Originally Posted by
Maverick
Two solid days deep on these accounts now and I've finally got there.
Firstly I absolutely commend Beagle on his nose for foreseeing this result, I've no idea how he plucked out the covid impact but he has proved to be spot on…..I'll be delighted to square you up after the AGM mate.:t_up:
Now, about that bit of egg on my face.
The care side of the profit is a very difficult beast to predict and I'm pleased to have got that part of my forecast right at $20m (it was actually exactly $20m) . This is important for more than my ego but because it validates the foundation for my workings that my entire pipeline “care profit” projections are based on. This needs to be right as Care profits will be evermore important to OCAs as it progresses.
The good news for shareholders is that based on the spreadsheets projecting the full pipeline of development, I have recently said here that this result will be the lowest point of care profit before climbing up again. (It's been falling in a most ugly fashion for the last 3 yrs now from $32m to $20m.)
Interestingly , Earl has just said for the first time that the care profits are now at a “point of inflection” -( “inflection”,...ooh I like that word:cool:), Beagle has recently mentioned the same idea and I've said too...so nice to be all agreeing on that.
Care profits are onward and upward from here, contributing increasingly at last instead of taking away.
Moving on from the “care” division to the “village” division.
This is where I estimated the Covid disruption quite wrong, which led to my 50m forecast being too high.
This is difficult to explain but really worth considering as it will affect next year's OCA profit in a positive way.
Basically I wrongly considered the disruption to sales/ resales to be limited to about 4 weeks lost (lock-down L4) then all will get up and going again straight away.
I also based the Covid sales disruption effect based on Summersets recent sales quarter results from April-May-June.
So here goes....
While I thought the disruption was just 4 weeks lost, I have now learned there are actually 2 parts to the disruption.
Part1 is the “lost” part of sales during L4 , Basically April written off-easy.
Part 2 is the “deferred” part of sales of about a month following L4 (May) . This month was spent getting the real estate sales gogs moving again so pre lockdown contracts can become unconditional. (Earl mentions it and i`ve confirmed it by searching Auckland housing statistics.) These are sales previously signed pre- lockdown ,OCA lost 11% of them during L4/3. ( ie still retaining 89%)
Because of these 2 months of non and frozen sales ,the deferred 1 month of sales mostly only got settled in the following month of June. And this is on top of the new June sales that were going to happen anyway.
Interestingly SUM sales results encompassed the “lost month” -April , the “deferred month”-May and the “catch-up month”- June, plus add on new normal sales for June ( a double whammy for June). All up the net result for SUM for the 3 months only reveals the lost month of May. (because June balances out May,)
In OCA`s case their financial year unfortunately cut off immediately after the deferred month of May but before the catch up/double whammy month of June. That leaves 2 really ugly sales months in this report . The catch up month of June still exists but wont show up until the next HY. This is supported by OCAs saying sales applications at June 30th are 39% ahead of last year.
So to summarize, OCA had a lot of delayed sales contracts which significantly impacted FY20 have simply shunted into June -FY21. The pendulum will now swing the other way in IHY21 so to speak. This has a significant negative effect on 2HY20 but an almost equally positive effect on 1HY21 underlying profit. In my workings/estimations those delayed contracts 's cost OCA delayed profit of 5-7m down in 2HY20 , this will then show as catch up when it will be lumped in with the normal 1HY21 sales.
Of course I have updated my projections and independently arrived at a similar estimate with Beagles around $55-$60m. FY21 (adjusted for a full year comparison).
After a deep dive into these accounts for a couple of days I remain just as positive about OCAs prospects as I've always been. My conclusion is that despite yet another sucky underlying profit which looks consistently poor to probably everyone, when you really dig deep there is every bit of evidence things are going exactly to plan. Problem with the share price in the time being is that who is really going to look that deep?
I agree for yet another time with Beagle (sorry if this is getting just too sickly folks:)) , the Covid impact on this result just has to be “looked through.”
Notwithstanding a NZ reinfection or property collapse in NZ I am very happy holding and waiting for the pendulum that swung against them in 2HY20 to swing the other way for them 1HY21. IMO it will finally be the start of great results actually showing up on the bottom line which Covid really messed things up for us all this time around.