trade at below .90
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trade at below .90
Underlying profit at $42.9m is as I expected and right in the mid point of the range I have been forecasting $40m - $45m. Kudos where its due and shows good old fashioned bean counting experience counts for something. Look forward to my free beer Mav :)
Cash flow is up 11.3% - Cash flow is the lifeblood of business - another old accounting adage.
They are prudently managing the delivery of new units in the year ahead. Bean counters love that word "prudent"
Valuations assumption changes by the valuers do not surprise me and shouldn't have surprised anyone else because as at balance date 31 May, all the experts thought real estate prices would tank. Fact is they haven't which augers extremely well for the future.
This is the first company to report on the full effects of the full period of the Covid 19, nobody should be surprised that the costs were huge, I have been saying this for a long time now $10 - $15m impact on underlying profit.
The heartwarming stories of how staff stepped up to help residents with their physical and mental health are awesome reading in the annual report.
They have navigated an extremely challenging period very well and really looked after their residents and staff exceptionally well and that makes me very proud to support this company.
Rome was not built in a day and I continue to believe this is an excellent long term hold and very resilient needs based business.
Good to see that applications for units are stronger in late May and June than this time last year and underscores the safety of living in one of OCA's villages.
Interesting to see the new CFO is working hard on what appears to be an application to the Govt for additional funding to meet the full impact of costs of Covid 19 which suggests to me that potentially some of these costs might be recoverable in the current year ?
All things considered, in my opinion this result is in line with expectations and is quite satisfactory considering the extremely challenging effects of Covid 19.
The team have done a fantastic job, (putting their own lives at risk) at protecting the wellbeing of residents and deserve our upmost respect and admiration.
ive always argued oca was the runt of the pack , just proved right again
Don't forget to tune into the webcast starting soon
The tone will say if good or maybe bad
Thank you Beagle for being the voice of reason. The absolute joy people take in a stock doing poorly always astounds me. This is money we've invested for our homes, and children's futures and to care for elderly parents one day. Delighting in other people's misfortune is just bad form.
Today this feels like a small setback, six months from now people will barely remember this report. Two years from now, it will just be a tiny blip in a a much larger narrative. I think back to what Warren Buffett said, "i'd be a much richer man than I am today if I never sold any stock." No selling for me. Just more buying into the inevitable overreaction.
MR B is correct but im still looking for .90 handle in the short term.
A market is just that a market. Buy and sell short term is not SHORTING a stock and is not a vote of not confidence in a market listed stock merely the moving of assets into and out of assets classes.
Its true OCA is not an AIR LINE. But it will offer multiple opportunities over the next 10 years as money moves classes.
the story is intact , and the price is better
Well said.
No of unit sales was UP by 17.5%. Which other companies in the sector have achieved that or better in the same 12-month period?
Does there need to be a dose of reality for some in the wider share market with all the money sloshing around looking for a home and/or yield?
First of the bunch to report including the Covid effect, got that one out of the way and it wasn't as bad as it could have been. Future looks promising. Be interesting when the others report over that same period.
probably price ran ahead of expectations , thats why i sold out before announcement. anyway performance of OCA relative to others in the sector over years is the worst bar met so everyone talking about long term holds for massive gains should check there history and keep living in hope
And yet property writedowns are not that significant and are reduced by specific property gains.
eg (4.6)m
Change in fair value of investment property (21,724)
Change in fair value of right of use investment property 17,086
Also, there is way too much OTHER - 50m of expenses and 23m net of income!!
Predicting the future is always difficult but I think the pathway to future growth is clear enough such that those looking to buy at an opportunistic price are likely to be disappointed.
I think in the last 3 months of the year they would have struggled to break even. Pretty good result for 9 months of profitable operations.
fish you've completely misread my post. I was totally out of OCA by end of Jan and bought in again in a modest way on 24 March at 42 & 45c. Haven't bought or sold since then. I totally agree this thread has been very informative but it has been very very bullish. That's all I was saying. I still think the result today is reasonably good and am happy to hold this in my long term portfolio. But the unimputed dividends should STOP completely while borrowings are growing.
Did anyone join the webinar and get further insights? Thanks
Well Beagle I well and truly owe you that beer. Well done on your estimate....excellent work!:)
Im frustrated to be tied up all day today on other stuff so cant dig into the numbers today.
At first glance its very disappointing , then at second glance its not too bad at all...so lots of proper homework to be done before I`m informed enough to comment,which will take at least a few days.
Yes I did. See post #6118 (last sentence above). Not explicitly said by them that the last quarter was a loss but they did keep referencing 9 months so the overall sense is this is a very satisfactory result for what ostensibly amounts to 9 months of profitable operations.
Note change of balance date next year to 31 March 2021 (ten months next year). They expect their 217 new units to be completed within that 10 month period. My VERY PRELIMINARY thinking is FY21 will be in the range of $50-55m for the ten month period, (annualised rate of approx. $60-66m). I expect annualised underlying earnings of circa 10 cps. Forward PE at $1.00 is about 10.
Makes for an interesting comparison with my estimate of forward underlying PE for SUM of 19-20 and ARV, (premilitary thinking 15-16).
OCA is a slow burner but has reached the point of inflection where ~ 50% of its units are premium and I always said that was the right time to invest for the long term. As they roll out the remaining 20% of premium care suites, beds and premium apartments and start to generate recurring DMF revenues from the ORA model I think we can look forward to steady growth in the years ahead.
Steady growth does not normally go with a forward PE of just 10, especially in this sort of ultra low interest rate environment when even a no growth stock should command a PE of at least 11.5 in my opinion.
I remain comfortable with my 1 year price target of $1.38. Happy long term holder. OCA is being priced as a no growth stock...time will tell if this is correct or not but I think the pathway to profit growth is clear enough to see in the years ahead.
Changing balance date to 31 March makes sense, 31 May is an odd one. But it'll make next year's comparison difficult.
Sort of agree ... only the first company reporting on Covid-19 impact and investors need to get used to dampening somewhat their exuberance. Not too disappointed, other that I didn't sell more of my shares before the result (I did sell some - OCA is one of my larger holdings and I reduced it from "XL" to "L").
Despite their smoke screen reporting (it takes a lot of time to extract out of their reports the numbers which really count) do I still like the story - and I do see lots of potential for them over the coming decade or so.
However - looking at where we are now:
NTA is now 88 cts / share (hardly changed);
Earnings is obviously negative (i.e. lets not talk about RoCE) - and their liabilities to asset ratio did further deteriorate (up to nearly 62%);
Surprised they don't expect any Covid-19 impact on their current FY. Hope they don't need to eat their words on that.
I noticed that analyst consensus dropped last week to $1.04 - i.e. somebody smelled something;
For what its worth - ShareClarity DCF shows currently 86 cts / share;
Anyway - I would be surprised if a 90 cent handle is over the next handful of months (when the real economic Covid-19 impact comes through) the lowest it will get. Might be interested to buy the shares I sold last week back when the handle reaches 70 cent. Here it is hoping.
Nice one Beagle. I like the look of the $1.38 1 year target, but of course the big risk here is an Aussie style return of the virus, which may well keep the shackles on for a while. Will be interesting to see if the SP can stay around a buck over the coming weeks, or if it drifts down to the point where I'll have to load up on a few more.
Anybody really understand How this right of use asset at Everil Orr village impacts thevaccounts?
Peat shows it has favourable in his post above .... there’s an Rental expense of $19.2m somewhere else
Two thing ..change in fair value and rental expense .....sometimes one is included while one is excluded when doing the diferent profit reporting and sometimes both are included.
cant see any signs of panic selling yet..
waiting for someone with extensive expert knowledge of the reporting standard to comment.
"Two thing ..change in fair value and rental expense .....sometimes one is included while one is excluded when doing the diferent profit reporting and sometimes both are included." ect.
All we see in P&L is a group consolidation over a lot of assets and complex business. Others here have spent years on this one and we should pay to go to an independent presentation on this one. i for one would a pay and attend.
I think the report does not really take into account subsequent events. As always an accountants conservative approach has been used to revalue the property holdings. Property prices have been firm recently, although not so firm as at balance date. Future looks good, inflationary pressures will boost values by next balance date. Would love to see OCA drop below 90 in the short term, so I can get my fill from the MET proceeds.
One other interesting snippet from the call this morning. The valuers have applied a discount of just over 27% to unsold units as at balance date due to uncertainties at that time, up from 25% at the interim report. This amounts to $64m or just over 10 cps, up from 8 cps at the interim period report. This again is another Covid effect. People who had singed up to move in before balance date couldn't sell their homes due to Covid so some sales were delayed and will shift to FY21.
Interesting to note applications were up 39% in June 2020 on the same month last year.
When you add absolutely everything up, direct costs less subsidy, lost development margin from units that could not be completed on time and lost profit from sales that could not be completed in FY20 because people couldn't sell their homes during lockdown I do not think its unreasonable at all to suggest the effect was that at best, the company traded at break even for the final quarter, (which Early suggested is traditionally their busiest quarter).
Given this it would appear to be quite conservative to simply gross up 9 months to 12 months and suggest underlying profit would have been 42.9 x 12/9 = $57.2m Total all encompassing Covid effect is estimated at approx. $57.2m - $42.9m =$14.3m. If anything I think that probably understates it. (How conservative ? Keep in mind a whopping 89 units could not be completed by balance date due to Covid 19)
Shares look very cheap to me relative to the rest of the sector. Yes there's the risk of community spread again but that appears to be fully priced into OCA but not the others, which is a little perplexing.
Thank you Mr B.
I am a starter for a professional presentation on this business if there is ever something arranged. Happy to pay for the opportunity.
One thing im watching is what happens to property prices once the wage subsidy finishes in september.
Market expectations were for more profit, more units completed and less overall Covid 19 effect. Not understanding the total effect of Covid is the reason. 89 units unable to be completed is more than one third of the number that had been projected for the year. That's a really massive effect right there. They've slowed down development for FY21 too, not trying to force the issue of the 89 unit catch up plus what was previously planned for FY21.
I like the conservative way they're running it.
Can anyone explain the bold bit I have highlighted?
1/ I understand the idea of having 'Investment Property' for future development and sale.
2/ I understand that over time you might expect the value of the investment property to go up.
3/ I DO NOT understand how you book an expected increase in future investment property value into today's balance sheet before it happens.
If OCA are taking $21.7m off the value of their Investment Property this year based on 'future changes in value', how is it that 'future changes in value' come to be baked into present day investment property values in the first place?
SNOOPY
Valuers use "fancy" DCF models to put a current value on units. Helps justify their outrageous fees ;) They reverse engineer values based on DCF models to get values that the market is telling them anyway based off market evidence. Clear as mud my Beagle friend ? Discounted cash flow models are vastly overrated in usefulness in this dog's opinion as they contain far too much guesswork and assumptions about long term matters. Discounting future cash flows at 14-20% when the long term risk free interest rate is less than 1% is but one example of the types of "work" that goes into their DCF model's.
Discounting the present value of completed but unsold units by more than 27% just because they are unsold when there's ample evidence they will be sold in due course at market value is another example of the "usefulness" of the valuation work that goes into these valuations. (This discount alone on completed unsold units is $64m or 10.4 cents per share).
More on the assumptions they use on page 20 of the analyst presentation http://nzx-prod-s7fsd7f98s.s3-websit...710/326865.pdf
Not saying they have no idea what they're doing but really NAV of $1.10 looks extremely conservative to me.
Thanks mate. I wish you had of been right but it was always going to be a really tough ask to get close to last year with all of the Covid 19 effects considered. Shortfall of 89 units built is one big fat material item all in itself ! I think all things considered this is a very satisfactory result and another year clicked off in their journey to transform the company to 70% premium care units. 3 years down, another 3-4 years to go and they'll really be cooking with gas !!
They're playing things pretty conservative with this coming 10 months build rate which I think is a good thing.
I can understand that commercial property that does not change hands very often is valued on a DCF basis. But we are talking about residential units in a retirement village here. I know that residential units do not change hands every year. But generally in a retirement village some units change hands each year. And in many cases they are cookie cutter clones of the units that do not change hands. I would have thought that in any particular village there are enough units changing hands to provide quite accurate valuations of those units that do not change hands. Even if you were in the midst of building a whole new retirement village, the size of units and even geographical location should be similar enough to an existing village to allow accurate present day valuations to be determined.
Assuming that if you turn the sod on a new village today, that you will be able to charge 20% (say) above current market rates in two years time for any capitalised development (mainly new units being built) on the books sounds insane to me. How much future property inflation is built into the balance sheets of other retirement village operators?
SNOOPY
2-3% per annum average underlying growth is built into a lot of valuation assumptions Snoops. Quite a body of evidence that construction costs generally move up at a rate slightly higher than the inflation rate as do property prices over the very long run.
Discounting brand new units by more than 27% just because they are unsold at balance date when there's a vast body of evidence of sales of other units ostensibly the same supporting the asking prices is something I struggle to make any sense of :confused:
I don't think so Snoopy. Fact is inflation has been running at somewhere around 2% on average for the last 20 years so 2%-3% per annum assumed increases in revenues is actually just keeping pace with inflation with a bit left over for profit growth. e.g. Govt approved weekly payments for people in care went up by 3.0% from 1 July 2020 as approved by the director general of health Dr Ashley Bloomfield.
PM me your email address and I'll email you confirmation of this if you want it.
I have posted their dividend policy twice quite recently and for anyone who wonders why.... this is their stated policy so there should be no surprises going forward !
Extract from 2017 annual report prepared just after the IPO. http://nzx-prod-s7fsd7f98s.s3-websit...591/262296.pdf
Page 3 under shareholder returns and I quote "Oceania Healthcare has established a dividend policy with a targeted pay out ratio of 50% to 60% of annual underlying NPAT".
Some people want income and for others they have a dividend reinvestment program wherein you can elect to receive shares in lieu of dividend at a 2.5% discount.
I posted a link to the plan booklet last week for anyone interested in this.
I don't doubt your information on the care payment allowance going up by 3% on 1st July 2020 Beagle. The question underlying this is what happens to the capital value of a care unit when the cost of running it goes up by 3% and the payment to cover the running cost goes up by 3%? Net increase increase in income from running that care unit is zero. So net change in capital valuation of that care unit is - drum roll - zero! Isn't that how residential units are valued?
SNOOPY
There's little value in providing basic care services funded by the Govt Snoopy. Nobody is building new supply of basic care units which typically are only circa 15 sq metes.
I am going off memory here but when OCA listed they were about 70 / 30 basic govt funded care v premium care units.
Over time as they complete their redevelopment program they are moving to 30 / 70 basic v premium care units.
This year marks the point of inflection as noted in their annual report where its about 50/50.
Over the years ahead the sale of occupation right agreement units both apartments and care suites will generate a much higher return on invested capital than the Govt funded basic units would.
A good long read of the investor presentation and annual report would dramatically lift your understanding of their business model.
Investor presentation http://nzx-prod-s7fsd7f98s.s3-websit...710/326865.pdf
Annual Report...some good heartwarming stories in there about how well residents were cared for which got me thinking its not all about just the numbers...bet you never thought a greedy bean counting dog would say that ;) http://nzx-prod-s7fsd7f98s.s3-websit...711/326868.pdf
the Beagles post at 6137 is boggling and boiling the brain. Thats what i mean i love to attend a very comprehensive presentation on this share. Holding hundreds of thousands and millions for some investors and upwards for investors is not a light decision on something as complex as valuations on property using Discounted cash flow models. is not something the average investor wants to take a chance on. Thats is why a sector ETF is usually purchased instead.
But in a busy day covering many shares and markets knowing a single company in depth is almost impossible.
DISC: trading this share only until its reporting is untangled.
Solid operating result from Oceania Healthcare in a challenging environment. Looking ahead, the company expects to complete a further 217 beds and units in FY21F and maintained medium-term guidance of 250+ beds and units while the key negative from OCA’s result was the 4% decline in NTA/share to NZ$0.95. Target price NZ$1.08 (prev NZ$1.00) - reflects near-term earnings upgrades
From a major broker.
Just listening to the webinar Q&A; the guidance of 200-250 units and all other figures is for the period ending March 2021 and not a full year.
For those who want to listen, here’s the link
https://globalmeet.webcasts.com/view...key=dc7b3b8293
Earl Gasparich presented at the N.Z. shareholders association Auckland branch, if my memory serves me correctly, in Sept 2018. Most I spoke to afterwards were impressed with his clear presentation. Perhaps I might have a word with Noodles and see if we can get him back to present sometime in 2021 to get an update on how things are going in what will hopefully still be a post Covid environment.
Other than that the annual meeting is always a good chance to ask questions both during the meeting and afterwards over refreshments and to meet the directors and management and get a feel for yourself on the calibre of people. 27 August 2020 2.00 p.m. at Eden Park Kingsland.
I plan to organise a lunch just around the corner at my nephews restaurant in Kingsland before the meeting. Anyone wanting to come along is most welcome, further details to be provided in due course. Phil is an award winning Michelin star chef and knows how to cook :)
^ That would be at Phil's Kitchen i assume? Can confirm they turn out some epic food
wow...what a hectic!! I have been very busy the last two days...and read the result.
Overall, this is a keeper. Where u can find $1 stock, with a solid assets and paying a dividend stock??
That is me,,my verdict is a hold.
Cash is trash. Just loaded some orders in for this a bit lower
Would like to make this a hold also like Infratil, but constantly need the income and so capital recycling. Have bought back in on the recent dip, hunting for dividends. Thank you also Beagle for your 50/50 tipping point analysis. Looking forward to the AGM. This is an allround quality company that I keep coming back to.
While I like the dividend from my modest holding of OCA, I really struggle to understand why companies pay unimputed dividends while taking on debt. I have read Beagle's post with the dividend policy a few posts ago, but it makes no economic sense to me.
Much prefer the 8.3% fully imputed SFF announced yesterday and which King1212 obviously hasn't seen according to his most recent post !
I believe RYM pay 50% of underlying profit as an unimputed dividend, SUM are about 30%, again unimputed and both have loaded up with massive debt to expand their development program so OCA's approach is certainly not unusual for this sector.
Debt is cheap now Iceman, circa 3% so its no big deal.
Mate, there is no ambiguity about why they are borrowing. They are borrowing to fund their development program, that's the express and only purpose of borrowing. The purpose for OCA embarking on a business transformation program should be crystal clear to all shareholders. You're drawing a very long bow to argue they're borrowing to pay dividends. I have no concerns whatsoever. Debt is merely a tool to achieve an objective.
OCA stated from the very outset with their IPO what their dividend policy is, to pay out between 50-60% of underlying profit after all costs including the cost of borrowing.
At a theoretical conceptual level I can understand your perspective. It's not tax efficient to force shareholders to incur a tax liability on unimputed dividends while contemporaneously incurring higher level's of debt to fund their development program. The problem is if you get too clever with the Govt and can't point to the sector at least paying some tax either at a company or shareholder level...that might not work out to be in the best interests of shareholders in the long run.
Whenever the thorny issue of tax for this sector has come up before the public eye before, RYM has often taken the sector lead and pointed to the tax paid by shareholders on dividends paid. To date their representations (sort of on behalf of the sector) seem to have kept the tax wolves at arms length.
Who would be silly enough to start poking a pack of sleeping wolves ?
I expanded further in that earlier post already. At this point in time the capital gains made on the resale of occupation right agreements are tax free as an ORA or licence to occupy is deemed to be a financial arrangement under the financial arrangements section of the income tax act. A financial arrangement is basically, you give OCA, say $300K to occupy a care suite for the rest of your life and when you pass on your estate gets 70% of that back ($210K). OCA is taxed on the $90K difference less any costs of refurbishment but if they resell that licence to occupy for $400K to the next incoming resident they are not taxed on the $100K capital gain as actual and real ownership of the property never changed hands, OCA simply granted a licence to occupy.
The sector is currently very tax efficient for shareholders and we want it to stay that way. Iceman should know that its unwise to rock the boat ;)
Indeed. One argument might go that if a company's MO meant there were never any imputations and as a result their policy was never to pay a dividend then the only way an investor could make a return would be to sell a few shares at a profit. Knowing this in advance suggests the investor could ONLY have the intention of making a capital gain therefore become subject to CGT. The IRD would only need one victory in court and probably the whole sector would then be caught up.
Thanks for pointing me to page 20 of the presentation. The footnote on that page appears to hold the answer regarding the $22.5m 'property impairment'.
"1. Fair value movement includes impact from right of use asset (Everil Orr village). This is a lease arrangement under which Oceania is the village operator. There is a corresponding rental expense of $19.2m (excluded from Underlying Profit). Note Everil Orr also contributed $1.5m to Deferred Management Fee revenue ($0.7m in FY2019)."
The note reads like almost all of the write down is associated with the "Everil Orr Village". The "Everil Orr Village" is leased/rented. I think this means this whole exercise could be tied up with the adoption of NZ IFRS 16 and how lease costs are reported? To further explain, under NZ IFRS 16, any property lease is recorded as a 'right of occupation' asset. That 'right of occupation asset' is then amortised each year as 'rental expenses' are charged up against it.
Having said this, I don't understand how a rental expense be excluded from underlying profit. It seems very obvious to me that rental expenses must be tax deductible in the income statement. Can you make any sense of that footnote on slide 20 Beagle?
SNOOPY
I'll have a look next week if I get some spare time mate.
I know I've already taken more than one pot shot at the valuers but I find the lower part of page 48 more than a little perplexing. Why would the company instruct valuers to value everything up as at 30 April 2020 when we were in the real thick of the Covid 19 crisis when the company has a 31 May 2020 balance date ?
If the valuers were doing their work as at 31 May 2020 when the crisis had more or less passed I'd be surprised if they were as overtly negative as the view they appear to have taken deep inside Covid 19. I think the difference in the underlying assumptions a reasonable valuer would have used as at 31 May could have been materially different from those used in April and certainly all evidence since then including the crucial REINZ medium sales data for June 2020 has confounded all the experts and being far more robust than anyone expected.
Given this valuation timing anomaly I am even more convinced that the low valuation has created a situation where the $1.10 NAV is not actually a true and fair view of the companies net asset value as at 31 May 2020.
Beagle, Just wanted to say a BIG THANK YOU for all your input to the OCA thread lately. It's really appreciated.
IMHO the OCA accounts seem overly complex and so your input is a great help to us lesser accountants. Unfortunately the changing balance date is going to provide more opportunity for confusion in the FY ahead.
Disc - I'm only a small holder (currently in the green) but won't be adding until I see more upward momentum.
The CFO alluded in the Q&A session to the challenges in preparing the financial statements at this time of the year, so could have been referring to the valuers and auditors.
The difficulty is that they have to come up with a valuation using the information available at balance date. While subsequent events have some bearing, with a volatile and dynamic economy, everything moves so quickly. In April May the consensus was that property prices were depressed, however subsequent property transactions have shown they are not. So I think the reduction in NTA is overstated. However we can't get over exuberant as things could change quite markedly by the end of March next year. Further I feel personally that with the govt expenditure, inflation will take off towards the end of the year and continue for some time. Combine this with the ever increasing demand by the older population coming through, values will be increasing quite markedly. Let's say NZ moves into depression. Retirement villages will be able to defer levies until a final settlement (if you know what I mean). So retirement operators are perfectly placed to weather the coming financial crisis. At least in the medium term of say up to 8 years. So a safe, secure and growth investment as I see it.
Nice healthy chart, weekly. Traded within the MA’s, stopped at natural resistance 61.8% fib. Respectable RSI and Bollinger with room to the upside. Looks primed for a re-rate once people get their heads around the discount to NAV. Can see 25% upside here on the chart without breaking a sweat.
My thoughts on the result
- The negative net profit from the unrealised movement in valuation is not of the biggest concern to me. I understand the valuers perspectives but from what we can see generally in the market, property prices are still doing very well. I'm not sure Covid-19 has actually had the effect first feared. Valuers aren't valuing the property from the perceptive that there will be a time where shortages in the industry will make it price sensitive. I don't think you can quantify that.
- I'm more worried about a few others things. Firstly, the financing costs are almost double that of last year which to me highlights and annoys me to why they are paying a dividend. Secondly, not a fan of this use of Underlying EBITDA. Its kind of like saying financing costs and depreciation aren't important parts of a business which is inaccurate.
- The care side of the business is still struggling to make significant headway. I still think it will require 3 or 4 years for the transformation to the premium side they are talking about and even then, without a funding boost I'm not sure if its lucrative.
- The development and sales side of the business is still doing well. The presentation did say they struggled in the last quarter greatly. Getting 45 more sales despite Covid-19 is very impressive from them. I do think this is their actual core competency (not the care business). I have not seen a company in NZ actually get consented and deliver so many units on time and on budget.
Overall, I think the company are showing they are perhaps a few years behind in terms of delivering the potential it has. I still think the best days won't be for a few years yet. They were the first to report numbers in the sector post covid and I think perhaps the others might not be flash either especially if the valuers are like this.
From a valuation perspective, I would say $1.00 is a fair valuation, from a $1.00 price and on 7c EPS based on underlying profit its a 14 PE stock. In the current climate its not a bad buy. I know I say that after saying bad things but just remember price is what you pay and value is what you get. I think FPH is an amazing company but I wouldn't buy on the valuation. If you are buying though, I think you have to be on the perspective that its a long term hold and won't be a A2 Milk type story. Its going to be a slog.
One thing that does annoy me also is the difficulty reading these reports. The use of acronyms throughout, the amount of useless graphs, the use of some accounting jargon that even someone with an accounting background struggles with. The fact the annual report is over a 100 pages long with text on a backing that isn't the easiest to read. Its surely put off retail investors.
Disc: Continuing to hold. I'll reduce if it goes up to a silly valuation ie over $1.10 and I'd buy again over 90c.
Thanks Master Beagle!
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.
some say 'cash is king'and others say 'follow the money'
That's why I like recasting the cash flow statements that I reckon shows where the cash goes and comes from. It is below and red is cash out and black is cash in
That big cash outflow from day to day activities a bit of a worry I reckon .....and as Iceman says maybe divies are a real extravagance as not funded from cash generated in the business.
that top line - cash burn for day to day stuff was evenly split across the half years
Make what you want from this - probably a load of the old proverbial
Hi Winner, I don't think your cash flow analysis tells the full story here.
Firstly I believe you included rental payments for right to use investment property as 'day to day'. I believe this is mostly related to the Everil Orr village, payments are made to the lessor as ORA are sold and then again as they are resold. Therefore I think this should be included as a 'building things' expense.
I believe you have also included interest, which again cannot really be separated from the 'building things' as that is what the debt is used for, although I suppose interest would meet the definition of a day to day expense.
Further, more and more cash is coming from the DMF rather than care fees, and this cash is captured as part of the difference between Payments for incoming ORA and payments for outgoing ORA. When means the cash OCA receive from caring for the elderly day to day is increasingly being captured in your 'building stuff' line item.
In terms of the dividend, I believe OCA can borrow at a much lower rate than the return I am looking for on my equity so am happy for them to keep paying dividends, even as borrowing increases. This is provided the overall debt is kept at a sensible and moderately conservative level. We can all judge what level of debt that is for ourselves.
I have a range of tricks to keep myself well fed, watered and entertained, (see at the 20 second mark), there are some of my other tricks, enjoy :) https://www.youtube.com/watch?v=CJU7Ot9zv2sQuote:
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…
and YTD 2021 full year estimate profit anyone? and underlying profit roughly then? of course if you dont want those viking know... i promise not to email it to anyone in skane.
Set up a DRP....let it grows....will leave and forget OCA now.
Met fund will either come to ARV or OCA as I could see RYM struggling with oz aged care
https://www.smh.com.au/politics/fede...27-p55fyy.html
"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"
Interesting interview with Bruce Shepphard about "Mum andDad "bank. At the re 2min 25 sec mark he give s reasons why he believes the housing market will drop and bottom re mid 2021.
Also at the re 10.49 mark" a sea of homes that will not be able to be made compliant to the healthy homes legislation". But eventually there will be a shortage as many of these will have to be knocked down
'Bank of Mum and Dad' putting parents at risk
Lots of catching up to do still, but a couple of interesting things skimming through the report. Here’s where I could use some guidance:
- Expense growth rate higher than revenue growth rate (not so major if it’s all temporary due to covid, but is it?)
- Debt up 55m on an cap of 500-600m. This translated to increased assets so maybe not so much to worry about.
- Equity down 15m. Mostly due to the 100m increase in ORA liabilities. Am I right in saying that this isn’t too troubling since the 181m cash collected for ORAs wasn’t recorded as revenue?
- Higher applications in June but if they are almost operating at bed capacity. Surely this can only drive limited amounts of increased revenue if they are operating at capacity? I must be wrong though since people seem so positive about the applications being up in June.
- It seems that the development pipeline hasn’t resulted in significant increased revenue (revenue growth wasn’t the ~10% I was expecting annually based o their build rate). Is this just because there is a 3-year wait to fully benefit from the DMFs? Maybe someone can enlighten me here - I’m not sure how the lifetime of revenue from DMFs/ORAs is recorded as revenue from an accounting perspective.
Yeap...it is a long term investment and as I have a project on with a fixed deadline 2 weeks hence that precludes me from spending any more time analysing OCA complex accounts or answering questions at this stage. OCA management have done a very good job in extremely difficult circumstances in recent times. Onward and upward !
I had a chance to recoup my losses from OCA when I first started investing years ago and it crashed for no reason. Glad to exit.. SP behavior is beyond strange.
certainly care is required with OCA as the profit and loss has included some very strange contra accounts over the years which seem to have vanished in this year and last year reports. If your under water on a long termer like this its often best to just leave it if you can. We got lucky several times on this one by just being patient. Easy to say but stocks are always a long term horizon just look at PEB which i forgot to follow in the end and missed the big money. Did not lose thought... only lost on AIR and prehaps one day ... far into the future we might get another go at it in say ... 5 to 10 years time? take the long view... these guys here are in for the long haul...and some of them are role models and provide the rest of us with some much needed balance ... like Mr B and M
Where else are so many Aucklanders going to raise a deposit for a dwelling unless they are prepared to wait until middle-age or until their families have left home...? There are various social costs to having a housing shortage and unaffordable residential housing.
Trying to get my head around this announcement.
What does this mean ? That the dividend is essentially "free" to Oceania as they just issue stock to cover it ?
And us poor pensioners who need the dividend are progressively diluted ? Is my understanding correct ?
Does this happen with other companies ? Not sure I've seen it before. I wonder how long this continues ?
"On 23 July 2020 Oceania Healthcare Limited announced its final dividend of
1.2 cents per share is payable on 17 August 2020 to those shareholders on the
record date of 5.00pm on 3 August 2020.
Oceania also advised that its dividend reinvestment plan (DRP) would apply to
the dividend, for those shareholders that elect to participate by 5.00pm on 4
August 2020. Under the DRP, shares are offered at a 2.5% discount to the
volume weighted price of Oceania shares traded through the NZX Main Board in
the 5 trading days starting on 31 July 2020.
Oceania advises that it intends to enter into an underwriting agreement with
Macquarie Securities (NZ) Limited, under which shares equivalent to the
portion not taken up by Oceania shareholders under the DRP would be issued to
the underwriter on 17 August 2020 on the same terms as offered under the DRP. "
Sort of correct on both counts
‘Free’ to the extent that they use very little cash in paying the divie (the cash dividends they pay are covered by Macquarie)
Yes, if you take cash instead of shares there will be some dilution (progressively as you say)
But at the end of the day Oceania gets a bit more capital
And the taxman gets his share from you.
So MAQ want out , then they want back in. They must see something still of value in this ol' dog.;)