Yea I believe some do and some don't, guess though when the property market peaks those profits on resales wont be as good as has been.
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Vaygor1 has had a lot of good stuff to say about this which explained why throughout the GFC RYM's profits increased every year.
Perhaps PM him and he might be so kind as to direct you to his post on RYM about the subject. I don't have any concerns. I view any pullback on SUM as a buying opportunity.
Forward PE of around 16.5 based on underlying EPS (my estimate of 32 cps for 2017) for a stock of this caliber is compelling value in my carefully considered view.
Based on SUM's fundamentals and growth the only reason I see to invest in any other stock in this sector is diversification but I am fine with a few MET and a 14.7% portfolio position in SUM, enough for me so won't be investing in this new float.
I have applied for Oceania, after what I admit was a little less research than I like i think there is upside potential in this one.
House prices fell 2008/09 ......RYM NPBT fell as well (and underlying profit hardly moved)
It was only a blip in the long term trend ....over time house prices always go up they say .... and for the foreseeable future RYM et all will continue to build new units and resell the ones of the dearly departed
Sometimes I think punters think too much and complicate things so much they don't see the big picture
We agree 100% that the greatest global financial crisis since the great depression of 1929 -1934 only caused a temporary blip in the long term trend. SUM's the long term situation up very well I believe :)
Edit - I think the main point Vaygor1 (without wanting to put words in my friends mouth so please feel free to correct me if I'm wrong Vaygor1), was making was that on average old folks stay in their units 7-10 years so when resold the average unit has 7-10 years worth of capital gains built into it so any temporary dip in the property market is ironed out and eliminated through the average price gain over the average term. In addition, a dip in the market gives a good company like RYM or SUM an opportunity to acquire future development sites a lot cheaper than would otherwise be the case as you often find a disproportionate drop in bare land development site prices compared to the more moderate drop in individual houses. You could therefore legitimately make the case that the occasional correction is actually beneficial to highly skilled operators and developers because they can get new sites at much cheaper prices therefore boosting future development margins :)
Any news anyone on the deal, pricing etc ? Was expecting an offer from my broker today
we've closed our book, and our bid has been placed.
not expecting much else to happen today the offer document says
The Final Price is expected to beannounced and posted on www.shareoffer.co.nz/oceaniahealthcare on or about 12 April 2017
I thought it was curious timing of Infratil to dump their MET stake in the middle of this IPO process. One would have thought they'd get more for it at a time when the market wasn't being asked for ~ $200m already by a capital raise in this sector.
Would have thought we would have heard something by now... Broker Firm offer opens first thing tomorrow...
My Broker(craigs) said this arvo but no contact atp.
I wonder if IFT brought it.??
Most probably.
I don't think IFT selling their MET holding ,means they are finished with the retirement sector in NZ.In fact, I think they will end up being big investors in this sector.How they do that will be interesting.
Yet I think Couta1's post #115 is how I see the best way to invest in this sector,for the reason he gave.
Thanks. Thats why i asked you why ARV has outperformed all others with its high predominant care model?.
With all the land and a target reduction from 67 to 44% care and with Ryman currently 56% care there looks to be ample growth there for Oceania to perform well against the others. 82c would be a pretty int entry point imo but hey it might do an ARV and get even cheaper after listing before performing; good entry then eh?
Trader Jackson quote.
In Recent Forsyth report on the retirement sector:
Needs Based (Being serviced apartments and care beds as a % of total portfolio) is a potential indicator as to how reliant on government funding a village is:
Arvida: 74%
Metlifecare: 18%
Oceania: 72%
Ryman: 56%
Summerset 32%
Trader Jackson quote."To give you an idea of how ARV and Oceania have (or likely to) change a few years after listing:
Arvida:
Prospectus (December 2014 - 17 villages):
Care Beds: 952
Retirement Units: 812 ('high margin' Independent living apartments: 46%)
54% / 46% split
1764 Total
March 2017 - 26 Villages
Care Beds: 1461
Retirement Units: 1285 ('high margin' Independent living apartments: 54%)
53% / 47% split
2746 Total
March 2019 Forsyth Forecast - 26 Villages
Care Beds: 1511
Retirement Units: 1517
50% / 50% split
3028 total
Oceania:
Prospectus (March 2017):
Care Beds: 2638
Care Suites/Care Studios: 241 ('high margin' care beds)
Retirement Units: 1071 ('high margin' Independent living apartments: 100% - I think)
67% / 6% / 27% split
3950 total
March 2019: (Total Consented or Under Construction)
Care Beds: 2284
Care Suites/Care Studios: 580 ('high margin' care beds)
Retirement Units: 1669 ('high margin' Independent living apartments: 100% - I think)
50% / 13% / 37% split
4533 total
March 2021?: (Total Consented, Under Construction and in Planning and Consenting phase)
Care Beds: 2284
Care Suites/Care Studios: 877 ('high margin' care beds)
Retirement Units: 2050 ('high margin' Independent living apartments: 100% - I think)
44% / 17% / 39% split
5211 total"
Yes I've quoted your great details in reply to coutas answer re care beds %. i will put your full name there instead of tj.
Confirm that and have my allocation.
Underlying PE of just 14.6 and Gross Yield of 5.8%?
Even better than ARV when they listed.
Extremely cheap I think.
As with all PE deals it is a little down the track when things wash out and you get a true picture of the business. I didn't want any have fun.
Not the usual PE 'quick flip' deal... Macquarie have owned it for 12 years or so (I think?), alongside management and others.
I hope things wash out down the track like they did with Arvida!
Share price would be about $1.06 in a couple years (+ dividends 2x higher than cash in the bank)
Just chatted to my broker and they got 20% of requested allocation... not sounding positive to get much :(
ASB Securities said they got 20% also. They are also intending to screw over anyone who applied for less than 15k and give them nothing in favour of their larger clients.. Sigh looks like i wont be getting anything. I knew i should have asked for more than what i wanted..sgh..
Yeah I'm with ASB and I applied for 20k so maybe I'll get a little? Everyone who applied should get something in reality but life isn't fair else Liverpool would win every year...
Did you mean ?
https://images-na.ssl-images-amazon....4,203,200_.jpg
Best Wishes
Paper Tiger
Applied for $20,000 got $4,543... I'm happy to get some
It does pay to have an account and a relationship with one or more of the big brokers who get to be lead managers in these sorts of offers. You have a much better chance of getting a decent amount this way rather than a pittance or none from brokers not involved. I have a trading account with ASB and an investment acc with craigs. That transparency also keeps the IRD happy.
So I suppose the $10,000 question is (seeing I missed out with ASB Securities) do you get in when they first list or wait a while and see what happens.....Hmm :confused:
I'm guessing demand was high at a certain price so listing price may not be spectacular given pricing at lower end of range.
Look how tegel performed on its first day... was rock bottom of the $1.55 range... $1.80 on the first day or something?
This time I don't think Oceania will drop like Tegel has afterwards, fundamentals are much, much better for starters... but who knows.
I am also considering what price to put an offer in on the first day... May 5 is it?
Sell in May go away might be good time to buy?!
Due the emphasis in care beds, I think Arvida is the correct retirement village operator to compare against. Now we know the final price, we can do a direct comparison. I've performed it for FY18 as it will include a full year of Arvida's recent acquisitions.
OCA ARV Discount PE 9.4 16.1 71.38% EV/EBITDA 9.9 17.8 80.64% EV/EBIT 11.5 21.5 87.40% DEBT/EBITDA 2.1 2.4 12.23% price/NTA 0.94 1.27 35.11%
Unfortunately, there is not yet much visibility on development profit from FY19 onwards, so we don't really know if OCA's FY18 result will be abnormally high. With that in mind, perhaps the safer comparison is the 35% discount with price/NTA.
Hi Noodles,
I presume you are assuming that OCA achieve their projected FY18 growth of what are they saying, 40% ?
Looking at their historical financials which hardly inspire, I'd take their projected growth for FY18 with the same pinch of salt as Tegal's.
Anyone can project anything they like, the key question is what credibility does one give to their projections especially in light of the recent dramatic change in caregivers pay rates ?
That said ARV is substantially overpriced relative to SUM in my opinion who have a vastly superior track record of growth.
I think this float gives the appearance of a bargain but only if you accept their FY18 forecast at face value and compare it to what appears to be an overpriced comparative company, yes still probably the best comparative but what this tells me more than anything else is ARV is a SELL.
In my opinion it is best to tread extremely conservatively with new IPO's when there is no track record of credibility upon which the directors can hang their forecasting hat.
Think about this, if they hadn't of projected 40% growth for FY18 they may not have even got the float done !
Remember these guys have been rattling cages on both sides of the Tasman trying to float this thing for years so they are HUGELY motivated to project an extremely positive forecast for FY18, just like Tegal's promotors were with their IPO.
Still...one imagines it will appeal to mum and dad investors, its less than $1 so it must be good value :)
Joking aside, I do actually factor this into things when I value :)
... To be filed under "feelings" or "market sentiment" ;)
Also, completely agree. I feel nervous buying an IPO. You have to remember a few things about shares IMO:
1. You have to trust the people managing your investment. You wouldn't go into a partnership in any other business this blind.
2. You are a small fish and can get out voted buy larger holders (which includes the current company owners) voting unabashedly in their sole interests. Look at what AUG attempted to do with NPT recently.
3. When selling a business, you spend the previous few years artificially inflating its value.
4. There are reasons you decide to sell a business. The person buying the business doesn't know these reasons, which are often industry knowledge, hidden issues or benign reasons.
5. Isn't it nice when lists go up to 3, 5 or 10 items? Makes them more snappy, don't you think?
... Oh I have a 5th point: You don't need to risk your money on this when there are other businesses on the NZX with a proven record covering all the above points.
Will be very interesting to see where this lists after the recent govt ann, according to brokers there was good demand, but will this result in increased SP post start of trading. I'm in with a small holding.
Thanks for sharing that noodles, looks very favourable to me and going on their track record 40% growth for 2018 looks conservative and we know how few rated ARV and how well it has performed since listing. OCA two times over subscribed is what I've heard; so good luck to all who took up some.
Getting ready to ramp it up tomorrow morning...
I'll be putting in a bid for a few.
Not sure if my bid is higher enough, but will be interesting to watch.
SUM, MET and RYM will all rebound tomorrow onwards so no worries (although I would have thought it ended at least a day ago with the T+2 settlement rules... yet SUM dropped most today... must be missing something because it is only dropping because of OCA - some like to believe anyway)
The T+2 Settlement is only relevant if the same funds are being deployed fom SUM to OCA. Most of the big players would be utilising cash reserves as bridging finance.
You can always use the funds from sales to buy into other stocks as soon as it is added to your account. There is no need to wait for the T+2.
If you select "MY Account" from the menu on ANZ Securities and look at the right hand side of of the balances, you will see "Trading Balance". This is the sum of your cleared funds Plus any sales completed less any purchases still within the T+2. And this has always been the case with ANZ Securities
Now trading. 81 cents, up a modest 2 cps on the issue price. Not much of a feed for the hungry stag's. Thoughts folks ?
Unbelievably surprised is probably the two words that best summarise it for me... the best value retirement stock by a blue mile even if it does have lower underlying growth than the likes of SUM... quite possibly one of the cheapest stocks in all of the NZX.
Wouldn't be to surprised to see the stock track up over the coming days as people put a 'more realistic' value on it
75c and end of trading.
You actually believe their forecast ? Don't you think its a little odd they'd bring this to market so close to their end of year for 31 May 2017 ? Guess why ? So they can say, look, we got that forecast right. It's the 40% growth in underlying earnings for FY18 that I for one am taking with a grain of salt. Call me a hardened cynic if you like, I don't honestly care but they've been trying for years to float this thing and if they hadn't of forecast 40% growth nobody would have been interested.
Huge vested interest to make that FY18 growth forecast ! Tegal or Feltex Mk2 in my opinion.
Flat growth for FY2017 and *forecast* growth of 40% for FY2018... sounds nice, hope they can pull that off.
Will wait for the IPO buzz to die down before putting any money down for the long run.
Huge effort required to maintain wages to revenue ratio below the ideal percentile, especially since extra money to pay Nurses and other staff to line up with caregivers increase will squeeze their profits further. Developing their sites will help in the future but not over the next year.
When you look at Tegal or Feltex, they had a few problems, but mainly: the market they were in had 'questionable' dynamics, and their product was very much the same as other products they were directly competiting against. (I won't bother talking about debt levels, or the fact they were a quick flip PE)
OCA is different.
Their villages are high quality, they have great locations, and the market around them is favorable... yet like ARV, everybody is sceptical if they can make it work. I agree with part of this scepticism, there are somepoints I don't 'like' either.
I am not sure it is good to get harp on about how impossible this 40% growth forecast... because before this growth, they forecast negative growth, for good reasons as well. (I won't bother going into how ARV beat both IPO forecast profit, and had triple digit growth from FY15 to FY16)
OCA are currently trading at just 14.7 Underlying NPAT, with FY18 underlying NPAT of just 9.6... even if they had no growth and missed their forecasts by miles, they are still the cheapest in the sector today, and paying a dividend well above a bank term deposit rate.
SUM directors under the pump at the annual meeting over wages costs and that's with their VERY modest care to independent living ratio. Doesn't look good for Oceania with their intensive care model. Further, anything they develop in Auckland will have the same cost pressures SUM others are facing.
TJ, I think the market is saying the above issue Couta1 has alluded too is a meaningful headwind for the company that's come about post IPO growth projections.
Shareholders discount this issue as being immaterial at their peril in my opinion. I don't know the company well enough to know where they're going to try and develop new facilities in due course but they're an inexperienced team swimming in choppy waters. Little to no growth in the past. My standard PE for no growth companies is 10 so it would appear to me the stock is about fairly priced, something the market agrees with.
I prefer to back companies with a solid and credible track record of performance. You always pay more for quality but it seldom disappoints.
The difference is they aren't developing anywhere near as much, nor have anywhere near as much debt to service, nor have anywhere near as much exposure to Auckland.
I suppose at ARV's meeting on 10:30am on Friday 7 July 2017 we will also hear about how bad wage costs will be... will be interesting to see/hear.
You have a good point there.
What did surprise me, and probably some others, is how this was not a good stag at all... reminds me a bit of ARV (in which case we could see the price dip below IPO for a short period... before a huge rebound)
Hard to say really, but what I do believe is that OCA, along with the rest of the sector, will be interesting to watch.
What is now happening is those who were hoping for a nice stag now want out 'no matter what the price is', so not a huge surprise to see some weakness, which could happen over the next few trading days.
A mere 50c increase in wages across the board costs the company around 2million, so think of the extra wage costs when you give all your nurses a $3 -$5 per hour increase, then all your activities staff an extra $3 an hour etc etc. It's quite conceivable that your could be talking an extra 10 million in wage costs.
At the end of the day management is not stupid. Increase in wages will only incur extra costs onto the elderly. No business will just suck up the cost of increased wages. They will pass it on and it will be business as usual.
someone will have to foot the bill and it would be ridiculous to think the shareholders should pay for it. I am all for everyone's wages increasing,but it always comes at a cost to either the customer or the government (The government is us as a nation). You would know where they would get the money from more than I would couta. I appreciate your input on this 😊
Until you get your property portfolio steaming along, extra money required can only be obtained by passing on some cost to private paying residents and charging extra for premium rooms, but the main factor is keeping the wages to revenue percentage down and focussing on consumable wastage.
I am not certain but isn't there a "maximum contribution" set by Director General of Health for those whose assets/income exceed the thresh-hold allowed for the residential care subsidy. So it would be up to the government to decide to pass on the extra costs to those who are not eligible for a care subsidy?
".....the DHBs, as well as by achieving higher productivity levels and lower temporary staf fing costs inits aged care business. "
Pretty sure this happens where my mother is but def haven't confirmed it, like moving nurses backwards and forwards between the various "homes' in the hospital care section.
Disappointing debut for OCA but that happened to ARV as well as TJ pointed out and the whole sector has come off the boil atp with most under the M/A's. Still way more sellers than buyers showing so will watch for a while and see if it all flushes out and we have an ARV like rerate hopefully.
And as just pointed out to me, the Auckland property mkt is going backwards atm so that along with the wage increase as an unfortunate timing for an IPO is an understatement indeed.:scared:
And in the meantime Nana needs to go into care.
Have not been able to stop her growing older.
She is not alone.
Luckily the sale of her property means she could buy two or three units.She will only require one.
Nice one Percy, even after an abysmal week for the retirement sector stocks, which is most annoying and inconvenient, buyers will still be lining up at an ever increasing rate. Once the market stops throwing it's toys out of the cot, it will realise, it's just business as usual.
Not a flash debut, wasn't it.
Closed flat, stags out of luck on listing, will be interesting to see what coming weeks have in offer.
I think they did very well not to be caught immediately in the current sector down draught that would be top of mind for the promoters.
Stags would be few imo if they had considered that. In an up trending sector, sure, the stags would be all over this. I'm not sure many were though, it was too risky with the sector backdrop to stag an IPO profit.
The market today verified its listing price as fair and reasonable, and the promoters will earn their commission regardless.
On Monday the company is listed alongside the others. From here on the market determines the company value.
My view is that in the short term at least, they will suffer the downdraft associated with the sector, the SP will move with it and the investors who have done their homework will flick out on a slightest move southwards and buy back in later.
Personally I think it's at fair value on the information provided but as some suggest that information may be overly optimistic. Seems a risky play until it settles in to a rhythm.
For those interested, 73% of Oceania's total product is in care beds currently, however they have a 7-8 years worth of land bank, so plenty of scope for unit expansion.