How much Patience is required before we eventually might see meaningful eps growth ?
I think the timing of the capital raise was "unfortunate" for OCA. Announced the day before, and institutional placement book build done on the same day the Red team showed the true extent of their socialist agenda.
As Cyclical suggested, its a great shame the socialist team (that have never been in business), didn't give the market more time for the already radical uplift in investor deposit requirements to 40% to filter its way into the market and didn't attend to the obvious issue of interest only mortgages before bringing out their sledgehammer to bludgeon Mum and Dad's long established rights to fair tax play.
The clear risk here is their extremist socialist approach may not be finished yet and new restrictions around interest only loans may be forthcoming shortly. Add that to higher deposit requirements, a capital gains tax (let's just call the 10 year Brightline test what it really is), and the egregious undermining of fundamental principles of fair play with deductibility of mortgage interest on top of all the tenancy law reform, lack of ability to claim depreciation and so on, the flow of new investment money to this sector will literally dry up overnight.
I put it to you folks the market has already changed and we are in for a dark winter ahead. The momentum is clearly downward and where that ends remains to be seen.
To Mav's point above about OCA being hit more than others. OCA's core care services lose a LOT of money every year and frankly OCA are far more heavily dependent on development and resale profit to subsidise the cost of running their heavily care focused business model than the others.
In a booming real estate market for the last few years since OCA listed, at a time when they have delivered on some really high value developments (The Sands and Meadowbank) to date their underlying eps is less than when they listed four years ago. They can't seem to break escape velocity from the ~ $50m underlying profit figure despite very favorable economic and house price tailwinds and that's in no small way because their annual wage bill has increased a whopping $30m per annum since they listed.
They don't have the benefit of very much in the way of high value development sell-down's in FY22 and they appear set to face headwinds in the real estate market compared to tailwinds in the past. Yes we get some benefit in FY22 from the gradual transformation of their business model with more DMF annuity but the pace at which their gradual snowball is growing is painfully slow and could easily be overcome by ongoing excessive wage cost pressures and real estate headwinds. My sense is they are going to be stuck around the ~ $50m per annum underlying profit level for some time to come. All I am suggesting is that eps growth to date has been non existent after 4 years and the wait for anything meaningful to eventuate is getting painfully slow, really painful and frankly quite exhausting and makes me wonder if this should be priced on non growth forward PE metrics until such time as they can prove their model actually works and does generate growth ?
Put a no growth PE of 11 x annualized underlying earnings of say 9 cps this year and we get ~ $1. Average analyst view is for 9 cps again in FY22 but those estimates will be before the very recent dirty tax bomb and its lingering effects https://www.marketscreener.com/quote...68/financials/. I am certainly not the only one expecting yet another no growth year for FY22 which will make it 5 years since they listed with no growth in eps and we are in a market that's clearly reached a point of inflection where house prices are on a tipping point which doesn't bode especially well for future years profits going forward from FY22. Its all pretty sobering stuff. If wages keep going up at 7.3% per annum or close to that like they have in recent years its clear staff are going to continue to enjoy the lions share of the growth from this company and shareholders will just get the more of the same in terms of stagnant earnings. The new CEO has a big job on his hands and its clear that Earl was not best in class at controlling operational and wages costs. Too kind ?
Maybe our new man (ex Jarden Investment banking director) is cut from the same much tougher cloth as Julian Cook (ex investment banker) ?
I'm calling it, its time for more shareholder focus with this company, if their sole focus is on residents and looking after staff and carbon reduction and other ESG nonsense...it won't be long before I extricate myself from this completely and head off for greener pastures.
For what its worth the last time I caught up with senior management and showed one analysts eps projections out to FY25 I didn't get any confidence that the growth rate was achievable. The sense I got that they're heading in the general direction of underlying eps growth but the growth rate itself, management didn't leave me with much confidence. It was shortly after that meeting I halved my position and have reduced a lot further since then. I think a certain person at OCA knew that ongoing wage cost pressure will continue to suck a lot of the forward growth rate out of this business going forward and that might make CEO incentive package targets a tough ask to beat and therefore a competitors offer of employment was a better option for his family. Suppose we can't blame him for that as a ~ $520K base salary with little prospect of long term incentives being meaningfully in the money isn't all that attractive compared to what other CEO's are earning.