The "ol excuse" is a fact, more of the sales this half were in lower priced regions, aggregate being lower gains/DMF. Will be interesting to see the full year, esp if they sell off a swag of high priced Auckland properties.
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U all old farts....U all should be happy with no CR today....god...some people is just hard to please...
The media is cheering it!!
https://www.nzherald.co.nz/business/half-year-net-profit-up-24pc-at-retirement-giant-oceania-healthcare/WK5WJQPBLBCULBC5LDUP4EDHKY/
With no dividends coming, there's less reason to hold the stock. I've canceled my "buy" order today.
For Bars Review
Oceania Healthcare (OCA) delivered a weak, yet somewhat reassuring 1H24 result. The weakness was undramatic and primarily related to increased village opex, driven by two village openings and slightly higher corporate overheads versus our expectations. Our main takeaway is the reduced risk of a downside scenario for the sector in general, with three reasons in particular for OCA. (1) OCA delivered all time high ORA sales of ~NZ$129m, +NZ$10m above its previous record in 1H21. Up +90% sequentially from the very weak 2H23 and up +15% on 1H23. (2) OCA sold two care sites at or marginally ahead of book value, these are non-premium assets that are broadly breakeven. This suggest some support for OCA's (and the sector's) book value at NZ$1.40 per share. (3) While leverage crept up another +120bps to 37.4%, the pace of debt accumulation has slowed materially. Assuming current market conditions remain, management suggested that debt should not move materially from here to year end and start to track lower thereafter. We reiterate our OUTPERFORM rating with a NZ$1.00 target price.
What's changed?
Earnings: Annuity EBITDA -8%/-9%/-7% in FY24/FY25/FY26 primarily driven by higher costs
Target price: NZ$1.00 from NZ$1.05, due to lower annuity EBITDA and reduced dividends.
Peak debt take two
OCA suggested at its FY23 result in May that it was at or close to peak debt; that did not turn out to be the case. OCA added ~+NZ$60m of net debt in 1H24, primarily due to a combination of: (1) a delayed start to sales at the flagship development The Helier; (2) a few opportunistic land acquisitions; and (3) delayed settlements of sales, primarily a number of care suites. Management again suggested that debt would plateau at its current level before trending down thereafter, but cautioned that it was dependent on housing market conditions. We believe management is being prudent. A combination of: (1) a well advanced sales process at at least two sites, (2) lower capex, (3) higher sales, and (4) no dividend, creates a back drop where maintained or reduced net debt is likely. We see ability to reduce net debt as both a necessary and sufficient condition for a re-rating of OCA's shares.
OCA has a relatively straight forward path to debt free (or near to) if it so chooses
We estimate that OCA needs to spend a further ~+NZ$140m of capex to finish the current 382 units it has under construction. Most, if not all, could be completed by the end of FY25. We estimate the cash sale price of the 382 units to be in the vicinity of ~NZ$240m, which together with currently available-for-sale stock (NZ$365m), and assets sales (NZ$40m), should reduce debt to ~NZ$100m. Against this OCA would still have ~NZ$180m of development assets.
1H24 result summary & forecast changes
OCA's 1H24 result was below our expectations at the annuity EBITDA and underlying earnings lines, primarily driven by higher than expected opex. With costs higher than our estimates across both its village and care operations. Pleasingly, care DMF (deferred management fee) was in-line after disappointing at its 2H23 result, while village DMF was slightly weaker due to the sale/closure of sites within the period. 1H24 sales rebounded from a weak 1H23, new sales gains (due to margins) were below expectations while resales gains were ahead of expectations. OCA did not declare an interim dividend and will consider a final dividend depending on cash flow, market condition and growth opportunities at year end.