Here's my 2 cents worth,
I'm pretty disappointed in this result, in fact , very disappointed. While it was only a little under expectations , it was the reasons it was light that mattered.
To be clear I wholeheartedly commend the OCA team for achieving the result in this environment. My disappointment is not of their making.
There's no point to go into any of my analysis here as the 2 reports I've seen today from Jarden and Craigs have beautifully broken it all down with well thought out commentary alongside. I had already arrived at the same conclusions/opinions in myself and all our workings seem to match well too, so no point doubling up with such good material already out there. ( Craigs is particularly well laid out explaining where OCA is at).
So stepping back a little , what to do now? It seems the market hasn't got a clue on what to do with all this new info judging buy the possum in the headlight amount of non-turnover.
Firstly , to be fair OCA has had the worst luck since listing about which there is nothing they could have done better.
The key issues to date;
A. Covid. Lockdowns and border closures and the raft of unintended consequences.
B. During this time the GOVT has deliberately unmatched care funding costs. In this report where they are now making a loss on care if OCA`s care DMFs and PACs are stripped out- that's a new thing. This surely means a regular rest home without these fancy rooms will be looking at closing up shop about now.
C. The property market slow down ( not pricing, but lead times) is such that selling down apartments is now unsustainably slow with the current model.
Back in the good old days of 2018 , none of these issues existed , the plan then stacked up handsomely. The issues since have been brutal and relentless. OCA has adapted to survive, now cutting their investment in building ( which ensures future growth) in order to shore up cash flow.
At today's SP of 79c there is great value and upside from here to be had but the days of $1.60 will fade to history until there is a paradigm shift in B and/or C above.
While the above is factual, what to do about it as an investor is subjective.
My own opinion.
A. Covid…done and dusted and borders now open.
B. Who knows what the Govt will do . I have no opinion . Luckily OCAs care suites perform well in their modern buildings. Care was never OCAs future source of serious profit anyway. Logical to cull older homes, as they are, that can't be rebuilt economically.
C. SUM was once a laggard stock in 2019 .Sitting then on an ever growing pile of unsold stock. Winner had good graphs of it. A covid property boom happened and whammo…it sold down really well and SUM tripled in price.
OCA now has the same problem. It now has $370m of unsold stock, that's 0.37 billion.. These used to sell well, we know the market used to buy them, and still want to. It's just now the dead property market that has caused this backlog. This has become a burgeoning millstone and is the sole source of grief to both profit and cashflow. We know the market wants these units, all RV companies are reporting “very strong inquiry” . It's just that they can't sell their own house to effect a “sale”. (RYM and SUM echo this, and ARV most likely will next week)
If this goes on too long then OCAs future profit growth (years out from now -not soon) will hurt… but… when the property market normalizes the OCA are sitting on a powder keg of sales, pure cashflow and profit ready to go.
So whether to buy, hold or sell depends on the individual's opinion as to when Property sales will resume to normal turnover. Interestingly , many thought property values falling would be the problem , but that is clearly not a concern to OCAs offerings , it's all about market sales volume. This is the standout factor that will turn the now millstone to a powerful profit driver.
From that point of market change we will see $370m converted to profit rather quickly , cashflow and then the subsequent resumption of high construction numbers again.
To sum up;
With the $370m of unsold stock, the delivery stage of Helier (and others), interest rates peaking, the bottoming - or near-of the property market , high immigration….the odds are stacked for a property turnover turn around not too far away now.
IMO the hard yards for OCA investors are behind and the next stage could well have a touch of FOMO- just like we saw last week.