Phew, I'm pleased I haven't got too much RYM. they are at their lowest in a year. $8.22
The investors must have read Percy's chart.
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Phew, I'm pleased I haven't got too much RYM. they are at their lowest in a year. $8.22
The investors must have read Percy's chart.
The mad rash fools.
Hey - look at it from a different angle: You needed in the good old times 10 OCA shares to buy 1 Ryman share and know what - some things just don"t change!
I think the only issue is that the market recognised SUM's worth already some years ago. OCA (which listed later than SUM) will be next.
To answer to some other poster - this is the reason I hold OCA above SUM ... always better to hold a stock with development potential rather than a stock where perfection is already priced in.
Excellent question....Funny thing is I was working on the SUM stuff this morning...
I think SUM is the better company for most people. Seriously , how can you go wrong?
Easy to have full confidence when they have a CAGR history like they do. They`re building some cool stuff in high end Auckland and have accumulated a leading knowledge of the industry. No analysis at all is needed to see this company is top notch. On a forward PE of about 13, that's tremendous buying in anyone's book. There, the job is done...buy SUM- I'm being serious.
You know there's a "but" coming ... SUM are getting so big now that their build rate of 600 now just can't keep increasing in NZ without meeting saturation. They are the fish that has reached its maximum size for its NZ tank. The company has been so successful , for so long and got so big , those heady CAGR years are on a glidepath now. Much like RYM has become. Its star is not fading fast by any means but its huge growth days are behind it - especially in a ,now falling, property market. Of course they have their Ozzy expansion but in my mind AU has not been an easy copy & paste for many NZ companies . At a forward PE of 13 though, its stunning value.
OCA has achieved zero CAGR. Last year we saw 16% growth for the very first time but it was swallowed whole with new shares issued ( to pay for subsequent village purchases). My maths and that of the analysts now are seeing decent growth this year and high growth the following. Regardless of a housing slowdown. So if my math's are right , and they will be close, we should see this year's FY profit grow 15-20% ( the analysts are also in line with these numbers) . That puts OCA on a forward PE of about 8.5. The year beyond then gets rudely healthy as Helier comes online.
So if you genuinely believe the bright forecasts that are yet to materialize over a benign track record then you can see why I go for OCA.
In 3 weeks we will see evidence of this rising star - or not- from a relatively small base and a cheap PE. If OCA does achieve the expected underlying growth rate anywhere around 15% PCP then you should gain confidence that you can buy a company at the start of its run at only 2/3rds the price of SUM.
One last thing, do not believe the constant nonsense out there about OCA being forever hamstrung by its older rest home businesses. While they do own plenty of these, just consider them as “land banks” that are paying their way in the meantime.
Good stuff as always Mav
I've been underweight RVs for the last 2 years and I really don't have a good understanding of them
The whole price to NTA thing I get. But one thing that has been on my mind from price to underlying earnings basis is the impact from the increasingly slow turnover of housing stock. Days to sell are on the rise. With fewer houses being sold, and those that are being sold taking longer to sell, does that slow the turnover of units? Any impact on the DMF? I'd imagine this one specific issue isn't so much an asset or price to NTA issue, but an earnings timing issue. Is there some sort of bridge made available from RV providers to those buying units until they are able to sell their houses?
As the market corrects I find myself getting more interested in learning about the sector
The challenge is whether these general residential housing market factors, which are in our face right now, actually relate to the RV market. I think from what I'm seeing, that the correlation of general housing is not anywhere near as close to RV as the market seems to think it is, or the commentators who frequently refer to the correlation.
RV's various property types/options start off being, in the main, priced at a significant discount to local housing stock. The demand is more needs based as well. I don't see the tight correlation that the market assumes is there. What I do see though is a ramp up in marketing and competition across the listed RV sector, with special deals offered and even better deals if you ask.
We'll see soon enough how or whether this actually affects the RV sector as much as some seem to think it does, as the general property housing market continues to correct. Albeit so far just taking the heat out of the previous 12-24 months of outrageous capital growth.
Another thing to consider is the desirability of the RV properties that OCA are bringing to market. Initial indications are that the high end properties that OCA are currently delivering, are still selling at premium prices. Properties like the Sands and Hellier are differentiated significantly from a run of the mill 'unit' in some RYM or SUM retirement 'village'.
They're luxury apartments and OCA are selling them in the millions of $. Can't compare that with a few hundred box houses or flats that look identical that the others are churning out.
Yeah I understand and agree with all that. I'm just nagged by the thought if it takes customers a lot longer to sell their place, does that mean slower turnover while the market remains in a funk, and if that impacts underlying earnings. At the end of the day I see this as being priced at a sum of the parts basis, some discount to NTA (20-30%), then some sort of NPV of care losses, as winner69 spoke to (rightly or wrongly over the long term). But if in the short term the slower turnover of stock impedes underlying earnings and compresses the ability to grow or at least maintain dividends, that is of interest of me. I've been waiting years to get back into the RV and RV+care market, and the prices are starting to look interesting enough to start my learning process. The gross yield is now acceptable and there is option value around long term capital growth. But I'm just for now trying to get my head around the earnings/dividend part of the equation.
I take your point on the high end/luxury section of the market. A pleasing attribute of OCA.
If the yield is at least maintainable, and if in say 5 years the government get off their butt and do something about care funding, that could result in quite the re-rate of OCA. That's the thesis I am wondering about and do some more work on.
You'll notice that no no one has ever put up any verified workings of the actual cost of care, for any RV, or the 'loss' that they assume is being incurred.
I think it's overstated, almost become a myth that never seems to be quantified in reality. Even our CEO said that the government funding at these apparently low levels has little effect on the profitability of OCA.
It's a conundrum that is not fully disclosed in the accounts, but from my research is generally over stated in these forums as a concern. All RV's have a quantum of care and the funding is capped, whether from government or from the resident. Whether that translates directly into a loss has not been proven. What has been proven is that care by itself is far less profitable than the property development and property turnover. Similar to a loss leader.
Most people couldn't actually quantity the 'cost of care' as they are confused or don't know about the quantum of care associated with the various accomodations, they just assume that if the word 'care' is part of the accomodation type, then it must have 'care costs overheads', whereas for example, a 'care suite' has very little care costs overhead, compared to a communal care or hospital care.
Anyway, I agree, OCA has the highest gross dividend yield of the listed sector. It will be sufficient on payout or DRP to compensate somewhat for temporary capital fluctuations but whether it is sustainable remains to be seen. I think what some will be banking on, is that OCA has a billion+ portfolio of properties and a strong development pipeline, a massive discount to NTA (like sell everything now and the payout to shareholders is greater than the share price), ridiculous low PE, and is apparently cheap to buy on market.
The only thing holding back people from piling into OCA is the uncertainty of whether the market might serve up even more compellingly cheap acquisition prices. There's no need to blow the wad now if you can get it cheaper later. Trick is knowing when now or later is.