sailor guess might be $1 valuation another person might be 50c. the joy of DCF
even the directors do there guess each report
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Your`ve got two costs there , 1 new sales , 2. Looking after occupants.
- New sales.
Apart from earthworks at Frankton , all OCA current projects are bolted onto existing villages.
So let's use Hamilton for an example of a large complex. They have always had one sales person, she worked hard initially ( and of course still does) getting the thing rolling from empty with low sales but now it's running with a nice momentum, achieving significantly greater sales volume. I doubt she will have to work even harder nor get a second salesperson when the adjacent building gets finished for sale( tower3 ). Once they get to the inevitable waiting list stage I should imagine she will be comfortable handling the whole village without needing more staff.
Nelson for example is a much smaller village and sales are now handled by the village manager. There's a waiting list so sales almost run themselves, the full time sales person they initially had when it was delivered empty is no longer a specific role there.
Last HY we had a huge jump in village operating costs ( up a whopping 30%). During this time Heleir and ChCh opened which would have contributed significantly to this. We only have 1 new villages opening from scratch going forward now ( ages away too).
2.Looking after occupants.
Care is cost intensive but not apartments. We are only talking about apartments in this context. So lets ignore care for now.
I can't see many extra hours proportionally needed for window cleaners, cleaners or lawn mower guys who are already looking after these complexes.
The other large cause of expenses jumping I understand is rates and especially insurance. These will rise more for sure and plenty too with new towers even on the same site. But these costs should be met by a corresponding increase in weekly fee that the resident pays ( that fee also covers the services mentioned in the last paragraph).
OCA fix fees for life so there will be a lag as older contracts cant be instantly repriced for cost increases. But the new ones should meet these extra costs accordingly. So yes, these cost rises will go up due to inflation and more services required but they will be equally met by incoming residents fixed weekly fees to match.
My numbers exercise yesterday was merely a back of envelope response to Winner's observation that villages seem to make no money from operations outside of resales and new sales.
To briefly sum up without repeating yesterday's math, I was trying to say …
While Winner's observations are indeed correct right now, the huge pile of unsold new stock that has been achieved during these last years of costs needs to be also recognized into the equation to give a true picture. When those are sold down there will be plenty of profit from operations.
So can we actually sell this sh*tload of stock for this to work?
The great news , say again, GREAT NEWS right now for OCA comes from the recent SUM resale figures and also from Tony Alexander's recent housing data.
From these we can now be assured that oldies are moving around again in a normal pre covid housing market. That is where a new village sells down over 24 months. That SUM resale figure was outstanding, up 30% . Almost unbelievable but it would seem there has become a build up of oldies who are now simultaneously emerging from sitting on their hands over the last few unsettling years.
OCA have this sh*tload of stock ready for sale at the perfect time as potential residents are now getting out, about and on with their lives.
If you're curious , I have new apartment sales figures for this period HY2 up at about 55, could even go as high as 65 but that's just too off the charts to believe until I see it for real. This is one of the key reasons OCA is going to finally deliver a great result in May. ( and yes , it's sustainable).
Hope that helps Champion.
superfluous to requirement
superfluous to requirement
Thanks good breakdown, and shows that Govt/ retirement village commision has no justification for thinking RVs are creaming it at the expense of residents.
If OCA sold all its stock on hand that could make a big difference to the bottom line through greater DMF
Good stuff Mav ….55 plus apartment sales this period will need see a big jump in underlying earnings with those hugecrealised gains
One thing even if they come up short it’ll happen eventually eh
Maybe time to buy and not miss out on inevitable rise in share price before the May announcement …..could even get to $1.10 ..and if 65 apartment sales could go $1.20 plus
Cupsy,
Welcome to the forum. It's delightful to see a brave new fella wanting to join in and contribute.
The “float “ is currently used as free cash to develop the next set of buildings. It has no return other than saving paying bond holders or banks for borrowings. When this expansion process finishes or reduces then the surplus float can be used to get a return from wherever OCA wants. They can't expand into infinity so will become available one day.
This will be years away but in my mind some cash hungry business will take OCA over before then for this money source. But that's YEARS AWAY.
Here`s a question to mess with you a bit about floats…
Habits post above says the 5% return apartments yield isn't that flash, that's true.
But of the mere 5% return they will be getting…how much of this invested capital is OCA actually putting in to gain this 5% ?
So what value do you put on a company making 5% return using entirely someone else`s money?
Dont even try to work that out.
5% on other people's money is a damn fine return after all.
Cupsy, Don't get hung up on the float if you're learning. Not todays problem. Stick with Unpat until you get that sorted.
Winner, I dont know if you just plucked those share prices out of the air or whether you have developed a pretty good spreadsheet ( I quietly suspect you do) but my workings agree with you almost perfectly.
Lets hope we are both be right on this one :)