Sometimes money isn't everything ;)
I'd be happy with 1 million - more money doesn't guarantee more happiness.
(But yes, I get what you are saying)
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Ok fixed it for you. Changed the numbers so they are relevant.
More money at a certain level doesn't guarantee more happiness, but having a bit lying round for unforeseen circumstances, or to give breathing room if lose job, or if a loved one needs help... It certainly makes life a lot easier.
From here to $2 over the next 18 years, the share price would produce a compounded 4.1% return. If dividends kept in lockstep (so the yield remained the same and the dividend also grew at 4.1%) and you paid 25% tax on the dividend and then reinvested into the company at the prevailing share price you would compound your investment at 7.92%.
Now if the share price stayed at 97c for the first 10 years and then grew steadily to $2 by the 18th year, you'd compound at 8.75%, but if the share price stayed at 97c for 17 years before jumping to $2, then you'd compound at a phenomenal 9.5%. This would turn a thousand into $5,500. At the original 7.92% it would be $4,400.
Obviously the share price staying static while dividends grow is unlikely, but this shows the effect of having a share price go nowhere. The longer it stays lower the better and you can of course commit external capital.
Given the choice 999 of 1000 investors would want and pray for only $3,460 and reject the $5,500, throwing away 2 thousand dollars as they prey for the share price to go up NOW which would mean only getting a compound 6.92% return.
You are correct. Assuming the $370m is sold in one year and that value is collected, then that adds $370m to cash and $370m to the ORA liability (what you call the 'float'). What happens next depends on a few factors, in particular the mix of sales and the management fee percentages (currently 30%).
Proceeds from new sales must be applied to the development facility (balance at FY23 was $221m). So the first $221m pays off the development facility with the remaining $149m going into general coffers.
The $370m cash will play out over about 8 years. Assuming 32% development margin that gives a boost to the first year underlying profit of $118m. But that is an accounting construct that is not necessarily related to cash (it is indirectly but that is another story).
Assuming sales by value are 10% care suites, 50% apartments and 40% villas, then OCA gets to keep $111m of the float, with the values in the P&L varying each year. Peak P&L contribution from DMF is ~$21m in years 2 and 3.
The values pertaining to the sales of $370m stocks will play out as follows:
debit credit credit credit Summary Financials $m Cash Nett ORA Liab. Unearned DMF (B/S) Cum. Profits Year 1 $370.00 $331.15 $28.28 $10.57 2 $370.00 $294.15 $44.14 $31.71 3 $370.00 $259.00 $58.15 $52.85 4 $344.10 $233.10 $38.86 $72.14 5 $344.10 $233.10 $21.42 $89.58 6 $214.60 $103.60 $9.53 $101.47 7 $214.60 $103.60 $3.19 $107.81 8 $111.00 $0.00 $0.00 $111.00
Please note these values exclude cash expenditure for operations, cost recovery recharges, any premium care income, any residents share of gains and I have ignored GST on the management fees for simplicity purposes. The care suite would be available for sale again in year 4, the apartment would be available for resale in year 6 and the villa in year 8 (working with average expected tenures). The funds needed to repay the nett ORA liability on departure will be sourced from the incoming resident. The incoming resident has historically paid a higher incoming price resulting in a "resale gain" and the DMF accumulation restarts.
Management Fees are charged to clients 15/10/5% in years 1/2/3 for care suites, and 10/10/10% for units. BUT these values are released to the P&L over the expected tenure of the resident. I used 3 years for c/suites, 5 years for apartments and 7 years for villas. So yes there is a lot of shuffling of funds on the Balance Sheet.
Initial accounting entries:
Dr Debtors -> Cash -> Dev Facility $370m
Cr ORA Liability $370m
Annual Management Fee Charge for first 3 years:
Dr Mgmt Fee Receivable (Balance Sheet)
Cr Deferred Management Fee (Balance Sheet)
Monthly Management Fees Earned (based on tenure)
Dr Deferred Management Fee (Balance Sheet)
Cr DMF Income (P&L)
Note the "Mgmt Fee Recievable" on the Balance Sheet is shown as a deduction from the ORA liability. I have presented such Nett figures above.
Combine increased sales of suites and units with an increasing sale price, and there is a snowball effect which can be seen in the history of DMF earned.
Edit: another assumption in the workings above is the average sale takes place half way through the first fiscal year.
Yes development gains are booked in the period they are sold - for each unit and care suite. So if all are sold in the period at 32% development margin, that gives a one time boost to underlying profit in that year of $118m. Keep in mind there is a policy/some rules around when a sale can be recognised but that is within the margins.
The cash stays at $370m for the first 3 years given I assumed all sales occurred exactly half way through the first year. Using an average tenure of 3 years for care suites, means the 70% of ORA remaining would be paid out at 3.5 years, assuming there is no delay. Hence the first fall in cash was modelled during year 4. The likelihood is that some clients will depart prior to the 3 years so the reality is some of the ORAs would be repaid earlier - but I was working purely with simple averages of expected tenures and trying to model the impact on an average fiscal year, instead of assuming all sales occurred on day 1.
"With cyclical problems, there is usually an industry-wide or an economy-wide recession in corporate profitability. Assuming we have correctly diagnosed the problems to be cyclical, which isn’t always easy to do, the restoration of past profitability is a matter of when, not if. Typical cycles last anywhere from 12 to 36 months, but there is no way that I know of to predict the length of any specific cycle.
However, that is exactly what most market participants try to do. They sit there, and pointlessly try to guess when the cycle is about to turn. Why? Because they don’t want to buy the stock too far in advance of the turn in profits, for fear of having it not appreciate, or worse, go down further for some period of time. So there they are, using methods not too far removed from reading chicken guts, guessing which quarter or in which half of which year the cycle will turn, so that they can be smart and buy the stock 3-6 months ahead of such a turn and have it appreciate soon thereafter".
How many are trying to do this with OCA?
I am told it is easy using crossing moving averages.
good analysis ferg
now of course its hypothical at this stage weather they will receive all that money but they reall y do need to start investing in AI
Ai can streamline op's
improve efficiency and performance of slack staff
optimize scheduling
data driven decision making
health outcomes can be optimised by data
the list can go on and on but AI is one way OCA can get the costs down on the care side
and yes you will need more than 1 screen to use AI efficiently