour intensive companies ...

[percy]

Average resale margin...........22.7%
Average resale gain per unit/care suite $99,613.Those resales are ongoing.[for ever]..Incredible.
NTA $1.34
Plenty of development going on.High development margin of 32.2% is surprisingly good with current building industry issues.
Reduced divie makes good sense in this market.
Plenty of head room with borrowings.
Therefore I am very happy with the result.

[Blue Skies]

The market is over-optimistic, & the market is over-pessimistic.
With current SP getting close to half book value, this negative sentiment is getting a bit overcooked isn't it.

[percy]

The market is over-optimistic, & the market is over-pessimistic.
With current SP getting close to half book value, this negative sentiment is getting a bit overcooked isn't it.

Agree............................................. .......
I am more than happy to buy a dollar of OCA a for under 60 cents .
Ie cureent share price 77 cents divided by nta of $1.34 is .5747.

[850man]

Agree............................................. .......
I am more than happy to buy a dollar of OCA a for under 60 cents .
Ie current share price 77 cents divided by nta of $1.34 is .5747.

Seems others are of that opinion too based on some of the trades going through today. Guess it depends if you're playing a long game or not and RVs are a long game IMHO

[percy]

Seems others are of that opinion too based on some of the trades going through today. Guess it depends if you're playing a long game or not and RVs are a long game IMHO

Yes buy to hold for ever.
Huge margin on new units.They will become resales in time.
Then those resales will go on for ever.
Average resale gain unit/care suite just under $100,000 at $99,613....Incredible.

[alokdhir]

Yes buy to hold for ever.
Huge margin on new units.They will become resales in time.
Then those resales will go on for ever.
Average resale gain unit/care suite just under $100,000 at $99,613....Incredible.

The way market is throwing all RV stocks since RYM HY ...its a question of survival which is troubling minds ...blow out debts , wage increase spiral , inflated running costs , inflated new build costs and reducing asset prices ...maybe too difficult to handle for some ...on top is the talk of rates up for long ...so need survive this for longer term basis at 8% rates !!! Thats the million dollar question in the minds of many big investors who trying to get out while they can ....

Maybe opportunity if they all pull thru next 18 months ...I think they can as only RYM is over 50% limits

[BlackPeter]

Agree............................................. .......
I am more than happy to buy a dollar of OCA a for under 60 cents .
Ie cureent share price 77 cents divided by nta of $1.34 is .5747.

Agreed.

OCA had over the last 9 years an average EPS of 8 cents per share. Given the current share price is this a PE of around 10. Unbelievable cheap - and this is not even taking into account that earnings actually did grow during this time (O.k., maybe not the last 6 months).

One of the stocks where I agree with the analysts that it is a "BUY".

But I guess more fear in the market just will make them still more juicy :) ;

[Snow Leopard]

I am mildly dissappointed with the result.

Still lots of potential in the company.

Every year so, so much more potential :crying:

[ronaldson]

Note 3.3 in the Financial Statements confirms that as of 30 September ten (yes, that's right, 10) sites are being held for sale (comparative at 31 March 2022 - nil). If my interpretation is correct, these are valued at $64m after a $2.5m write down, and on sale there will be a net $14.4m transferred to the new purchaser for refundable ORA obligations. These are sites that don't meet the acceptable rate of return hurdle.

I also noted that there are now $164m of available tax losses (comparative at 31 March 2022 - $130.3m). Don't expect imputed dividends any time soon!

Then there is the question - What happens when the state of the property market is such that resales of ORA's/villas do NOT produce a gain on sale? Remember, the basic model for RVs is that outgoing residents do not share in/benefit from capital gains. But they also don't shoulder capital losses. The latter will/must be borne by the Village operators. This has probably never happened before but is quite plausible now, especially where the turnover happens quickly, which must be a proportion of resales.

[bull....]

all RV stocks getting savaged :scared:

[psychic]

all RV stocks getting savaged :scared:

Oca seems to be holding up well by comparison? Wonder if the Directors are buying today?

[bull....]

Oca seems to be holding up well by comparison? Wonder if the Directors are buying today?

surprising , but the full extent of rym fall came in the days after

[Poolboy]

all RV stocks getting savaged :scared:

The way RYM is falling another week or two they will be free to a good home.

[ronaldson]

I thought to expand on my post 14077 above which drew attention to the fact that 10 of OCA's sites are now classified as " held for sale".

The first mention of this was in the CEO's commentary on 23 June at the AGM. He said " As the business matures we also have an eye to those sites that may no longer fit the portfolio or meet return thresholds and divestment of a few sites will likely be part of this year's activity."

After a couple of subsequent acquisitions OCA now has 47 sites, 26 of which are described as existing sites with mature operations,21 as existing sites with current or planned development, and 1 undeveloped. I suspect it is only the rules around accounting treatment that have forced the disclosure in the half-year financials that no less than 10 of these sites have been assessed by the Board as appropriate for disposal (no doubt dependent upon price that can be achieved).

The Chair makes clear that " The strategy is to enable less reliance upon Government funding for ongoing operations, with (remaining) sites free to operate outside the restrictions of the current Government funding model." And there is reference to " recycling cash within the business."

This may beg the question how you successfully dispose of operational sites that are not making an adequate return, to whom you might do that, and what sale price might be achieved in such circumstance. But it is still more than 20% of the portfolio and should have Andrew Little on edge as once the listed and unlisted RV operators effectively abandon ship with regard to basic state funded aged care as policy he is in really big trouble. I would say this is yet another dead canary signaling how it is and is going to be in future.

I wonder what will occur so far as the intended divestments are concerned between now and FY23. That may tell a tale what, if anything, can be achieved and as to the extent of any "haircut" to values.

[Rawz]

Where is our lord and savior MAV

[Maverick]

Well folks , I'm gutted and really confused.

It all goes down to one metric, “new sales volume”. Everything else is cracking along on most measurements even better than projected. Even the overly bashed care side of things is showing some good form, DMFs perfectly on track and embedded value through the roof.

The whole result has been broadsided solely by low new apartment sales volume. ( price and margins are superb).

Here's this and the previous 4x HY periods of new apartment sales.
44…11…44…48...28
And the new sales profit $m;
17m…11.6m…15.3m…17.6m…12.7m
The obvious other bad HY was the first covid lockdown, remember , when the world was going to end.

The $4-5m shortfall in profit from my expectations is entirely this one metric. They should have done really well on just the fact they had so much empty new apartment stock and yet the opposite has happened.

This HY had 50% more apartments available and they only sold 17% of them.
The webcast comments focused only on Awatere being slow to get sales going ( but apparently it's improving now ) does not cut it with me. OCA also has good availability at Auckland, Tauranga and Christchurch.

At the AGM 4 months ago Brent said the first 2 months of this HY “ there was an observable increase in sales volume and margin”. To be fair to Brent this would be true due to the other groups selling so well. The competition has also commented how well their own units are selling.
It's not right to say apartments aren't popular as they have all sold well and reliably for years now. OCA has proven their offerings are desirable. The Helier is having incredible presales.
All the while their apartment resales are also doing extremely well. They started with 25 empty offerings at the beginning of this HY and sold almost the same number 24.(96%).

(It's like it's a typo but obviously not. I just cannot work it out. I expected 58 sales. That's carefully based on historical patterns , stock availability, site visits, you name it I did it.

So from here…If new sales resume to their historical norm then everything is humming.
No profit is lost at this point, it's just delayed.

If they dont resume then that's a huge issue. So what has caused this?
- Has everyone hunkered down in fear of the economic doom out there
- are the units overpriced? That doesn't make sense though as they've sold plenty in the past for more than this and look at the Hellier with those staggering presales and prices.
-are they oversupplying?
-Why are resale apartments going so well and “new apartments” stalled?

I have no answer for now, can anybody else shed some light ?

(I'm not so keen on that "lord and savior" thing Rawz:), I'm just part of the team like everyone else here and obviously just as fallible)

[Rawz]

Thanks for your post Mav :)

[Muse]

Thanks Mav. Agree there is nothing worse when doing the work and eagerly awaiting a result and when it arrives its nearly foreign. Who hasn't been there?

Based on those historical run rates its entirely understandable where you landed - had I done the work I probably would have gotten to the same position too. Anecdotal only but activity levels took a dive August and September across many sectors.

I wonder if the slow down in OCA sales is related to houses taking longer to settle (days to sell unconditionally taking 2x as long in some regions, and perhaps unconditional to settlement stretching as well). But if that was the issue you'd assume an even impact on resale and new apartments I would have thought.

I'm not close to the RV sector and quite underweight in it, but I'm interested to deploy further capital into the sector at some point. I really have appreciated the work you've done and shared. You've been open and transparent in your workings, sharing them in order to further the sharing of knowledge and trends, and left it there without offering some sort of venal target price or rating. You've also stayed above all the puerile rubbish that infects these discussion forums.

As I watch the sector I'll continue to follow your posts with great interest. Thanks for your excellent contributions.

[justakiwi]

As always, thank you! I appreciate all your hard work and guidance.

[iceman]

I second that. Thanks once again Maverick. OCA again on my watchlist with an alert when it hits 70c :-)

[Balance]

RV stocks are highly leveraged to the property sector due to the nature of their funding - that’s why they were stellar performers during the property cycle upturn.

Now they are experiencing the exact reverse as property values head south.

Just as they can double in sp, they can also halve in sp.

Nothing surprising in their performances to date.

[iceman]

RV stocks are highly leveraged to the property sector due to the nature of their funding - that’s why they were stellar performers during the property cycle upturn.

Now they are experience the exact reverse as property values head south.

Nothing surprising in their performances to date.

Spot on Balance and the reason I sold out of the industry in the 2nd half of 2021. But they're back on my radar screen but I think it will be awhile yet before I buy back in.

[Gunner]

This is on my watchlist now. Good long term value here. Problem is I dont think we've bottomed here with the slow down in housing, interest rates rising, high inflation and recession reportedly looming.

Wake me up in 6 months when this has crossed the 200ma. Wealth is created in a bear market.

[Ferg]

If they dont resume then that's a huge issue. So what has caused this?
- Has everyone hunkered down in fear of the economic doom out there
- are the units overpriced? That doesn't make sense though as they've sold plenty in the past for more than this and look at the Hellier with those staggering presales and prices.
-are they oversupplying?
-Why are resale apartments going so well and “new apartments” stalled?

I have no answer for now, can anybody else shed some light ?


This was from page 8 of the report:


We have achieved a good level of resales during the period despite operating in a softening housing market. The timing of sales of independent living apartments and villas has been impacted by conditions in the broader residential property market and we are starting to see an increase in the median days to sell these units. However, the price of retirement village units in the sector, including at Oceania’s villages, has historically been well below the median house price in the surrounding catchment areas. As a result of this buffer, Oceania has either maintained or increased pricing for its independent living villas and apartments over the last six months.

So it sounds like a timing issue - and time taken to settle. I was under the impression unit prices were around 60% of the local catchment price (but don't quote me on that and I cannot find the source right now)

[Bjauck]

...
-Why are resale apartments going so well and “new apartments” stalled?

I have no answer for now, can anybody else shed some light ?

(I'm not so keen on that "lord and savior" thing Rawz:), I'm just part of the team like everyone else here and obviously just as fallible) I am not sure about specific circumstances. However there was the ongoing war in Europe, the British interest rate surge as a result of Liz Truss's policies, as well as the rise in interest rates globally. Even HMTQ's death may have caused a lull in activity? So all combined may have helped create a depressed month or two. It still would not explain the new/resale activity divergence though.

[winner69]

Agree with you Maverick - it was sales not meeting expectations

I was miles out with my $40m underlying earnings forecast ... all because I must have been enthusiastically optimistic about how many sales they were going to make. But that was based on the bullish statements made at the ASM

Never mind .... may just keep the forecast in place for H2 - $40m Underlying Earnings but add say $5m as a bit of a catch up - so $45m in H2 bring full year to $67m v $61m in F22

[percy]

The divie.Reduced ,or increased?
I had $10,000 to invest in OCA.
When the share price was $1.00 I would have bought 10,000 shares, and received $210 dive ie 2.1 cents x 10,000 shares.
However waiting until the share price hit 80 cents I bought 12,500 with my $10,000 and receiving 1.9 cps, I am getting $237.50 in divies.
A handsome increase of 13%....

[Baa_Baa]

Forbar still bullish "We remain of the view that OCA is one of the most attractive medium and long term investments under our coverage. We reiterate our OUTPERFORM rating and see ~70% upside to our reduced 12 month target price of NZ$1.30 (from NZ$1.45)."

[Grimy]

I have to decide whether to participate in the upcoming DRP. I did last time and got caught out badly with the falling share price. Changed my option to cash but tempted to go back to the DRP. Although that will almost guarantee a continued slide in the share price..........

[SailorRob]

Some rather impressive figures on page 29 of the presentation.
Average development margin 32.2%
Average resale margin...........22.7%
Average resale gain per unit/care suite $99,613.


Development margins are a farce. They don't include the cost (construction, land or financing) of the entire facility ex the footprint of the actual units. So what are the actual margins and why try to cover them up?

[bull....]

obviously no - one got the tip that boiled cabbage was good for resales lol anyway im forecasting more declining div next yr possibly for all rv stocks as cashflow tightens even more

[Bjauck]

Forbar still bullish "We remain of the view that OCA is one of the most attractive medium and long term investments under our coverage. We reiterate our OUTPERFORM rating and see ~70% upside to our reduced 12 month target price of NZ$1.30 (from NZ$1.45)."The orchestra plays a sweet tune as SS Oceanic slips beneath the waves….

[Entrep]

Forbar still bullish "We remain of the view that OCA is one of the most attractive medium and long term investments under our coverage. We reiterate our OUTPERFORM rating and see ~70% upside to our reduced 12 month target price of NZ$1.30 (from NZ$1.45)."

Forbar don't want to miss out on OCA's next raise?

[SailorRob]

I'm sure there has been plenty of discussion on this previously and a lot of good knowledge on the subject within this forum, but briefly;

How do we know that the industry isn't overbuilding? I guess it comes down a lot to demand forecasts which should be reasonably accurate.

Cheers.

[Balance]

I'm sure there has been plenty of discussion on this previously and a lot of good knowledge on the subject within this forum, but briefly;

How do we know that the industry isn't overbuilding? I guess it comes down a lot to demand forecasts which should be reasonably accurate.

Cheers.

The demand will be there but at what price?

Market is pricing in a fall in prices and margins.

[percy]

I'm sure there has been plenty of discussion on this previously and a lot of good knowledge on the subject within this forum, but briefly;

How do we know that the industry isn't overbuilding? I guess it comes down a lot to demand forecasts which should be reasonably accurate.

Cheers.

From what I read demand is expected to exceed supply.

[SailorRob]

Anyone know if Earl kept his shares? I guess if he sold after leaving then we wouldn't know.

[BlackPeter]

obviously no - one got the tip that boiled cabbage was good for resales lol anyway im forecasting more declining div next yr possibly for all rv stocks as cashflow tightens even more

Hi doomster, you clearly forgot to mention that the world is ending in 2026 anyway ... we just need to decide whether this is due to an asteroid collision or due to overpopulation - so, who cares about your boiled cabbage anyway?

https://en.wikipedia.org/wiki/List_of_dates_predicted_for_apocalyptic_events#21s t_century_2

[justakiwi]

Just put him on ignore. He isn't worth a response. His only purpose for being in these forums is to stir ****. No doubt buying up large behind his doomsday bluffing.


Hi doomster, you clearly forgot to mention that the world is ending in 2026 anyway ... we just need to decide whether this is due to an asteroid collision or due to overpopulation - so, who cares about your boiled cabbage anyway?

https://en.wikipedia.org/wiki/List_of_dates_predicted_for_apocalyptic_events#21s t_century_2

[Balance]

From what I read demand is expected to exceed supply.

No question about demand.

Retirees are only going to move into retirement villages if they can afford to.

As property prices are dropping, it will be harder and harder for the retirees to get a good price for their existing homes to buy into retirement villages.

Why RV share prices are so sensitive to the property cycle - so good on the way up and now, nasty on the way down.

NZ is but in the first year of a potential 5 year down cycle.

No big hurry to ride the cycle down.

[BlackPeter]

I'm sure there has been plenty of discussion on this previously and a lot of good knowledge on the subject within this forum, but briefly;

How do we know that the industry isn't overbuilding? I guess it comes down a lot to demand forecasts which should be reasonably accurate.

Cheers.

Demand is well understood and rising. Just look at the population pyramide.

Price is a function of the real estate market (given that buyers need money from somewhere).

Most analysts expect real estate market to bottom out in 2023 - and given that real estate is always worse in winter, I'd say mid 2023 might be a good guess. It is as well the time when the recession might start to bite and Labour is losing their chances to win again ... which is good for the property market :);

From Tony Alexander's latest article:


House prices are going to fall further but the pace of decline has already slowed down in recent months and will likely remain relatively slow for a number of reasons despite the extra pessimism set to come along. Construction costs continue to go up, net migration flows are proving stronger than anticipated, job security remains strong, and the extra hike in interest rates is going to make it even more difficult for the current government to get re-elected late next year.

In fact, with the Reserve Bank forecasting recession from the middle of 2023 the chances of a change in government have increased and this means that as we move through 2023 more investors are likely to start sniffing at the property market in expectation of interest expense deductibility returning.

Clearly there are a great number of extremely uncertain factors in play here even without having to make reference to the also very uncertain international economic and political outlook. But for those people who have the spare cash flow to handle slightly higher interest rates the housing sector is turning more and more in their favour.



https://www.oneroof.co.nz/news/42687

[percy]

No question about demand.

Retirees are only going to move into retirement villages if they can afford to.

As property prices are dropping, it will be harder and harder for the retirees to get a good price for their existing homes to buy into retirement villages.

Why RV share prices are so sensitive to the property cycle - so good on the way up and now, nasty on the way down.

NZ is but in the first year of a potential 5 year down cycle.

No big hurry to ride the cycle down.

From Ferg's post #14092
This was from page 8 of the report:

We have achieved a good level of resales during the period despite operating in a softening housing market. The timing of sales of independent living apartments and villas has been impacted by conditions in the broader residential property market and we are starting to see an increase in the median days to sell these units. However, the price of retirement village units in the sector, including at Oceania’s villages, has historically been well below the median house price in the surrounding catchment areas. As a result of this buffer, Oceania has either maintained or increased pricing for its independent living villas and apartments over the last six months.

[BlackPeter]

No question about demand.

Retirees are only going to move into retirement villages if they can afford to.

As property prices are dropping, it will be harder and harder for the retirees to get a good price for their existing homes to buy into retirement villages.

Why RV share prices are so sensitive to the property cycle - so good on the way up and now, nasty on the way down.

NZ is but in the first year of a potential 5 year down cycle.

No big hurry to ride the cycle down.

Somewhat confused ...

How would you know the length of the housing down cycle - or did you make that bit up?

Did NZ house prices (the red line in the graph below) ever drop for 5 years in a row?

If not - why now?

14336

Apart from that - if you talk a 5 years "cycle" - this would be 2.5 year up and 2.5 years down - otherwise its not a "cycle".

Do you know what you are talking about?

[Getty]

A recent Hawkes Bay example is someone sold their home for $680K, and bought into a retirement village for $570K.

If those % differentials remain, then many will still see retirement villages as an option, despite the annual fee, $5900 in this case.

[BlackPeter]

editing mishap / duplicate - deleted

[SailorRob]

Thanks all, looking at it from a demand perspective, there will be demand for almost any goods and services at the right price and obviously there will always be appropriate demand levels for Oceania's services at the 'right' price.

What I was more getting at was, is there any evidence of overbuilding such that prices will be forced to match demand at prices that don't reflect good returns on the capital invested to create the services and property.

I would not have a clue, but I imagine that if construction of the units and suites is outpacing demand for them then this will be a pricing issue that is separate again from the residential property market.

[Balance]

Somewhat confused ...

How would you know the length of the housing down cycle - or did you make that bit up?

Did NZ house prices (the red line in the graph below) ever drop for 5 years in a row?

If not - why now?

14336

Apart from that - if you talk a 5 years "cycle" - this would be 2.5 year up and 2.5 years down - otherwise its not a "cycle".

Do you know what you are talking about?

Property cycle :

1982 - 1987 up

1988 - 1992 down

1993 - 1997 up

1998 - 2002 down

2003 - 2007 up

2008 - 2012 down

2013 - 2018 up

2019 - 2020 down

2020 (note 2020) - 2021 up boosted by record low interest rates

2022 - ? Down

BP - there are those of us who are involved with property development who have to watch the cycle very carefully.

No reason for me to make things up. If my assessment of the cycles are wrong, happy to be proven so.

[psychic]

Who knows, I'm the contrarian and have just bought.. :eek2:
To be fair though Balance, I seem to recall you didn't see the covid boom coming right?

[BlackPeter]

Property cycle :

1982 - 1987 up

1988 - 1992 down

1993 - 1997 up

1998 - 2002 down

2003 - 2007 up

2008 - 2012 down

2013 - 2018 up

2019 - 2020 down

2020 (note 2020) - 2021 up boosted by record low interest rates

2022 - ? Down

BP - there are those of us who are involved with property development who have to watch the cycle very carefully.

No reason for me to make things up. If my assessment of the cycles are wrong, happy to be proven so.

So - with "down" you really mean prices either flat line or growth rates are lower than in upcycles, do you?

I guess with a roughly 10 to 11 years "cycle" it does make sense ... but flat lining prices (I could imagine that) still don't mean prices are going down.

If I take e.g. your "down period" from 2008 to 2012 - prices did go up slower, but they still went up by something like 12% (in 5 years from Jan 2008 to Dec 2012).

But hey, even if property prices as well as building prices flat line from here, what's the damage to retirement villages? Sure - they won't get huge windfall profits from re-valuations - i.e. the next doubling of SP might take a bit longer ... but I don't see this as essential for their business plans.

[winner69]

Good story in NBR (if you can access)

Should allay some fears

https://www.nbr.co.nz/investment/were-starting-to-see-the-market-copy-us-oceania-boss/

And a cool photo of our brent at work

[bull....]

looks to be following the same pattern of rym after there results .............. timber

[mike2020]

Come on bull, rym had a bounce this afternoon. OCA could look at cryogenics and extending lifespan. Not for residents we need the turnover, for shareholders so they can last until the inflection kicks in.

[forest]

Why are resale apartments going so well and “new apartments” stalled?

I have no answer for now, can anybody else shed some light ?

Maverick thanks for all your detailed information on this forum it is greatly appreciated.

My comment lacks detail however it might clarify your question a little.
OCA is different as you know to the other RV companies in that OCA demolish many units on their brownfield sites.
When they rebuild and report that they deliver an x number of units that does not mean that they have x number of units for sale.
For sale will only be the number of new units minus the number of new units needed to house the residence from the demolished units.
So the unsold delivered units are still occupied but no sale revenue can be gained until the resident from the demolished unit moves on.

[justakiwi]

Exactly. This is something Maverick has pointed out in the past too.


Why are resale apartments going so well and “new apartments” stalled?

I have no answer for now, can anybody else shed some light ?

Maverick thanks for all your detailed information on this forum it is greatly appreciated.

My comment lacks detail however it might clarify your question a little.
OCA is different as you know to the other RV companies in that OCA demolish many units on their brownfield sites.
When they rebuild and report that they deliver an x number of units that does not mean that they have x number of units for sale.
For sale will only be the number of new units minus the number of new units needed to house the residence from the demolished units.
So the unsold delivered units are still occupied but no sale revenue can be gained until the resident from the demolished unit moves on.

[forest]

Exactly. This is something Maverick has pointed out in the past too.

Ok, I must have misunder stood his question.
I am puzzeled what he means with his question in that case.

[justakiwi]

No I don’t think you misunderstood. I think what you have pointed out is correct but I don’t think those unsold units fully explain the lower than expected new sales. Mav will have a better idea of the numbers than me re how many fall into the category you mentioned (residents grandparented into new units as part of an acquisition), but I can’t imagine they are the only reason for the low sales.


Ok, I must have misunder stood his question.
I am puzzeled what he means with his question in that case.

[Rawz]

I think we all know the answer. Retirees are delaying the move where they can because their house is worth $200k less than it was

[Bjauck]

I think we all know the answer. Retirees are delaying the move where they can because their house is worth $200k less than it was It is still worth more than just two years ago, probably more than it will be worth next year, and a $1m more than when they bought their first home!

[Forrestdun]

Sound like the government is planning on pay parity for nurses in retirement villages amongst others. If they are already paying more to retain nurses could be helpful for their bottom line.

[Grimy]

It is still worth more than just two years ago, probably more than it will be worth next year, and a $1m more than when they bought their first home!

Very true, but most people see a lower value from a high point as a loss, even though it is a still a large gain long-term. Then think if they wait they may get that higher number again, all the while missing out on current opportunities in front of them. Human nature and seems to become more common as people get older.....

[RTM]

I think we all know the answer. Retirees are delaying the move where they can because their house is worth $200k less than it was

Reckon you are right on the money with respect to the delay, but the reason for the delay might be more complex. May relate as well to difficulty in finding a buyer who has the finance. If it’s time to downsize due to health, changing plans, advancing years, then I think for many -$200k would be annoying rather than a show stopper.

[psychic]

Should Balance's morbid prediction of a 5 year decline in house prices be correct then some might think this might be a great time to jump into RV license to occupy?

[Bjauck]

Very true, but most people see a lower value from a high point as a loss, even though it is a still a large gain long-term. Then think if they wait they may get that higher number again, all the while missing out on current opportunities in front of them. Human nature and seems to become more common as people get older.....
Retired folk tend to more conservative and may hope that asset prices to do better under a National govt too. However retired folk perhaps have more of the advantage of perspective and not expect to be able to time the market perfectly.

[RTM]

Retired folk tend to more conservative and may hope that asset prices to do better under a National govt too. However retired folk perhaps have more of the advantage of perspective and not expect to be able to time the market perfectly.

That advantage of perspective/experience and perhaps taking advice may also have seen them sell earlier when prices were higher. Causing some sales to occur earlier(year or two ?) than they might have otherwise.

[winner69]

May as well put up the updated EPS trend chart. Just as well earnings don't matter - it's the story that counts.

EPS based on Underlying NPAT since listing. Middle part of chart may be a bit wonly because they changed Balance Dates and the Definiition of Underlaying NPAT (made it a bigger number so the numbers around 2017/2018 may actually be understated on a true comparative basis)

Underlying NPAT is just a guess anyway - the Oceania definition 'Underlying Profit is a non-GAAP measure of financial performance and considered in the determination of dividends. The calculation of Underlying Profit requires a number of estimates to be approved by the Directors in their preparation. Both the methodology and the estimates may differ among companies in the retirement village sector.'

For what its worth here's my chart. I dare not comment

[ronaldson]

The post War baby boom demographic is inexorable, and these folk have begun to arrive at the sweet spot age for RV occupation, particularly Villas and ILU. Peak care-suite requirement is just a bit further away, but on the horizon.

So any blip just now due to the need to adjust to house price falls is temporary and short term.

[justakiwi]

You’re starting to sound like a certain other “cracked record” poster. No need to repeat it ad infinitum. We get it.


…..Just as well earnings don't matter - it's the story that counts.

[Rawz]

You’re starting to sound like a certain other “cracked record” poster. No need to repeat it ad infinitum. We get it.

Come on JAK... W69 post was actually informative and included effort with a chart added in.

Ive noticed the lower the OCA sp has gone the more attacking you have become to other posters that you dont agree with. give it a rest please

[justakiwi]

It was, and I'm not disputing that or complaining about the content of his information, in any way. What I was commenting on is the sarcastic, repetitive catch phrases that are creeping into his posts. Once is enough if one wants to make a sarcastic point. Repeating it with every post, gets a tad "old." Which is why I only quoted the relevant section of his post.

If you see it as "attacking" so be it. I have been on the receiving end often, from various posters - both publicly and behind the scenes. But when it is happening to me, I'm told "it's just a guy thing" - double standards much.


Come on JAK... W69 post was actually informative and included effort with a chart added in.

Ive noticed the lower the OCA sp has gone the more attacking you have become to other posters that you dont agree with. give it a rest please

[Rawz]

It was, and I'm not disputing that or complaining about the content of his information, in any way. What I was commenting on is the sarcastic, repetitive catch phrases that are creeping into his posts. Once is enough if one wants to make a sarcastic point. Repeating it with every post, gets a tad "old."

Which is why I only quoted the relevant section of his post.

share trader would be a very boring monotone place if people didnt add in a bit of flavour to their posts

[Onemootpoint]

Very true, but most people see a lower value from a high point as a loss, even though it is a still a large gain long-term. Then think if they wait they may get that higher number again, all the while missing out on current opportunities in front of them. Human nature and seems to become more common as people get older.....

I think that is a valid point which is also a problem when buying or selling shares…..wait for the ‘best’ level ever….but in the meantime missing out on opportunities possibly ending up in a buy high sell low scenario.

[bottomfeeder]

You know the benefit of hindsight is a wonderful thing. But in share trading its so easy to comment with hindsight. A few posters here are saying 'wouldnt touch them with a barge pole' ' waiting for them to get down to 50cents'. Where were they when the SP was motoring from $1.40 to $1.60. Now when the SP is 80c they are calling it a **** show. I say wow what value.

[Habits]

Come on JAK... W69 post was actually informative and included effort with a chart added in.

Ive noticed the lower the OCA sp has gone the more attacking you have become to other posters that you dont agree with. give it a rest please


Taking it personally and defensively. Jump to wrong conclusions

[nztx]

You know the benefit of hindsight is a wonderful thing. But in share trading its so easy to comment with hindsight. A few posters here are saying 'wouldnt touch them with a barge pole' ' waiting for them to get down to 50cents'. Where were they when the SP was motoring from $1.40 to $1.60. Now when the SP is 80c they are calling it a **** show. I say wow what value.

but the risk factor of the sector probably still deserves a 50-60c rating before it's even worth a look in :)

[Balance]

Should Balance's morbid prediction of a 5 year decline in house prices be correct then some might think this might be a great time to jump into RV license to occupy?

Here’s the views from 3 experts :

https://www.stuff.co.nz/life-style/homed/real-estate/300749124/what-will-the-housing-market-look-like-in-november-2023-three-experts-weigh-in

House prices should stop falling sometime from late 2023 or 2024 so could be 2 year or 3 year down cycle according to said experts.

‘Tony Alexander thinks the housing market’s fortunes may be turning by this time next year.’

‘Kelvin Davidson said this week’s update from the Reserve Bank had changed his view on what might be happening at the end of next year. He said that was now more likely to be the case in 2024 rather than 2023.‘

‘ Miles Workman said ANZ was expecting a 27% peak-to-trough fall in house prices when adjusted for wage growth, or 18% in nominal terms. He said ANZ was previously expecting house prices to find a floor in mid 2023 but that could now come later due to the OCR probably lifting for longer than previously expected.’

[troyvdh]

Hold on here.Dont folk moving into retirement homes....will still happen.

BTW Balance I detest experts.

If they declare exposure...I will listen.

[Curly]

Here’s the views from 3 experts :

https://www.stuff.co.nz/life-style/homed/real-estate/300749124/what-will-the-housing-market-look-like-in-november-2023-three-experts-weigh-in

House prices should stop falling sometime from late 2023 or 2024 so could be 2 year or 3 year down cycle according to said experts.

‘Tony Alexander thinks the housing market’s fortunes may be turning by this time next year.’

‘Kelvin Davidson said this week’s update from the Reserve Bank had changed his view on what might be happening at the end of next year. He said that was now more likely to be the case in 2024 rather than 2023.‘

‘ Miles Workman said ANZ was expecting a 27% peak-to-trough fall in house prices when adjusted for wage growth, or 18% in nominal terms. He said ANZ was previously expecting house prices to find a floor in mid 2023 but that could now come later due to the OCR probably lifting for longer than previously expected.’
Yeah pretty much two years of downward adjustment, plateau period, say 3 yrs and then the start of upward trend again.
Overall its always up. Chinese proverb,
“Never sell”. Just think of what you paid for your first home and what it is worth now if you were able to keep it. So all good in Camp OCA. Just bought another 11k at . 78c.

[Brain]

Hold on here.Dont folk moving into retirement homes....will still happen.

BTW Balance I detest experts.

Yes exactly . When I decide to move into one it will be out of necessity because I can no longer enjoy where I am living now because of ill health or maybe loneliness. And it will be to Oceania because they offer the best product based on what I have seen at the Sands.

[troyvdh]

Brain...Thankyou go well cheers.

Loneliness...thanks for mentioning that.

[SailorRob]

With the $917,647,000 Deferred management fee/refundable occupation right liability being essentially like insurance float, perhaps a lot better, you could make a strong argument that these funds are better than equity capital and will grow over time. If that is the case then we have a situation where we can purchase 1.882 billion dollars of capital for $550 million, or 29 cents on the dollar. Some of that capital you're buying was injected quite recently.

Anyone see it differently?

[Baa_Baa]

With the $917,647,000 Deferred management fee/refundable occupation right liability being essentially like insurance float, perhaps a lot better, you could make a strong argument that these funds are better than equity capital and will grow over time. If that is the case then we have a situation where we can purchase 1.882 billion dollars of capital for $550 million, or 29 cents on the dollar. Some of that capital you're buying was injected quite recently.

Anyone see it differently?

No, don't see it differently. Nice to see you're drilling into the underlying investment proposition, and maybe seeing why this (and other RV's) are a good long term investment. Property underpins it, but the business model you describe is way more appealing along with the thesis of demand from a 2-3 decade ongoing aging population.

It might help as well to see how massively undervalued the market has these RV's based even on NTA right now. Like if they could sell all their assets now and pay out shareholders, we'd get a lot more than the market price right now. Not that I want to see any takeovers, but you'll get my point I'm sure.

[ronaldson]

Over 2.5m shares traded on-market today. The daily turnover is consistently high, even given there are 715m shares on issue, most days over 1m. Clearly there are buyers and there are sellers.

Is someone accumulating in this more recent trading range of, say, 78c to 81c?

[Balance]

Over 2.5m shares traded on-market today. The daily turnover is consistently high, even given there are 715m shares on issue, most days over 1m. Clearly there are buyers and there are sellers.

Is someone accumulating in this more recent trading range of, say, 78c to 81c?

There are buyers and sellers everyday!

It is a matter of the price sellers are prepared to sell at and what buyers are prepared to pay - the sp trend tells the story there.

[ralph]

No, don't see it differently. Nice to see you're drilling into the underlying investment proposition, and maybe seeing why this (and other RV's) are a good long term investment. Property underpins it, but the business model you describe is way more appealing along with the thesis of demand from a 2-3 decade ongoing aging population.

It might help as well to see how massively undervalued the market has these RV's based even on NTA right now. Like if they could sell all their assets now and pay out shareholders, we'd get a lot more than the market price right now. Not that I want to see any takeovers, but you'll get my point I'm sure.

I agree with most of that Baa Baa ,but the point is most of those tangible assets in real estate are losing value & cannot be sold on at those inflated prices Now & not for a long time

[SailorRob]

I agree with most of that Baa Baa ,but the point is most of those tangible assets in real estate are losing value & cannot be sold on at those inflated prices Now & not for a long time


They are ultimately protected by replace cost which is sky rocketing and in no circumstances would you be able to replicate the new facilities cheaper than they built them for. It's not the value of the NET tangible assets that matters it's the value of the float which is nearly a billion dollars. Unless you want to mark it all down by 77% then you are in the money.

[Rawz]

What’s this billion dollar float you talk about SRob? I’m struggling to get my thick head around the idea sorry

[SailorRob]

What’s this billion dollar float you talk about SRob? I’m struggling to get my thick head around the idea sorry


So the $917,647,000 Deferred management fee/refundable occupation license item on the balance sheet is essentially an interest free loan that cannot be called and is only paid back once the next lot of money has come through. It is a thing of immense beauty and the key to understanding the industry.

So it allows them to massively increase the amount of property they own and develop, at no cost or risk. Also worth noting here the terms and rate on their actual conventional debt which is outstanding, one bond is I think 2027 at 2.3% and the other 2028 at 3.3%. So massively negative in real terms.

So a conventional developer like you or I in simple terms, to build a million dollar house, we have to first get a million dollars, then build the house and then to build another one we either have to sell the first, or go to the bank and borrow against the first and maybe get 800k if we are lucky and subject to handing over the title to the first one to the bank and paying interest and introducing all kinds of risk.

OCA has their cake and eats it, they 'sell' the first house for more than a million while still owning it and don't pay any interest on the money they get and they don't have to pay it back (they keep a ton of it too) until it's been 'sold' again, and they do this until the cows come home and then do it some more. So they can never get into trouble with this type of liability, and it reminds me of float in the insurance industry which is fought over like crazy. Only this is way better as float is heavily regulated and you have to put up your own capital too.

Then as they develop more they get more of this free money and develop more... It's one hell of a business, and everyone is missing it as they think you're buying the net tangible assets but no, you are also buying the free billion dollars. I've never seen it discussed here but it's the real key to the business model.

[Snoopy]

Newshub can reveal since July, the Government has signed off on employers to recruit 1097 aged care nurses from overseas, while 95 nurses have applied and 69 have been approved. But only five have arrived in the country.

https://www.newshub.co.nz/home/politics/2022/11/jacinda-ardern-grant-robertson-react-to-pictures-of-them-in-80s-as-aged-sector-calls-for-more-funding.html

and the ones left continue to burn out and leave ?


Please forgive an interjection from someone not in or yet invested in the industry. But sometimes those not in the industry are able to see potential solutions more clearly. It seems to me that both care workers and care nurses are under so much pressure these days, that their underlying good nature and commitment to doing good for their residents sees them as slaves to their jobs, and without wage parity to their other health system peers.

The solution came to me in a blinding flash - re-introduce slavery, but with a very important modern twist. Since modern care workers are so wedded to their responsibilities, and work in slave like conditions, it would make sense to 'be honest' and reclassify them -officially- as slaves. This would end all pay parity arguments, threats of strikes or any such bourgeois 'rights' issues, and allow workers to focus solely on their work. Of course,to get care workers to accept such a deal there would have to be 'compensatory offsets'.

Accommodation would all be in house, but to five star standards. Oceanias many unsold apartments would be ideal residential bases for our live-in slave population. This too would provide an instant solution to the excess unsold accommodation stock at Oceania we keep hearing about. 'Five star food' supplied by the cities' finest chefs would be the cuisine starting point. A personal trainer and masseuse for each slave would ensure our people kept in top physical condition. Doctor and dental visits would all be free. A giant personal TV with unlimited access to all the world's streaming services would keep them entertained. All laundry would be done for our slaves. Once a month they would be escorted to town via limousine and a minder to spend a generous clothing allowance, on garments of the finest patterns and made of silk. These minders would be dedicated professionals themselves, employed under the moniker tag 'slave driver'. All worries of their previous life for our slaves, struggling to pay rent, power and food in a hostile climate of rampant inflation would be gone. But, and here is the one disadvantage, they would not be allowed to leave Oceania - which of course would solve the staffing crisis. If they got too old or physically decrepit to do the work, then they would instantly transition from 'worker' to 'inmate', removing all long term care worries.

Once a year, replacing Labour day (because no-one these days works a 40 hour week anyway) the country would have a 'Slave Appreciation Day' (acronym SAD, sounds catchy), where we 'externals' would stop to remember our 'dedicated slave workforce' who would not be able to stop and appreciate themselves - because they would still be working looking after those 'oldies'. My 'elegant solution' does seem to solve most of the industry's problems, including the ever increasing wage bills that shareholders seem to worry about.

SNOOPY

[Rawz]

So the $917,647,000 Deferred management fee/refundable occupation license item on the balance sheet is essentially an interest free loan that cannot be called and is only paid back once the next lot of money has come through. It is a thing of immense beauty and the key to understanding the industry.

So it allows them to massively increase the amount of property they own and develop, at no cost or risk. Also worth noting here the terms and rate on their actual conventional debt which is outstanding, one bond is I think 2027 at 2.3% and the other 2028 at 3.3%. So massively negative in real terms.

So a conventional developer like you or I in simple terms, to build a million dollar house, we have to first get a million dollars, then build the house and then to build another one we either have to sell the first, or go to the bank and borrow against the first and maybe get 800k if we are lucky and subject to handing over the title to the first one to the bank and paying interest and introducing all kinds of risk.

OCA has their cake and eats it, they 'sell' the first house for more than a million while still owning it and don't pay any interest on the money they get and they don't have to pay it back (they keep a ton of it too) until it's been 'sold' again, and they do this until the cows come home and then do it some more. So they can never get into trouble with this type of liability, and it reminds me of float in the insurance industry which is fought over like crazy. Only this is way better as float is heavily regulated and you have to put up your own capital too.

Then as they develop more they get more of this free money and develop more... It's one hell of a business, and everyone is missing it as they think you're buying the net tangible assets but no, you are also buying the free billion dollars. I've never seen it discussed here but it's the real key to the business model.

Wow okay that’s a really interesting way of looking at it- like an asset. Thanks for your post and sharing this idea, I’ve never seen it discussed here before

[SailorRob]

Wow okay that’s a really interesting way of looking at it- like an asset. Thanks for your post and sharing this idea, I’ve never seen it discussed here before

It is an asset in all but a technical sense. Float in the insurance industry is viciously fought over to the point where they're happy to lose money on underwriting in order to gain the float to invest. Look at the amount of this source of funds vs the amount of interest bearing debt, or the amount of equity.

Google 'insurance float' for a quick overview of the concept.

[clearasmud]

Wow okay that’s a really interesting way of looking at it- like an asset. Thanks for your post and sharing this idea, I’ve never seen it discussed here before

Then why did Ryman need to borrow $3 billions from the banks??

[SailorRob]

Then why did Ryman need to borrow $3 billions from the banks??

My answer would be that they didn't.

They didn't need to, they wanted to. And it's not all bank debt, looks like just over half is and a fair bit is due to weak exchange rate affecting their USD bonds.

Ultimately this conventional debt allows them to ramp the float faster.

[winner69]

Then why did Ryman need to borrow $3 billions from the banks??

Probably the same reason why Oceania have borrowed $0.5 billion

[SailorRob]

Probably the same reason why Oceania have borrowed $0.5 billion


I'd say they have borrowed 270 million, the remainder amounts to legalised theft from the bond holders.

In real terms Oceania is getting paid to take the money, borrowing at vastly negative interest rates.

[winner69]

I still can't believe that they only had 61 new sales in first half year

Thats 40 less than same period last year and half the number they sold in pcp2021

They were even selling more new ORAs in 2018

The numbers don't seem to reconcile with the words and images in their reports.

[winner69]

Hey Maverick

Have you noticed that they have stopped breaking sales prices of villas, apartments and care suites between new sales and resales - now only show a combined (new plus resales) figure.

Something they don't want us to see? But it pisses me off when they continually keep changing how they report things.

Never mind, its a wet day today so I'll do my own restating of past numbers to keep a trend I monitor up to date.

[bottomfeeder]

I still can't believe that they only had 61 new sales in first half year

Thats 40 less than same period last year and half the number they sold in pcp2021

They were even selling more new ORAs in 2018

The numbers don't seem to reconcile with the words and images in their reports.

I don't think it is of great concern at this stage. Six months is too short a period to positively identify a trend. Winter is always a time for depressed sales. Also the lead time for elderly to sell their house, then sign up for licence to occupy extended due to the interest rate increases, slowing down the purchasers of their home. It takes a little time to get used to accepting a lower price for your house. But it will not stop them selling, as they have very little alternatives. You have to remember elderly just don't have the time as a younger person would to hold fire until better prices may come around the corner. The next full year results will be more telling and then the six months after will define a trend much better.

I think probably the six months ended 30 September were the worst six months for purchasers of dwellings to make decisions to go ahead with purchase or wait.

[limmy]

So the $917,647,000 Deferred management fee/refundable occupation license item on the balance sheet is essentially an interest free loan that cannot be called and is only paid back once the next lot of money has come through. It is a thing of immense beauty and the key to understanding the industry.

So it allows them to massively increase the amount of property they own and develop, at no cost or risk. Also worth noting here the terms and rate on their actual conventional debt which is outstanding, one bond is I think 2027 at 2.3% and the other 2028 at 3.3%. So massively negative in real terms.

So a conventional developer like you or I in simple terms, to build a million dollar house, we have to first get a million dollars, then build the house and then to build another one we either have to sell the first, or go to the bank and borrow against the first and maybe get 800k if we are lucky and subject to handing over the title to the first one to the bank and paying interest and introducing all kinds of risk.

OCA has their cake and eats it, they 'sell' the first house for more than a million while still owning it and don't pay any interest on the money they get and they don't have to pay it back (they keep a ton of it too) until it's been 'sold' again, and they do this until the cows come home and then do it some more. So they can never get into trouble with this type of liability, and it reminds me of float in the insurance industry which is fought over like crazy. Only this is way better as float is heavily regulated and you have to put up your own capital too.

Then as they develop more they get more of this free money and develop more... It's one hell of a business, and everyone is missing it as they think you're buying the net tangible assets but no, you are also buying the free billion dollars. I've never seen it discussed here but it's the real key to the business model.

Thank you for your explanation, Sailor Rob.

[Maverick]

Hey Maverick

Have you noticed that they have stopped breaking sales prices of villas, apartments and care suites between new sales and resales - now only show a combined (new plus resales) figure.

Something they don't want us to see? But it pisses me off when they continually keep changing how they report things.

Never mind, its a wet day today so I'll do my own restating of past numbers to keep a trend I monitor up to date.

Hi Winner, nice to hear from you.
Yep, I'm totally with you on that. Everyone has always complained about how complicated and that too much stuff was in their reports but Ive always loved their detail. I guess they are just aligning it with the other guys as none of them break it down either.
Personally I'm a bit disappointed they've done it but like you we just have to adapt.

I'm ok about care suites new and resale prices lumped together. The condition and price of a care suite new or second hand are as good as identical anyway, in fact last HY the second hand C/S where dearer than new C/S by $23k.
Villas dont really matter as they dont really make new villas anyway.
On thinking about it apartments are kind of like the care suites where a second hand Remuera rise apartment is going to be dearer than a brand spanker Awatere one so I guess eventually they all may as well get mixed together I suppose. The teased out detail becomes irrelevant for any practical purposes. Exception being 1HY24 new Helier sales- they will skew things for sure. Hopefully they'll strip those ones out just for fun.

Interestingly The second hand apartment prices would have been really skewed anyway by some resale's soon to start flowing from Browns Bay ( remember a couple originally sold for $2.6 m which are statistically due to recycle as second hand in a couple of years) . Then some in this lot will be "Remuera rise "resale's almost certainly going for more than $1m. So I guess on reflection they may as well amalgamate it all. Second hand care suits and apartments are always going to be as good as the new ones anyway.

BTW , I'm still beavering away in the background on the drop off in APARTMENT NEW SALES which killed any growth in this HY underlying profit. I'm really gutted about that as we were all set to demonstrate good profit growth. How many more times can I tell my wife ..." next time"?
Got some good leads I'm working through and so far I'm happy with about 3-4 acceptable reasons I've found but its too important of an issue to just hope she`ll come right.

BTW I do agree with you Bottom feeder on your good post above , That is one factor defiantly in the mix.

[winner69]

Thanks Mav for those comments. Must be a bit of a worry if you have to keep telling your wife that future is bright and it's just a matter of weathering the current storm.

F123 Underlying NPAT was $266k less than last year. Realised Gains from resales were up $5.8m ($3.0m impact from selling more and $2.8m impact of better prices and margins) but Development Margin on new stuff was down $2.6m (the impact of selling less was $6.0m partially offset from a $3.4m favourable impact of higher prices/margins)

So ORA/Property activity was actually $3.2m than last year but other stuff which I call the day to day 'Operating Surplus' was $2.9m
worse than last year. This Operating Surplus over the years has been positive but lately it has turned negative. The $3.2m difference from last year (negative) isn't obvious as to the cause - I'm just assuming its the impact of all those things like higher wages, govt fees shortfall etc etc ..... but we wouldn't want to see it getting worse would we.

Overall lets hope the new sales problem is just a 'timing' difference andthe next couple of halves will be the really great.

[Playa]

OCA any is too many

[SailorRob]

Hi Winner, nice to hear from you.
Yep, I'm totally with you on that. Everyone has always complained about how complicated and that too much stuff was in their reports but Ive always loved their detail. I guess they are just aligning it with the other guys as none of them break it down either.
Personally I'm a bit disappointed they've done it but like you we just have to adapt.

I'm ok about care suites new and resale prices lumped together. The condition and price of a care suite new or second hand are as good as identical anyway, in fact last HY the second hand C/S where dearer than new C/S by $23k.
Villas dont really matter as they dont really make new villas anyway.
On thinking about it apartments are kind of like the care suites where a second hand Remuera rise apartment is going to be dearer than a brand spanker Awatere one so I guess eventually they all may as well get mixed together I suppose. The teased out detail becomes irrelevant for any practical purposes. Exception being 1HY24 new Helier sales- they will skew things for sure. Hopefully they'll strip those ones out just for fun.

Interestingly The second hand apartment prices would have been really skewed anyway by some resale's soon to start flowing from Browns Bay ( remember a couple originally sold for $2.6 m which are statistically due to recycle as second hand in a couple of years) . Then some in this lot will be "Remuera rise "resale's almost certainly going for more than $1m. So I guess on reflection they may as well amalgamate it all. Second hand care suits and apartments are always going to be as good as the new ones anyway.

BTW , I'm still beavering away in the background on the drop off in APARTMENT NEW SALES which killed any growth in this HY underlying profit. I'm really gutted about that as we were all set to demonstrate good profit growth. How many more times can I tell my wife ..." next time"?
Got some good leads I'm working through and so far I'm happy with about 3-4 acceptable reasons I've found but its too important of an issue to just hope she`ll come right.

BTW I do agree with you Bottom feeder on your good post above , That is one factor defiantly in the mix.

It's great to get down in the weeds but ultimately none of this really matters. Everything will be sold eventually and resales will occur eventually.

The big picture is that the float has compounded since May 2016 through September 2022 at 25.5%.

I can tell you with certainty that a business model like this would interest Buffett immensely.

[SailorRob]

OCA any is too many

What's your reasoning Sport?

[BlackPeter]

What's your reasoning Sport?

Good question.

He probably subscribes to the well established "buy high sell low" strategy :) ;

[Blue Skies]

Surely this new annual $200 million govt increase in funding towards pay parity for nurses including ' residential aged care workers' is excellent news also for OCA.
Going to make recruitment & retainment much easier.


https://www.newshub.co.nz/home/politics/2022/11/new-zealand-nurses-organisation-very-happy-after-government-announces-new-pay-parity-deal.html

[ronaldson]

Yes, sector having a revival on-market this morning. And that announcement is clearly the driver, even thou signaled previously. Nothing like reality to move the market!

[Maverick]

Surely this new annual $200 million govt increase in funding towards pay parity for nurses including ' residential aged care workers' is excellent news also for OCA.
Going to make recruitment & retainment much easier.


https://www.newshub.co.nz/home/politics/2022/11/new-zealand-nurses-organisation-very-happy-after-government-announces-new-pay-parity-deal.html
This is a material change. OCA pay their nurses at the going public hospital rates anyway. So now that funding can come from DHBs rather than scrounging it from other areas of operation.
Wait there's more.....Kathryn said on the webcast the latest EXTRA pay increase DHBs are giving operators equates to $4/bed/day...that means about $1.5m extra cream to OCA for this 2HY by my estimation. This is on top of the parity deal.

It is clear that the govt are unwinding some of their funding cuts of the last 5 years.

This is a fantastic announcement. For all the posters here who have been waiting for the Govt to recognize they've cut too far and start to improve funding...this is that day.

OCA who has been beaten up the most for its care weighting will be the one that gets revalued the greatest from these 2 funding increases.

[Maverick]

One last bit of housekeeping.
Today is the last day for the 1.9c unimputed divi.

[winner69]

Retire sector in favour again .....and share prices on a roll (big time)

The bad times are over

Re Oceania .... we will never never see the 70's again

[Entrep]

Re Oceania .... we will never never see the 70's again

Good chance you see it tomorrow ex-div, without the US dumping when it reopens.

[justakiwi]

Probably just a recap on the results meeting but might be some additional comment now that this pay parity funding has been announced.

14356

[bottomfeeder]

Bought some Oceania bonds at a 6.9% yield. Oceana really got the timing right to get then issued at 3.3 %. Another factor which gives this share some legs.

[Curly]

Mkt liking ARV result...

[SailorRob]

Bought some Oceania bonds at a 6.9% yield. Oceana really got the timing right to get then issued at 3.3 %. Another factor which gives this share some legs.


Why would anyone buy the bonds over the stock?

[BlackPeter]

Why would anyone buy the bonds over the stock?

People do ... otherwise there would not be any bonds for sale :) :

Apart from that ... bonds do have a different risk profile than shares (i.e. they help with risk mitigation in a balanced portfolio) and, if you buy them in high interest times, they are likely to add to the interests a capital gain (if and when interest rates go down).

Not commenting on this particular case, but there clearly are situations where it makes sense to buy bonds over stocks ... and people do.

Discl: Holding currently as well some bonds (though no OCA bonds).

[Balance]

Sobering updated house price prediction from ANZ.

https://www.stuff.co.nz/business/money/300751714/anz-house-prices-will-drop-32-from-their-peak

[Balance]

Deleted deleted

[X-men]

Economists....i call them visionary...talk sheet no actions. Just like politicians and my boss...talk..talk..talk...no actions,,,expect others to do the mahi.

The economist predicted the housing price would fall when the covid hit. Instead,, the house price is doubling since 2020!!!

[winner69]

Infratil not selling Retire Australia

Probably didn't want to sell at 30%/40% discount to NTA - wait another year or two until sector seem more favourably

Those interested (assuming there was interest) might make a move on Oceania .... shareholders probably happy to accept a buck a share even though our Liz would say it's an opportunistic offer and doesn't refect the true value of the company

That

[Curly]

We have had our inlaws living with us since April having sold their property early this year. They have made offers on numerous properties pitching their price reflecting the medias spin on prices coming down. Their summation is while there is some evidence of prices coming down, it is no where near what is being represented by the media. Lot of click bait going on. Prices pretty much still up there unless you have a desperate vendor.

[SailorRob]

People do ... otherwise there would not be any bonds for sale :) :

Apart from that ... bonds do have a different risk profile then shares (i.e. they help with risk mitigation in a balanced portfolio) and, if you buy them in high interest times, they are likely to add to the interests a capital gain (if and when interest rates go down).

Not commenting on this particular case, but there clearly are situations where it makes sense to buy bonds over stocks ... and people do.

Discl: Holding currently as well some bonds (though no OCA bonds).


Emphasis on the bonds over the stock, meaning why buy OCA bonds at 6% over the stock at 29c on the dollar.

[BlackPeter]

Emphasis on the bonds over the stock, meaning why buy OCA bonds at 6% over the stock at 29c on the dollar.

Lets see:

If you buy OCA010 at current prices, they get you something like 6.5% ... and I'd say the risk of default is negligible. If interest rates drop, you will get on top of that a capital appreciation. Your risk: If interest rates further rise, your capital will drop.

And you are right ... if you buy the share at 82 cents you get a dividend yield of 6.1% (i.e. nearly the same as the bond) ... and the chance (and amount) of a capital appreciation appears to be much higher - but hey, it is still a share, i.e. the overall risk (and certainly the volatility) is higher.

Anyway - I hear what you say, but still could see why conservative investors want some of the bonds in their portfolio as well.

[bottomfeeder]

Lets see:

If you buy OCA010 at current prices, they get you something like 6.5% ... and I'd say the risk of default is negligible. If interest rates drop, you will get on top of that a capital appreciation. Your risk: If interest rates further rise, your capital will drop.

And you are right ... if you buy the share at 82 cents you get a dividend yield of 6.1% (i.e. nearly the same as the bond) ... and the chance (and amount) of a capital appreciation appears to be much higher - but hey, it is still a share, i.e. the overall risk (and certainly the volatility) is higher.

Anyway - I hear what you say, but still could see why conservative investors want some of the bonds in their portfolio as well.

Always good to have a mix of investments. After all while we have ideas of what the future holds, you just cannot be 100% sure. I already have enough shares in OCA and Arvida. Mind you if the price comes down further I will buy some more, but once the price starts to rise, I don't chase the share on the way up. 6.9% doesn't look too bad. Just see what the banks offer. Am reluctant to make them money at my expense.

[Snow Leopard]

...If you buy OCA010 at current prices, they get you something like 6.5% ... and I'd say the risk of default is negligible. If interest rates drop, you will get on top of that a capital appreciation. Your risk: If interest rates further rise, your capital will drop.

To clarify and ensure that no one is confused::

Each OCA010 bond has a face value of $1.00 and a rate of 2.3% pa ( Each bond pays out 2.3c pa before tax).

At the last trade of $0.82256 per bond you get at effective rate of 2.796% [ being 2.3c/82.256c as a % ]

The figure of 6.65% you see on the NZX website is your annualised return assuming that you hold the bonds to maturity and get back $1 for each bond (that you only paid 82.256c for ).

[winner69]

To clarify and ensure that no one is confused::

Each OCA010 bond has a face value of $1.00 and a rate of 2.3% pa ( Each bond pays out 2.3c pa before tax).

At the last trade of $0.82256 per bond you get at effective rate of 2.796% [ being 2.3c/82.256c as a % ]

The figure of 6.65% you see on the NZX website is your annualised return assuming that you hold the bonds to maturity and get back $1 for each bond (that you only paid 82.256c for ).


So you have to wait 5 years (Oct2027) until you hit the jackpot …that’s a bugger eh

[SailorRob]

Lets see:

If you buy OCA010 at current prices, they get you something like 6.5% ... and I'd say the risk of default is negligible. If interest rates drop, you will get on top of that a capital appreciation. Your risk: If interest rates further rise, your capital will drop.

And you are right ... if you buy the share at 82 cents you get a dividend yield of 6.1% (i.e. nearly the same as the bond) ... and the chance (and amount) of a capital appreciation appears to be much higher - but hey, it is still a share, i.e. the overall risk (and certainly the volatility) is higher.

Anyway - I hear what you say, but still could see why conservative investors want some of the bonds in their portfolio as well.


Yeah, but if you buy the bond at current prices for a 6.5% yield and rates drop then you have to really think through the capital appreciation as you'd have to sell to realise it and then be stuck with lower rates to reinvest, otherwise you've still got the 6.5% to maturity.

Same if rates rise further, if you sell to realise the loss then you can reinvest at a higher rate.

My point is it's all a wash. You're getting your 6.5% either way. It's all in the cake when you bake it.

Nobody makes money from rates dropping to increase bond values when you think about it properly as what are you going to do?

Same with rising share prices from lower rates... it's a shot in the arm now but lower returns forward so it's all a wash.

[SailorRob]

Always good to have a mix of investments. After all while we have ideas of what the future holds, you just cannot be 100% sure. I already have enough shares in OCA and Arvida. Mind you if the price comes down further I will buy some more, but once the price starts to rise, I don't chase the share on the way up. 6.9% doesn't look too bad. Just see what the banks offer. Am reluctant to make them money at my expense.

Definitely not always good usually it's just diworsification.


Nobody under 60 should hold any certificates of confiscation at all (bonds) unless you're super sophisticated and you're trading around mispricings.

6.9% is a loss of capital and guess who's winning? The shareholders.

[RTM]

To clarify and ensure that no one is confused::

Each OCA010 bond has a face value of $1.00 and a rate of 2.3% pa ( Each bond pays out 2.3c pa before tax).

At the last trade of $0.82256 per bond you get at effective rate of 2.796% [ being 2.3c/82.256c as a % ]

The figure of 6.65% you see on the NZX website is your annualised return assuming that you hold the bonds to maturity and get back $1 for each bond (that you only paid 82.256c for ).

Thanks...well explained.

[bottomfeeder]

Definitely not always good usually it's just diworsification.


Nobody under 60 should hold any certificates of confiscation at all (bonds) unless you're super sophisticated and you're trading around mispricings.

6.9% is a loss of capital and guess who's winning? The shareholders.

Just to clarify. The bonds were issued last year 100million at 3.3%. Every $10000 you invested you get $330, before tax.

I Pur hased the bonds at the quoted interest rate of 6.9 percent. I paid for $10,000 bonds at maturity by the payment of $8,342.16. So I still get the coupon value of interest of $330 a year. But because I paid less it works out to be an interest rate of cash 3.96%. If all remains the same the difference of $1,705.47 I get in five years time, a sort of deferred interest. So over the 5 years in total I get a return averaged out at 8.04%.p.a. Note I. Can sell at ant time. Provided all remains equal, as I get closer to maturity date the bonds can be sold for proportionately more so that I get a piece of the deferred interest. So my return stays at $8.04% p. a..
Where the complications come in is if interest rates become volatile. If interest rates go up markedly, I still get my 8.04 percent to maturity. Unless I sell then I get less. If interest rates drop ie Covid, recession, war foot and mouth. etc then if I hold till maturity, I still get my 8.04 percent. Or If I sell I will get more return on investment. I prese tly hold four shares, which if they go down, I will probably buy more. These shares and industry I know better than others. So I am not looking for other investments. So if it all turns to total ****, I have some safer more secure investments to fall back on. I already have 730,000 OCA, and while I have 95% confidence they will get to $1.30 soon enough, I am not risking everything on that thought. So spare cash is going into bonds at the moment on the way up.. I have other bonds as well. I am retired. I don't have the luxury of losing all of my money and then starting again, such as some of you younger guys and gal's.. So some of my decisions have to border on conservatism.

[ronaldson]

And I think the gain on maturity is tax free, whereas if you received it as actual interest (like the $330pa in the example) then that income is liable for tax. So bottomfeeder is actually even better off by holding than he/she is indicating.

[bottomfeeder]

And I think the gain on maturity is tax free, whereas if you received it as actual interest (like the $330pa in the example) then that income is liable for tax. So bottomfeeder is actually even better off by holding than he/she is indicating.

All adjusted financial insruments become taxable.

[SailorRob]

Just to clarify. The bonds were issued last year 100million at 3.3%. Every $10000 you invested you get $330, before tax.

I Pur hased the bonds at the quoted interest rate of 6.9 percent. I paid for $10,000 bonds at maturity by the payment of $8,342.16. So I still get the coupon value of interest of $330 a year. But because I paid less it works out to be an interest rate of cash 3.96%. If all remains the same the difference of $1,705.47 I get in five years time, a sort of deferred interest. So over the 5 years in total I get a return averaged out at 8.04%.p.a. Note I. Can sell at ant time. Provided all remains equal, as I get closer to maturity date the bonds can be sold for proportionately more so that I get a piece of the deferred interest. So my return stays at $8.04% p. a..
Where the complications come in is if interest rates become volatile. If interest rates go up markedly, I still get my 8.04 percent to maturity. Unless I sell then I get less. If interest rates drop ie Covid, recession, war foot and mouth. etc then if I hold till maturity, I still get my 8.04 percent. Or If I sell I will get more return on investment. I prese tly hold four shares, which if they go down, I will probably buy more. These shares and industry I know better than others. So I am not looking for other investments. So if it all turns to total ****, I have some safer more secure investments to fall back on. I already have 730,000 OCA, and while I have 95% confidence they will get to $1.30 soon enough, I am not risking everything on that thought. So spare cash is going into bonds at the moment on the way up.. I have other bonds as well. I am retired. I don't have the luxury of losing all of my money and then starting again, such as some of you younger guys and gal's.. So some of my decisions have to border on conservatism.


You clearly know what you're talking about however if you only own 4 companies in the same industry then perhaps you should own bonds in a different company than what you also hold a lot of stock in.

I will go through the bond math later and ask if I have any questions, but if rates drop and you sell the bond, how do you get more return? You get return pulled forward but then you have to find another investment and if it was OCA bonds then you're buying back the bond you just sold less 2 x brokerage costs. Same applies to any other investment - you're faced with lower rates, so wont you end up with roughly the same 8.04% less brokerage?

[SailorRob]

Just to clarify. The bonds were issued last year 100million at 3.3%. Every $10000 you invested you get $330, before tax.

I Pur hased the bonds at the quoted interest rate of 6.9 percent. I paid for $10,000 bonds at maturity by the payment of $8,342.16. So I still get the coupon value of interest of $330 a year. But because I paid less it works out to be an interest rate of cash 3.96%. If all remains the same the difference of $1,705.47 I get in five years time, a sort of deferred interest. So over the 5 years in total I get a return averaged out at 8.04%.p.a. Note I. Can sell at ant time. Provided all remains equal, as I get closer to maturity date the bonds can be sold for proportionately more so that I get a piece of the deferred interest. So my return stays at $8.04% p. a..
Where the complications come in is if interest rates become volatile. If interest rates go up markedly, I still get my 8.04 percent to maturity. Unless I sell then I get less. If interest rates drop ie Covid, recession, war foot and mouth. etc then if I hold till maturity, I still get my 8.04 percent. Or If I sell I will get more return on investment. I prese tly hold four shares, which if they go down, I will probably buy more. These shares and industry I know better than others. So I am not looking for other investments. So if it all turns to total ****, I have some safer more secure investments to fall back on. I already have 730,000 OCA, and while I have 95% confidence they will get to $1.30 soon enough, I am not risking everything on that thought. So spare cash is going into bonds at the moment on the way up.. I have other bonds as well. I am retired. I don't have the luxury of losing all of my money and then starting again, such as some of you younger guys and gal's.. So some of my decisions have to border on conservatism.


Ok cheers, the math checks out. So how do they calculate the quoted rate, which as you have highlighted is wrong.

However if rates drop and you sell I disagree you will have a greater return over the period.

[bottomfeeder]

... if you only own 4 companies in the same industry then perhaps you should own bonds in a different company than what you also hold a lot of stock in?

I don't own shares all in the same industry. Only two Oceania and Arvida.

I have bonds in varying companies.

If interest rates go down to 1 percent, and you sell bonds you bought at 6.9 percent, You make money. If all you can get is 1 percent investments, you have to make money selling an investment with a 6.9% yield.

[winner69]

Ok cheers, the math checks out. So how do they calculate the quoted rate, which as you have highlighted is wrong.

However if rates drop and you sell I disagree you will have a greater return over the period.

Quoted rate seems OK to me ... not wrong

But intrigued how bottomfeeder got 8.04% pa

[SailorRob]

Quoted rate seems OK to me ... not wrong

But intrigued how bottomfeeder got 8.04% pa

Bottomfeeder is correct on the 8.04% but he/she is wrong about making money on a bond bought at 6% if rates drop. It's an illusion.

[Snow Leopard]

Quoted rate seems OK to me ... not wrong

But intrigued how bottomfeeder got 8.04% pa

There are a couple of variations of bond yield to maturity formula but none of them give you anything approaching 8%.

:mellow:

[bottomfeeder]

There are a couple of variations of bond yield to maturity formula but none of them give you anything approaching 8%.

:mellow:
Based it on 5 years left to run, it may be six. This would probably then bring it down to the correct 6.9% yield. Not sure about maturity date, i probably wont be alive then. So I have been trying to coach my wife on the ins and outs of bonds.

[Poolboy]

So I have been trying to coach my wife on the ins and outs of bonds.

Not your wife but still curious about bonds. So you can sell the bonds at sometime before maturity. I'm guessing if the interest rate dropped to 3% you could sell you bonds to someone who factors in a 8% return and you get something half way in between in cash as if you had waited those years and got annual payments? Disclaimer: I don't know anything about bonds.

[GTM 3442]

All adjusted financial insruments become taxable.

Could you please expand on this? What's an "adjusted financial instrument"? Would it cover shares as well as bonds?

[SailorRob]

There are a couple of variations of bond yield to maturity formula but none of them give you anything approaching 8%.

:mellow:

I'm pretty sure he's right. The key is that you still get the $330 per bond but you paid less than par. So you need to factor that in plus the discount to par. I worked it out for the 2027 and he's bang on.

[justakiwi]

Could we maybe move the bond discussion to a new thread, as it is now a generalised discussion on bonds, not specific to OCA?

[Ferg]

Could you please expand on this? What's an "adjusted financial instrument"? Would it cover shares as well as bonds?
It's where you buy something like a promissory note or bond that guarantees to pay out X at a future date for a discount, e.g. you pay 90c now for a $1 bond that matures in say 2 years time. Shares do not have that guarantee so they are not an 'adjusted financial instrument' - which are referred to as 'financial arrangements' in the Income Tax Act. The discount of X versus the future receipt is treated as taxable income with various methods for allocating across multiple financial years, where applicable.

[winner69]

I'm pretty sure he's right. The key is that you still get the $330 per bond but you paid less than par. So you need to factor that in plus the discount to par. I worked it out for the 2027 and he's bang on.

Hey Snowie me ol mate …..looks like we are both wrong with our calculations …..and by a long way

But I’m with you ……nowhere near 8%

Maybe we’ve been around too long and need to catch up with modern ways.

[SailorRob]

Could we maybe move the bond discussion to a new thread, as it is now a generalised discussion on bonds, not specific to OCA?

Absolutely not. We are discussing OCA bonds.

[SailorRob]

Hey Snowie me ol mate …..looks like we are both wrong with our calculations …..and by a long way

But I’m with you ……nowhere near 8%

Maybe we’ve been around too long and need to catch up with modern ways.

Maths hasn't changed too much. Run us through the calculation. I can see how bottomfeeder gets 8.04% but could be wrong, we should all learn why.

[Snow Leopard]

I'm pretty sure he's right. The key is that you still get the $330 per bond but you paid less than par. So you need to factor that in plus the discount to par. I worked it out for the 2027 and he's bang on.

OCA020
6.90%
0.05% / 0.73%
52 Week Change: No change
Instrument Name OCA 13/09/2028 3.3% Oceania Healthcare Limited Bonds
Issued By Oceania Healthcare Limited
ISIN NZOCADT002C1
Type Vanilla Corporate Bonds
Price Per $100 $83.684
Maturity Date 13 Sep 2028
Previous Payment Date 13 Sep 2022

from the NZX OCA020 page (https://www.nzx.com/instruments/OCA020)


Maths hasn't changed too much. Run us through the calculation. I can see how bottomfeeder gets 8.04% but could be wrong, we should all learn why.

Always check your inputs.

[SailorRob]

OCA020
6.90%
0.05% / 0.73%
52 Week Change: No change
Instrument Name OCA 13/09/2028 3.3% Oceania Healthcare Limited Bonds
Issued By Oceania Healthcare Limited
ISIN NZOCADT002C1
Type Vanilla Corporate Bonds
Price Per $100 $83.684
Maturity Date 13 Sep 2028
Previous Payment Date 13 Sep 2022

from the NZX OCA020 page (https://www.nzx.com/instruments/OCA020)



Always check your inputs.

I was using the 2028 bond rate on the 2027 bond. Will check it all through later. Cheers

[Snow Leopard]

Could we maybe move the bond discussion to a new thread, as it is now a generalised discussion on bonds, not specific to OCA?

I would post a nice picture of an apologetic Snow Leopard but this was the best I could do :blush:

https://www.unilad.co.uk/wp-content/uploads/2018/09/leopard1-1.jpg

Unilad (https://www.unilad.com/animals/snow-leopard-loses-it-after-being-scared-by-new-camera-in-enclosure)

[justakiwi]

Seems to me it is now a discussion on bonds in general, but if you say so.


Absolutely not. We are discussing OCA bonds.

[bull....]

if property falls another 20 - 30% like some banks are suggesting and RV cashflows continue to tighten
the question should be what price or rate will OCA bonds trade at then

[Poet]

if property falls another 20 - 30% like some banks are suggesting and RV cashflows continue to tighten
the question should be what price or rate will OCA bonds trade at then

No bank is forecasting another 20-30% fall.
The most pessimistic are forecasting 27% from peak to trough - and that is accounting for inflation - more like 15% in nominal terms and half of that has already happened!

[winner69]

What bonds are offering is often seen as a measure of company ‘risk’

OCA bonds currently 6.6%/6.9%, ARV 6.8%, RYM 6.3% and SUM 6.0%/6.25%

Could say the market sees OCA and ARV ‘riskier’ than RYM or SUM. To some extent this degree of ‘riskiness’ is seen in the relative share prices as well, like discount to NTA

Isn’t it good we back on topic!

[bottomfeeder]

Sorry to keep on these bonds. I worked out my 8% based on five years left to run. Its the difference between what I paid and the ten thousand payable on maturity, over what it should be just under 6 years ie maturity September 2018. So it is probably correct if you buy them at 6.9% then the correct return is 6.9%.

Lastly if interest rates on bonds do come down to 3.3%. Then theoritically I could sell them for $10k immediately when I paid around $8.5k. Not something to hoot about, but better than a poke in the eye with a burnt stick.

Enough of Bonds, back to OCA shares.

[RTM]

I was using the 2028 bond rate on the 2027 bond. Will check it all through later. Cheers

Interesting discussion…..just catching up…been working all day.
SailorRob….you must be retired now ?:)

[winner69]

Bonds or Shares

Those OCA020 Bonds were issued in October last year - punters fell over themselves to buy them ... very popular.

Buy $10,000 back then, Now worth $8,368 and you would have collected $330 in interest - down $1,302

Could have put that $10,000. That's now worth $5259 and you would have collected $409 in dividends .... down $4.851

Don't need to sell today so no need to crystalise the losses (to date) - the 13% on the 'safe' bonds and 48% on the shares

Suppose if the bonds and shares are held until 2028 it will be all hunky dory and one would have made 3.3% pa on the bonds and
maybe over 10% on the shares if the share price has got to $2.50 plus

Oceania has no been a great investment either way since October last year eh

[SailorRob]

Just to clarify. The bonds were issued last year 100million at 3.3%. Every $10000 you invested you get $330, before tax.

I Pur hased the bonds at the quoted interest rate of 6.9 percent. I paid for $10,000 bonds at maturity by the payment of $8,342.16. So I still get the coupon value of interest of $330 a year. But because I paid less it works out to be an interest rate of cash 3.96%. If all remains the same the difference of $1,705.47 I get in five years time, a sort of deferred interest. So over the 5 years in total I get a return averaged out at 8.04%.p.a. Note I. Can sell at ant time. Provided all remains equal, as I get closer to maturity date the bonds can be sold for proportionately more so that I get a piece of the deferred interest. So my return stays at $8.04% p. a..
Where the complications come in is if interest rates become volatile. If interest rates go up markedly, I still get my 8.04 percent to maturity. Unless I sell then I get less. If interest rates drop ie Covid, recession, war foot and mouth. etc then if I hold till maturity, I still get my 8.04 percent. Or If I sell I will get more return on investment. I prese tly hold four shares, which if they go down, I will probably buy more. These shares and industry I know better than others. So I am not looking for other investments. So if it all turns to total ****, I have some safer more secure investments to fall back on. I already have 730,000 OCA, and while I have 95% confidence they will get to $1.30 soon enough, I am not risking everything on that thought. So spare cash is going into bonds at the moment on the way up.. I have other bonds as well. I am retired. I don't have the luxury of losing all of my money and then starting again, such as some of you younger guys and gal's.. So some of my decisions have to border on conservatism.


Big lesson for me here. I knew this didn't sound right but thought I was getting a lesson from a bond math wizard and it really sounded like he knew his figures. Of course I still double checked but thinking he was right lead me to try and come up with the same number and I did coincidently by using the rate off one bond to calculate the other.

Not impressed, but my own fault.

[SailorRob]

Interesting discussion…..just catching up…been working all day.
SailorRob….you must be retired now ?:)


If I carry on calculating bond math like I have today the retirement will be short lived.

Publicly backed up bottomfeeder with his crap calculations. Not a good look.

[SailorRob]

if property falls another 20 - 30% like some banks are suggesting and RV cashflows continue to tighten
the question should be what price or rate will OCA bonds trade at then


So my ex work mate just sold this Whangarei crapper for 1.75 million. With an RV of 1.2 and homes.co.nz estimate of 1.3.

Unreal.

https://homes.co.nz/address/whangarei/kamo/144-karanui-road/Kkx0W

[SailorRob]

Sorry to keep on these bonds. I worked out my 8% based on five years left to run. Its the difference between what I paid and the ten thousand payable on maturity, over what it should be just under 6 years ie maturity September 2018. So it is probably correct if you buy them at 6.9% then the correct return is 6.9%.

Lastly if interest rates on bonds do come down to 3.3%. Then theoritically I could sell them for $10k immediately when I paid around $8.5k. Not something to hoot about, but better than a poke in the eye with a burnt stick.

Enough of Bonds, back to OCA shares.


Makes no difference. You just would have had the gain sooner and then be faced with lower reinvestment for the remainder of the term.

Buy the bond way below par, then rates drop, sell the bond for a 'profit' and then you buy back the bond you just sold and lose brokerage x2.

Or invest elsewhere at the new lower rate.

It's all in the cake when you bake it.

[Curly]

Enough of the Bonds,
Sean Connery was the best Bond. 😝

[bottomfeeder]

If I carry on calculating bond math like I have today the retirement will be short lived.

Publicly backed up bottomfeeder with his crap calculations. Not a good look.

Not here to teach you.

[Baa_Baa]

Not here to teach you. I am not your or anyone for that fact acting as an investment advisor. I work on ball park figures, carried out in my head. If you are getting angry over either 6.9% or 8% over 5 or 6 years, perhaps you should keep sailing. Within a month the dynamics of these calculations could change dramatically.

The main issue I was illustrating was that OCA has 100 mill at 3.3 percent, when current interest rates on these bonds is 6.9%. So what a good deal for the company issuing these early. It was only when a few were speculating as to why anyone would buy bonds, I thought I would explain myself somewhat.

If you base your investment decisions on what you read here, pity help you. Some of these guys might have $5,000 invested in OCA. They may know more than all of us, so not disparaging those that have less money at their stage of life or for some very good reasons have been holding off purchasing. Just because I have 730000 shares, it does not mean firstly I know what I am doing and secondly that I am going to make money from OCA. Only time will tell. As the Zen Master said many times "we will see".

Hopefully you don't take it personally that SailerRob has an alternative view. I think it's time someone put up the maths, so we can all understand what exactly it is people are using to calculate PV -> FV of the bonds.

I thought I was learning something about OCA bonds, and bonds in general (that I have never held because I don't get it, lending money to companies for a fixed % interest return, with variable return on the invested capital), but now I'm probably more confused than before.

Never mind, I hope you are richly rewarded for holding your bonds and your shares. You deserve success for such a substantial vote of confidence. We're all in the same boat, wanting an ROI on our investments, whatever the instruments we choose to achieve that.

[WAIKEN]

You will do well from OCA bottom feeder It is easy to get seduced by academic analysis when investing in listed companies I always look at reality. I don't trade. I hold on average for 5 -10 years and sometimes longer.
JLL have stated that NZ is grossly undersupplied in retirement units and care beds looking at current stock plus the rate of new builds plus growth in the aging population..
The discount to NTA is substantial but the discount to replacement cost is possibly 100%. The economy is slowing but tradesmen aren't going to drop their rates and Fletchers and other suppliers of materials aren't going to permanently drop prices. Nobody in NZ is going to take wage cuts or drop their hourly self employed rates. Mortgage rates are likely to peak in 2023. The huge holdings of strategically placed land held by OCA is unlikely to loose much value and it will be held for years There's a lot of inflation still to come.
My prediction for OCA's price in 18 months is around 2.00.

[SailorRob]

Not here to teach you. I am not your or anyone for that fact acting as an investment advisor. I work on ball park figures, carried out in my head. If you are getting angry over either 6.9% or 8% over 5 or 6 years, perhaps you should keep sailing. Within a month the dynamics of these calculations could change dramatically.

The main issue I was illustrating was that OCA has 100 mill at 3.3 percent, when current interest rates on these bonds is 6.9%. So what a good deal for the company issuing these early. It was only when a few were speculating as to why anyone would buy bonds, I thought I would explain myself somewhat.

If you base your investment decisions on what you read here, pity help you. Some of these guys might have $5,000 invested in OCA. They may know more than all of us, so not disparaging those that have less money at their stage of life or for some very good reasons have been holding off purchasing. Just because I have 730000 shares, it does not mean firstly I know what I am doing and secondly that I am going to make money from OCA. Only time will tell. As the Zen Master said many times "we will see".


Not getting angry.

Difference between 6.9 and 8% is huge. You were not using ball park figures nor doing anything in your head, you were posting extremely specific calculations and giving answers to 2 decimal places (8.04%), if you can compound a number to two decimal places in your head for 5 or 6 years then you are Einstein level. The seeming complexity of the calculations sucked me in. Enough said.

You well know I don't base my investing decisions on what anyone here says as I spend most of my time arguing with them and disagreeing with what is said!

Agree bonds in your circumstances are acceptable.

[SailorRob]

Hopefully you don't take it personally that SailerRob has an alternative view. I think it's time someone put up the maths, so we can all understand what exactly it is people are using to calculate PV -> FV of the bonds.

I thought I was learning something about OCA bonds, and bonds in general (that I have never held because I don't get it, lending money to companies for a fixed % interest return, with variable return on the invested capital), but now I'm probably more confused than before.

Never mind, I hope you are richly rewarded for holding your bonds and your shares. You deserve success for such a substantial vote of confidence. We're all in the same boat, wanting an ROI on our investments, whatever the instruments we choose to achieve that.

Not sure what you mean BaaBaa about the fixed % interest return but the variable return on the capital, but perhaps you mean the changing discount or premium to par in the aftermarket.

That changes to reflect changes in interest rates or perceived risk in the bond, but if you hold to maturity then you get your full capital back unless they default. The changes you see in the interim are reflecting what someone else will pay you due to changes in general interest rates or risks.

So the variable return on capital is nothing to do with the company (unless they have done something to increase the risk of default) it's just your old 2.3% bonds are no longer desirable as you can get double that in a term deposit so the capital value changes to reflect that.

[SailorRob]

You will do well from OCA bottom feeder It is easy to get seduced by academic analysis when investing in listed companies I always look at reality. I don't trade. I hold on average for 5 -10 years and sometimes longer.
JLL have stated that NZ is grossly undersupplied in retirement units and care beds looking at current stock plus the rate of new builds plus growth in the aging population..
The discount to NTA is substantial but the discount to replacement cost is possibly 100%. The economy is slowing but tradesmen aren't going to drop their rates and Fletchers and other suppliers of materials aren't going to permanently drop prices. Nobody in NZ is going to take wage cuts or drop their hourly self employed rates. Mortgage rates are likely to peak in 2023. The huge holdings of strategically placed land held by OCA is unlikely to loose much value and it will be held for years There's a lot of inflation still to come.
My prediction for OCA's price in 18 months is around 2.00.


Agreed with most of that, however if the discount to replacement cost is 100% then that means it's zero.

Anything discounted by 100% is zero no matter what it is.

I think you mean replacement cost is 100% higher than NTA, which means the discount is 50%. In actual fact it is 58% or bit higher now, so not far off.

As I pointed out the other day with the value of the float the discount to NTA is actually 71% or 29c on the dollar of assets.

If it ever gets to 100% we are all bust.

[Maverick]

My disappointment with this result was so great I actually sold quite a sizeable portion last week. After a brutal year of SP punishment, 3 relentless years of Covid, care funding cuts and an expected profit rise that never eventuated,I found this result the very last straw.

The sole problem of this result was new apartment sales. Everything , and I mean “everything” else about this report is excellent.
-Resales going higher in price and volumes than anticipated.
-Care suites gaining excellent traction and market acceptance at higher prices. OCA had pre-sales for the first time. ( do not believe the nonsense out there that they ever had 450 empty care suites - that misinformation has always been utter rubbish)
-A meaningful increased Govt DHB rates to be captured in HY2 ( but missed for 1HY). This has nothing to do with the pay parity deal.
-The 2 very substantial developments are still due on time in 4 months with strong pre-sales.
-Excellent resale values from recent acquisitions.
-Very high embedded value underscoring future profits through DMFs and resales.
-Easing of staff pressures.
-I personally like them intending to sell 10 villages that they recognize can't have value added.

You name it, the metrics were all at the top of expectations except 1 - “new apartment sales”.
I have been clear that this report would see good profit growth due solely to a jump in this. This did not materialize . They had nearly 160 apartments to sell , with this large opening stock they should have sold 50-60 ... boom, would have been a great result. But in reality they only managed 28, WTF?

I've since had an intense week studying this result. Scouring the webcast recording multiple times, same with the ARV audio conference, the RYM result , spoken with OCA at various levels and I believe I've got a good understanding as to what went wrong and where OCA are currently at.

From this work I have u-turned and have since bought those sold shares back, albeit at a higher price. I have concluded for myself that the poor sales were an aberration with acceptable reasons behind it and that they were one offs. I personally do not believe the issues are systemic and sales are now back to their normal patterns.

Now I don't expect anyone to take my word for it, nor should they, but I'm saying that even with my original mindset of a portion of capitulation and acting on it, I have found satisfactory explanations to cause me to u-turn back to highly positive once again. My frustration with how slow this process has been is palpable, probably like everyone else's.

Selling or holding OCA really comes down to one issue now with all the other areas going very well from this report... will new apartment sales recover?

Now I'm not trying to sell anything to anyone, I completely understand anyone who has given up on this company, if you can’t quantify for yourself what’s ahead why wouldn't you? I just feel I owe folk an update after being so optimistic about his flat result.

FWIW, like Winners recent comment, I too maintain my FY profit of up around 15% almost unchanged. The delayed HY1sales will re-emerge to some degree in HY2 and the other improved metrics go quite some way to offsetting the 1HY hole. FY24 will still be dynamite. Emotive language but Waimarie with its substantial presales is going to redefine OCAs P&L. I expect no completed sales for 2hy23.

One last thing, The analysts ( from their Q &A on the webcasts to both OCA and ARV) really do have a good understanding of where OCA is at. This seems underscored that OCA didn't get slammed after the result- it could have easily been trashed like RYM was.
Even though RYM underlying was up 44% , ARV about 10% and OCA 0% they seem to understand each company beyond this basic moment in time measurement. I think I'm even seeing buying support for OCA for the first time in a bloody long time.

[RupertBear]

My disappointment with this result was so great I actually sold quite a sizeable portion last week. After a brutal year of SP punishment and 3 years of Covid, care funding cuts and a profit rise that never eventuated for whatever reason, I found this result the last straw.

The sole problem of this result was new apartment sales. Everything , and I mean “everything” else about this report is excellent.
-Resales going higher in price and volumes than anticipated.
-Care suites gaining excellent traction and market acceptance at higher prices. OCA had pre-sales for the first time. ( do not believe the nonsense out there that they ever had 450 empty care suites - that misinformation has always been utter rubbish)
-A meaningful increased Govt DHB rates to be captured in HY2 ( but missed for 1HY). This has nothing to do with the pay parity deal.
-The 2 very substantial developments are still due on time in 4 months with strong pre-sales.
-Excellent resale values from recent acquisitions.
-Very high embedded value underscoring future profits through DMFs and resales.
-Easing of staff pressures.
-I personally like them intending to sell 10 villages that they recognize can't have value added.

You name it, the metrics were all at the top of expectations except 1 - “new apartment sales”.
I have been clear that this report would see good profit growth due solely to a jump in this. This did not materialize . They had nearly 160 apartments to sell , normally they should have sold 50-60 ... boom, would have been a great result. But in reality they only managed 28, WTF?

I've since had an intense week studying this result. Scouring the webcast recording multiple times, same with the ARV audio conference, the RYM result , spoken with OCA at various levels and I believe I've got a good understanding as to what went wrong and where OCA are currently at.

From this work I have u-turned and have since bought those sold shares back, albeit at a higher price. I have concluded for myself that the poor sales were an aberration with acceptable reasons behind it and that they were one offs. I personally do not believe the issues are systemic and sales are now back to their normal patterns.

Now I don't expect anyone to take my word for it, nor should they, but I'm saying that even with my original mindset of a portion of capitulation and acting on it, I have found satisfactory explanations to cause me to u-turn back to highly positive once again. My frustration with how slow this process has been is palpable, probably like everyone else's.

Selling or holding OCA really comes down to one issue now with all the other areas going very well from this report... will new apartment sales recover?

Now I'm not trying to sell anything to anyone, I completely understand anyone who has given up on this company, if you can’t quantify what’s ahead why wouldn't you? I just feel I owe folk an update after being so optimistic about his flat result.

One last thing, The analysts ( from their Q &A on the webcasts to both OCA and ARV) really do have a good understanding of where OCA is at. This seems underscored that OCA didn't get slammed after the result- it could have easily been trashed like RYM was.
Even though RYM underlying was up 44% , ARV about 10% and OCA 0% they seem to understand each company beyond this basic moment in time measurement. I think I'm even seeing buying support for OCA for the first time in a bloody long time.



Thanks for sharing this Maverick, much appreciated :)

[bull....]

So my ex work mate just sold this Whangarei crapper for 1.75 million. With an RV of 1.2 and homes.co.nz estimate of 1.3.

Unreal.

https://homes.co.nz/address/whangarei/kamo/144-karanui-road/Kkx0W

crapper lol
anyway i never give much weight to RV or homes.co.nz estimates. had a disagreement yrs ago with homes data scientist on his method of working out their estimates of house values.
at the end of the day just like OCA value is in the eye of the purchaser or seller

[SailorRob]

crapper lol
anyway i never give much weight to RV or homes.co.nz estimates. had a disagreement yrs ago with homes data scientist on his method of working out their estimates of house values.
at the end of the day just like OCA value is in the eye of the purchaser or seller


Crapper meaning it's Whangarei and just a very basic 290 square meter house.

Yeah 35% higher than the estimator shows it's way out.

[SailorRob]

My disappointment with this result was so great I actually sold quite a sizeable portion last week. After a brutal year of SP punishment, 3 relentless years of Covid, care funding cuts and an expected profit rise that never eventuated,I found this result the very last straw.

The sole problem of this result was new apartment sales. Everything , and I mean “everything” else about this report is excellent.
-Resales going higher in price and volumes than anticipated.
-Care suites gaining excellent traction and market acceptance at higher prices. OCA had pre-sales for the first time. ( do not believe the nonsense out there that they ever had 450 empty care suites - that misinformation has always been utter rubbish)
-A meaningful increased Govt DHB rates to be captured in HY2 ( but missed for 1HY). This has nothing to do with the pay parity deal.
-The 2 very substantial developments are still due on time in 4 months with strong pre-sales.
-Excellent resale values from recent acquisitions.
-Very high embedded value underscoring future profits through DMFs and resales.
-Easing of staff pressures.
-I personally like them intending to sell 10 villages that they recognize can't have value added.

You name it, the metrics were all at the top of expectations except 1 - “new apartment sales”.
I have been clear that this report would see good profit growth due solely to a jump in this. This did not materialize . They had nearly 160 apartments to sell , with this large opening stock they should have sold 50-60 ... boom, would have been a great result. But in reality they only managed 28, WTF?

I've since had an intense week studying this result. Scouring the webcast recording multiple times, same with the ARV audio conference, the RYM result , spoken with OCA at various levels and I believe I've got a good understanding as to what went wrong and where OCA are currently at.

From this work I have u-turned and have since bought those sold shares back, albeit at a higher price. I have concluded for myself that the poor sales were an aberration with acceptable reasons behind it and that they were one offs. I personally do not believe the issues are systemic and sales are now back to their normal patterns.

Now I don't expect anyone to take my word for it, nor should they, but I'm saying that even with my original mindset of a portion of capitulation and acting on it, I have found satisfactory explanations to cause me to u-turn back to highly positive once again. My frustration with how slow this process has been is palpable, probably like everyone else's.

Selling or holding OCA really comes down to one issue now with all the other areas going very well from this report... will new apartment sales recover?

Now I'm not trying to sell anything to anyone, I completely understand anyone who has given up on this company, if you can’t quantify what’s ahead why wouldn't you? I just feel I owe folk an update after being so optimistic about his flat result.

FWIW, like Winners recent comment, I too maintain my FY profit of up around 15% almost unchanged. The delayed HY1sales will re-emerge to some degree in HY2 and the other improved metrics go quite some way to offsetting the 1HY hole. FY24 will still be dynamite. Emotive language but Waimarie with its substantial presales is going to redefine OCAs P&L. I expect no completed sales for 2hy23.

One last thing, The analysts ( from their Q &A on the webcasts to both OCA and ARV) really do have a good understanding of where OCA is at. This seems underscored that OCA didn't get slammed after the result- it could have easily been trashed like RYM was.
Even though RYM underlying was up 44% , ARV about 10% and OCA 0% they seem to understand each company beyond this basic moment in time measurement. I think I'm even seeing buying support for OCA for the first time in a bloody long time.





Thanks for the detailed post Maverick and the admission of capitulation, not many can be as straight as that.

The balance sheet is the tell all. The earnings are all trapped there and I don't really care when they move to the income statement.

When you can buy the NTA for cents on the dollar and get another billion thrown in for free the margin of safety is such that I can wait for 'earnings'.

Cash flows are just fine.

[Balance]

Crapper meaning it's Whangarei and just a very basic 290 square meter house.

Yeah 35% higher than the estimator shows it's way out.

Value is in the land, not in the house.

[SailorRob]

Value is in the land, not in the house.


High quality surrounding farmland changes hands at a price that would make that land (without services) worth $7500.

So we have to ask what development costs are.

There is no value in the land whatsoever, the whole city is surrounded by such land on all sides. It's all due to monopoly regulatory body.

4 white pegs and a bureaucrat signature worth 600k

[Balance]

High quality surrounding farmland changes hands at a price that would make that land (without services) worth $7500.

So we have to ask what development costs are.

Hell of a difference between farm land vs residential ‘future subdividable’ land.

Come to Auckland and have a look at what developers were paying for subdividable land before the market started its bust from Dec 2021. It was par for the course for them to pay 50% to 200% more than CV.

Now we have mortgagee sales of development land all over Auckland.

[percy]

My disappointment with this result was so great I actually sold quite a sizeable portion last week. After a brutal year of SP punishment, 3 relentless years of Covid, care funding cuts and an expected profit rise that never eventuated,I found this result the very last straw.

The sole problem of this result was new apartment sales. Everything , and I mean “everything” else about this report is excellent.
-Resales going higher in price and volumes than anticipated.
-Care suites gaining excellent traction and market acceptance at higher prices. OCA had pre-sales for the first time. ( do not believe the nonsense out there that they ever had 450 empty care suites - that misinformation has always been utter rubbish)
-A meaningful increased Govt DHB rates to be captured in HY2 ( but missed for 1HY). This has nothing to do with the pay parity deal.
-The 2 very substantial developments are still due on time in 4 months with strong pre-sales.
-Excellent resale values from recent acquisitions.
-Very high embedded value underscoring future profits through DMFs and resales.
-Easing of staff pressures.
-I personally like them intending to sell 10 villages that they recognize can't have value added.

You name it, the metrics were all at the top of expectations except 1 - “new apartment sales”.
I have been clear that this report would see good profit growth due solely to a jump in this. This did not materialize . They had nearly 160 apartments to sell , with this large opening stock they should have sold 50-60 ... boom, would have been a great result. But in reality they only managed 28, WTF?

I've since had an intense week studying this result. Scouring the webcast recording multiple times, same with the ARV audio conference, the RYM result , spoken with OCA at various levels and I believe I've got a good understanding as to what went wrong and where OCA are currently at.

From this work I have u-turned and have since bought those sold shares back, albeit at a higher price. I have concluded for myself that the poor sales were an aberration with acceptable reasons behind it and that they were one offs. I personally do not believe the issues are systemic and sales are now back to their normal patterns.

Now I don't expect anyone to take my word for it, nor should they, but I'm saying that even with my original mindset of a portion of capitulation and acting on it, I have found satisfactory explanations to cause me to u-turn back to highly positive once again. My frustration with how slow this process has been is palpable, probably like everyone else's.

Selling or holding OCA really comes down to one issue now with all the other areas going very well from this report... will new apartment sales recover?

Now I'm not trying to sell anything to anyone, I completely understand anyone who has given up on this company, if you can’t quantify for yourself what’s ahead why wouldn't you? I just feel I owe folk an update after being so optimistic about his flat result.

FWIW, like Winners recent comment, I too maintain my FY profit of up around 15% almost unchanged. The delayed HY1sales will re-emerge to some degree in HY2 and the other improved metrics go quite some way to offsetting the 1HY hole. FY24 will still be dynamite. Emotive language but Waimarie with its substantial presales is going to redefine OCAs P&L. I expect no completed sales for 2hy23.

One last thing, The analysts ( from their Q &A on the webcasts to both OCA and ARV) really do have a good understanding of where OCA is at. This seems underscored that OCA didn't get slammed after the result- it could have easily been trashed like RYM was.
Even though RYM underlying was up 44% , ARV about 10% and OCA 0% they seem to understand each company beyond this basic moment in time measurement. I think I'm even seeing buying support for OCA for the first time in a bloody long time.



Well done.
Sounds like you have been to hell and back.
It is hard buying back at a higher price, a share you should not have sold.I have done it,and it has always turned out to be the right thing to do.
I am sure it will be the same for you.

[Grimy]

Thanks Maverick. You had me worried at the beginning of your post......Very pleased to see the rest of your post reaffirming your belief in the numbers you've worked so hard on.
It certainly has been a long haul and while none of us really know when OCA will take off (and more importantly maintain its flight), I also believe it will happen, so I am going to continue to be on the register for the foreseeable future.
Important lesson for us all. If you believe the numbers, and the story, then trust yourself to make the right calls.
Thanks again for sharing your thoughts.

[davflaws]

My disappointment with this result was so great I actually sold quite a sizeable portion last week. After a brutal year of SP punishment, 3 relentless years of Covid, care funding cuts and an expected profit rise that never eventuated,I found this result the very last straw.

The sole problem of this result was new apartment sales. Everything , and I mean “everything” else about this report is excellent.
-Resales going higher in price and volumes than anticipated.
-Care suites gaining excellent traction and market acceptance at higher prices. OCA had pre-sales for the first time. ( do not believe the nonsense out there that they ever had 450 empty care suites - that misinformation has always been utter rubbish)
-A meaningful increased Govt DHB rates to be captured in HY2 ( but missed for 1HY). This has nothing to do with the pay parity deal.
-The 2 very substantial developments are still due on time in 4 months with strong pre-sales.
-Excellent resale values from recent acquisitions.
-Very high embedded value underscoring future profits through DMFs and resales.
-Easing of staff pressures.
-I personally like them intending to sell 10 villages that they recognize can't have value added.

You name it, the metrics were all at the top of expectations except 1 - “new apartment sales”.
I have been clear that this report would see good profit growth due solely to a jump in this. This did not materialize . They had nearly 160 apartments to sell , with this large opening stock they should have sold 50-60 ... boom, would have been a great result. But in reality they only managed 28, WTF?

I've since had an intense week studying this result. Scouring the webcast recording multiple times, same with the ARV audio conference, the RYM result , spoken with OCA at various levels and I believe I've got a good understanding as to what went wrong and where OCA are currently at.

From this work I have u-turned and have since bought those sold shares back, albeit at a higher price. I have concluded for myself that the poor sales were an aberration with acceptable reasons behind it and that they were one offs. I personally do not believe the issues are systemic and sales are now back to their normal patterns.

Now I don't expect anyone to take my word for it, nor should they, but I'm saying that even with my original mindset of a portion of capitulation and acting on it, I have found satisfactory explanations to cause me to u-turn back to highly positive once again. My frustration with how slow this process has been is palpable, probably like everyone else's.

Selling or holding OCA really comes down to one issue now with all the other areas going very well from this report... will new apartment sales recover?

Now I'm not trying to sell anything to anyone, I completely understand anyone who has given up on this company, if you can’t quantify for yourself what’s ahead why wouldn't you? I just feel I owe folk an update after being so optimistic about his flat result.

FWIW, like Winners recent comment, I too maintain my FY profit of up around 15% almost unchanged. The delayed HY1sales will re-emerge to some degree in HY2 and the other improved metrics go quite some way to offsetting the 1HY hole. FY24 will still be dynamite. Emotive language but Waimarie with its substantial presales is going to redefine OCAs P&L. I expect no completed sales for 2hy23.

One last thing, The analysts ( from their Q &A on the webcasts to both OCA and ARV) really do have a good understanding of where OCA is at. This seems underscored that OCA didn't get slammed after the result- it could have easily been trashed like RYM was.
Even though RYM underlying was up 44% , ARV about 10% and OCA 0% they seem to understand each company beyond this basic moment in time measurement. I think I'm even seeing buying support for OCA for the first time in a bloody long time.



I remain ridiculously overweight and a very long way underwater. As I continue to hold my breath, your frank disclosures and detailed analysis help me manage my anxiety. Thank you.

[winner69]

Thanks Maverick. You had me worried at the beginning of your post......Very pleased to see the rest of your post reaffirming your belief in the numbers you've worked so hard on.
It certainly has been a long haul and while none of us really know when OCA will take off (and more importantly maintain its flight), I also believe it will happen, so I am going to continue to be on the register for the foreseeable future.
Important lesson for us all. If you believe the numbers, and the story, then trust yourself to make the right calls.
Thanks again for sharing your thoughts.

Yes Grimey …it’s the story that really matters …..numbers are secondary

[bull....]

Yes Grimey …it’s the story that really matters …..numbers are secondary

yes so true. lucky the OCA price follows the story , if it followed the numbers it be at 30c :scared:lol

[Balance]

yes so true. lucky the OCA price follows the story , if it followed the numbers it be at 30c :scared:lol

Nope - sp will be $1.20 if it follows the numbers.

[SailorRob]

Nope - sp will be $1.20 if it follows the numbers.

You guys are complete idiots if you are doubting Bull.

This is a guy who can make money by trading off any chart, anywhere, anytime.

Be very careful if you are not listening to what he's saying.