I'm kind of glad the share price fell a bit before the weekend. There is something “grounding “ about it so rational thinking can resume for the 2 day holiday.
There is no doubt that the rapid SP rise was solely on the back of public recent reratings by 2 analysts (out of 3) . “4 traders” website has the 3 OCA analysts average target price now of $1.40. It seems highly likely that the 3rd analyst will upgrade too when he gets to it.
I have been lucky enough to have been sent both of those reports from a friend here. After spending a couple of days on the Credit Suisse report I see 2 clear mistakes (the rest of the report is excellent) they have made which produces a significant undershoot in their underlying expectations.
This gets technical but “a must” to understand for any serious OCA investor….
First, they have used an assumed ILU price of $720ish by averaging an apartment ($1100ish) and a villa ($480k ish). Problem with this is OCA’s pipeline is 90% apartments and only 10 % villas. See the issue? This makes a massive difference to the bottom line as income from new sales and future annuity like DMFs are seriously understated.
Second, is to do with the forward assumed resale price % increases. Here they have again averaged the historical resale returns of a care suit (10%) and a ILU(29%) to come up with 19%. What they have missed is the care suits churn every 2.5 years so , apples for apples , care suits actually should be adjusted to 30% resale margin to line up with a 7 year ILU churn. Or better still , actually treat care suits as a completely indepenadant bunch of numbers on their workings.
In a nut shell, thats 3 out of the 4 income streams where these incorrect assumptions are coming up short . The 4th income stream is DHB care fees, I don't think we should ever expect any income growth coming from there.
Respectfully, I suggest Credit Suisse have tried to condense the OCA numbers so they fit into an existing SUM or RYM template which doesn't account for OCA’s complex different weightings of high and low value offerings, all the while churning at different rates.
Forsyth have made almost exactly the same assumptions as CS and their net result is similar to Credit Suisse.
However what we all can agree on together, is that there is about 15% CAGR in profit in the next 3 years (neither 2 project further than this). It's just that I start from a much higher 2021 base and I am even more bullish with the CAGR. Id like to add Beagles latest earning numbers here are almost identical to mine and for the record we both work independently.
So I'm saying the latest analyst figures are quite wrong to the underside. These minor errors may seem small buried somewhere in a spreadsheet but produces a result significant under shooting on the bottom line.This tells me that the story is still not understood properly even by the larger broking houses.
I fully respect the analysts composing these reports . So for clarity , my comment about “ drunk monkeys“ the other day which has taken some traction here was never pointed at them for a moment. We all do agree on all the other well laid out stuff.
While they will be much smarter than myself, I can say am right on this and they are wrong only because personally I have all day to fully focus specifically on a just few companies I'm interested in. These poor fellas will have to spread themselves thin all over the place under a ton of pressure and deadlines. No swanning around the country doing site visits for them!
However ,the share price is moved by their words , not lil’ ol’ Mavericks or Beagles butfrankly, what difference does a short term shareprice fluctuation make to a non- trader anyway?
Late January is judgement day when I'm saying there will be a seriously major uplift in underlying profit well ahead of any expectations to date.
My conviction on these statements and stock (covid withstanding) is such that if I am proved to be wrong I should be expected to "turn in my wings."