No anal for me please
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No anal for me please
Go get a Carrot Bull and eat it
Bull with the upgrade. Watch out.
Reminds me of the line from the show "Arrested Development."
I'm an analyst AND a therapist. An analrapist if you will.
Good to see some decent buying support yesterday.
Lets see where these Retirement stock go ....posted on 4/6
Updated -----------4/6----------..6/7--------------5/8.................8/9..................7/10............7/11
Arvida ..............$1.37..........$1.48 ............$1.60............$1.65................ $1.77.........$1.78
Summerset.......$6.34..........$6.73.............$ 7.80............$8.56...............$9.15......... $10.50
Ryman..............$13.35........$13.04 ..........$12.77..........$13.79.............$14.8 5.......$14.70
Oceania............$0.94..........$0.95 ............$1.03..............$1.04.............. $1.20.........$1.36
Metlifecare........$4.28..........$5.76 ............$5.92.............$5.94..............$ 5.98 .........$6.00
I suspect most posters here are pretty well just waiting at this point for the January HY1 result to see for themselves if the point of inflection has indeed been reached and what it materializes as. I've personally got nothing to do now apart from sit on my hands until then.
Sooooo…..just for mental occupation, I've been exploring the effect of these heafty property price rises (currently HPI 15% yoy) and what net effect that will have on the OCA bottom line.
Firstly , there is a huge difference between monetising profit on house price rises from being a direct landlord compared to owning a piece of a retirement village. The landlord can only access this capital gain on the sale of the house. He can not put the rent up just because his asset is now worth 15% more as the rent limit is capped by affordability of the tenant, therefore increased cash return is tied more to wage inflation and less to the new value of the house.
Whereas the DMF structure does fully capture the HPI rises in cash because the incoming resident sells the family home at the new market rate and then pays the new market rate of the OCA unit. Therefore the new DMF price is directly tied to the HPI. Any OCA price increase will always be affordable as the new resident will have the same ratio of increased wealth to pay with.
Then moving on to how much HPI increase flows to the OCA bottom line. It gets tricky here because there are loads of effects intertwined.
For example;
-New sales profit margins are affected disproportionately greater than the HPI rise itself as any dollar earned extra is pure profit as there are no extra costs to earn it. (it also doesn't costs any more to build stuff which is now selling for more).
-Resales margins are also disproportionately higher as noted above.
-Both new and resale downstream DMFs are now also higher.
Enter the spreadsheets…..It turns out it's surprisingly easy to model different HPI assumptions as all the s/sheet cells are already set up interconnected to each other making the above considerations automated. FWIW , until now I had assumed a general 2% HPI going forward even though it has historically been about 3.5% average the last few years, just to stay conservative.
The result turns out simple and consistent;
For each 1% HPI rise equates to about 1% increase in underlying earnings, thereafter about 0.6% for the following 3 years as the increased DMF effect washes through.
So with the HPI increase currently at 15% that implies if OCA was to put in a "no growth" year of $50m underlying once again then this time it would now actually be $57.5m and the following 3 years about $53m.
This simple scenario is based on house price rises alone to demonstrate the net effect. There is no consideration for;
New deliveries ,
high “catchup “ sales volumes from FY 20, completion only finalised post lockdown in FY 21,
inflection points,
or multiple other things which are also currently in play.
Of course this fully applies to all the other village operators too. It's easy to see why SUM is so popular right now being biggest beneficiary by having the most empty stock available to capture this wave.
As previously stated I also have the HY1 forecast at about 12cps (annualized underlying ) inline with Beagles. I acknowledge this estimate seems ridiculously high given OCAs results to date but however I try to fault the numbers and assumptions, this result still sticks.
There is absolutely no doubt in my mind the result is going to be VERY impressive.
Anyone modelled the "house prices never go down " , Helicopter Ben. Yes not likely in the next 6 months.
I like MR M having a spreadsheet model because for this company transforming, the model would need a lot of work and is very very valuable..