obviously they are very happy to see a lower stock price lol
just like you they will be able to keep buying more because the float is bullet proof lol
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I am not sure where you are going with this post. Since 2021 and those ultra low interest rates starting to rise, neither retirement village operators, nor property owning listed PIEs have been great repositories for your investment money. And I guess you can blame rising interest rates for both situations.
The property owning PIEs are more focussed on gentle ownership development of their existing assets. So it is really the straight comparative yardstick of much higher bank term deposit rates as alternative investments that have contributed the most to striking their share prices down.
By contrast, the Retirement Villages such as OCA, are really 'property development companies', focussed on building new stock, be they green field or brown field developments. Dividends have reduced, and in the case of OCA disappeared for the immediate future. So you might gather from this that the reduction in OCA share price is due to the higher discount rate applied to those future development returns, and is not related to the loss of dividends. The OCA dividends never compared well to the dividends available from a typical property PIE anyway. Yet being a very different business model I would not expect them to.
Both RVs and the listed property PIEs are funded by bank funding, although I do acknowledge that the RVs have that extra funding source on which they pay 0% interest that, everything going well, and which does not have to be paid back by the company - ever: 'the float'. Added to that are the deferred management fees that are paid up front, even if nominally they are spent on 'running the village' over time. However, very little net cash comes out of the RV listed companies for shareholders, as what cash that is generated is largely reinvested alongside the up until now 'ever expanding equity offset' - due to inflation- of the company asset base.
If you are insinuating that Mr Market does not really understand the listed RV model and has marked down the listed RV providers, particularly OCA, in an irrational way, with the PIEs, because they are 'property companies', then I am not seeing it. Sure both classes of property investment entities have been marked lower, but that is for two different reasons. Not a 'broad brush swipe' at all property owning entities assuming they are all the same.
SNOOPY
Remember this back in November
Oceania Healthcare says its bankers won't let it tell the market what its banking covenants are, and the interest coverage ratio (ICR) one in particular.
An ICR is a measure of how many times operating earnings cover the company's interest bill, and the rapid increase in interest rates globally has made breaches of such covenants much more likely.
She went to say Oceania weren’t being very transparent
I said at time it seems that Oceania doing everything possible to avoid a capital raise …which no doubt they see as embarrassing and a sign of failure.
Value seems to know more than the market!
The issue is these 'extreme rates' of return are largely within the company. In order for a shareholder to get their money out they have to sell their shares 'on market'. And currently a nice villa completed for $600,000 in real dollar costs in 2021, is valued by NZX investors at just $300k (because OCA shares are trading at half their asset backing). For those investors who participated in the capital raise in 2021, every dollar of real cash they subscribed can now be withdrawn by them via the NZX at a rate of just 50c. They have exchanged real cash for stake in a villa that has halved in value, at the valuation hand of Mr Market.
Now that villa is still owned by OCA and would probably cost more than $600k to build today. But there is no way for shareholders to recover that invested money to that degree. Even if the villa was now worth $660k as an equivalent new build, by selling OCA shares today, shareholders will only get $330k of value. By any measure, putting $600k in to get $330k out is not good business. I fear OCA investors are mesmerized by the glory days of 2021 and are just waiting for their shares to return to their former glory price at net asset backing. Hence they will realise the full value of their investment in OCA with all development property fully reflected in the share price. I put it to those investors that OCA selling at net asset backing was an aberration, due to the impossibly low interest rates engineered by the reserve bank at the time. Those interest rates will never be seen again. So our hapless investors who took part in that capital raise will have to wait another 20 years for construction costs to double from 2021 costings. And in twenty years time they will at last, via selling shares on the NZX, be able to get their capital back from all those years ago previously, when they subscribed for that 2021 OCA share issue.
SNOOPY
liz buying again ?