The way RYM is falling another week or two they will be free to a good home.
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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.
Where is our lord and savior MAV
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)
Thanks for your post Mav :)
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.
As always, thank you! I appreciate all your hard work and guidance.
I second that. Thanks once again Maverick. OCA again on my watchlist with an alert when it hits 70c :-)
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.