Originally Posted by
Mudfish
Right, I don't say much on here but thought I would have a go at articulating my understandings to at least help me clarify my own thinking about OCA as a medium to long term investment.
Firstly, thanks to all, especially Maverick and Beagle for all the freely shared information. Top quality stuff.
As has been said many times, the SP won't really get cracking until OCA shows significant profit growth. This coming first half year report 2021 in January will be critical in the short term to the SP. If it does well, off we go as OCA's model will be seen to be correct and working. If the report is pretty average, it's back to the long term waiting game. I personally believe, this is a fantastic long term share and in 5 years time, will prove a great divi stock that I will likely never sell. However, I also am keen to see it fire up and get going in the short term so am keen to explore the possibilities of how this coming report may look.
Here's my attempt:
Earl has stated, June-July-August sales are 26% up on the same 3 months last year. To me in a very crude way without getting hung up on DMF's, resale margins, PAC fees, etc etc etc, this can be extrapolated as 26% more profit on the bottom line. Very simple thinking I know.
- 24.6m (last years 6 months profit) /2 to get to 3 months = 12.3m
- 12.3m x 26% = 3.198m (that's simple 26% extra profit for June-July-August)
- 12.3m +3.198m = 15.498m (profit )
-15.498m x2 = 30.996m gives the whole 6 month period. Round down to 30m to be conservative.
Therefore the profit is 30m - up from 24.6m same time last year. I'm making assumptions here that the sales rates continue to be strong through the entire 6 months. I can't see any reason why this is not so. 30m gives a EPS of 4.81cps (annualised to 9.62cps - crude and simple thinking again)
Therefore:
PE of 13.5, SP=$130
14.5, SP=$140
15.5, SP=$150 ( I think things should be sitting now but understand the market needs to see the proof)
16.6, SP=$160
Add some more thoughts to this
-If I take your thoughts of 25-30m Beagle (you are much better at this than me) and apply midway at 27.5m. This gives annualised EPS of 8.82cps. At a PE of 15, that's a SP of $1.33.
- Maverick's (also much better than me at this) very specific 32.8m prediciton gives 10.52 EPS. At a PE of 15, that's
SP of $1.58
- Earl's statement of " we are at the point of inflection" is significant in its self. He didn't need to say that.
- Credit Suisse rates OCA at $1.30. Forsyth and Barr rates it at $1.65. Maverick believes they have made some
mistakes and will need to rethink after January. Time will tell, but even if they are right, SP should be between $1.30
and $1.65.
- House prices have boomed recently.
- The light's on at the end of the tunnel regarding Covid risk.
In conclusion, right now there appears to be plenty of indicators pointing towards excellent, if not fabulous growth that will be seen in January. Then the cat will be out of the bag and the market will choose how high to push the PE and of course the SP. If the report is not as good as I/we hope, it's certainly not a disaster but more waiting required.
For the record, I own loads of these shares and intend to hold for a very long time expecting them to become a great little set and forget divi stock in the years to come. Feel free to rip my post apart and destroy my thoughts as you wish.