Well said BP. It is a privilege to read Beagle's, Maverick's and your posts, amongst others too.
Printable View
Meanwhile, Market Screener continue to rate OCA a buy with a target price of $1.70.
I doubt any of the analysts have revised their target prices and eps growth projections since last weeks dirty tax bomb and given the proximity to FY21's reporting date next month they may not review them until after that. Food for thought...should we be worried that they're doing a significant capital raise in the month immediately just before FY21's result is announced ? What if FY21 is a bit of a disappointment ?
I do like the new acquisitions but the timing is...well...lets just call it "interesting". Investing $50K into a rapidly declining share price trend...Hmmm
FWIW the 5 day VWAP capital raise share price measurement period starts from Tuesday next week and runs to Monday 12th April.
Follow the VWAP and volume for each day, take off 2.5% and you'll get the issue price for the new shares under the retail offer. Trouble is Computershare need the completed application and cleared funds by 5.00 p.m. on 12 April 2021 so in practical terms you'll not get the full 5 day look at what the VWAP will be but we should have a pretty good idea by close of business on Friday 9th after 4 of the 5 trading days in the measurement period are done and dusted.
Whatever the price of the retail offer is after the 2.5% discount, whether that is likely to be the new new low water mark is the real question to ponder. Hmmm
Actually - two of the three stock market analysts monitoring OCA did lift their target prices only end of March (i.e. after the governments surprise announcement) which brought the consensus up from $1.61 to $1.70. This does mean that at least these two analysts reviewed the target price after the announcement and both of them choose to increase their target price.
Having said that - analysts are only humans as well, and Ben Grahams rule "nobody is able to predict future stock prices" fully applies.
While I do check these consensus prices as well (given that they are as well a useful input into the current market mood) did I find them in the past hardly correlated with the stock prices eventuating. Analysts hit rate of future stock prices is roughly comparable with the hit rate of people throwing darts while being blind folded and without any other information about the location of the target.
Interesting and that's a revision from $1.66 March 23rd to $1.70 March 28th, unchanged March 31st. Maybe they don't read the news or Sharetrader? I'm more interested in whether Forbar revise their $1.70 target now that the sky is falling.
Actually, all joking aside, my take on the SP's weakness recently across the sector is more related to the recent Retirement Commission recommendations taking a poke at the sector. Interesting article today citing John Ryder's take on that. This as far as investor risks go imo is way more significant than whether residential property prices wobble around a bit in the near to medium term.
LOL, ouch that's a little bit harsh on the professional analysts BP. Thanks for pointing out the analyst changes...I have ben too busy recalculating my own forward growth projections and despairing and reacting to the result.
Its interesting to note that analysts are projecting wage cost growth to broadly go up in line with MOH funding in the future, about 3% per annum, i.e. they believe Earl Gasparich's previous assurances whereas quite clearly I am deeply skeptical and will believe wage cost growth moderation when I see it and not before ! That and house price inflation going forward are the two key variances between how the average analyst sees it and my revised outlook.
Baa Baa, This was issues a day after they announced CR. Apart from that the only item time that they looked into say a decline in 1% from memory.
Oceania Healthcare
Good Acquisition, But Why the Extra Money?
OUTPERFORM
Oceania Healthcare (OCA) has undertaken an NZ$100m equity raise at a fixed offer price of NZ$1.30 (representing a 6.5%
discount to the last close price of NZ$1.39) to fund the purchase of two new sites in Auckland. (1) NZ$60m for Waterford on
Hobsonville Point — a 100 unit (64 villas and 36 apartments) village with two development zones to add ~60 units/care suites,
and (2) NZ$17m for a new Franklin site that currently has 2 hectares of leased land and 4.1 hectares of additional land, the
land adjacent to the site offers a further ~215 units and care suites to OCA’s development pipeline. The total acquisition price
of NZ$77m leaves an additional ~NZ$20m to help support further growth opportunities.
What's changed?
What are the balance sheet and earnings impacts?
Waterford village transacted at ~20x annuity EV/EBITDA multiple; a relatively attractive price
At face value, we view the Waterford village as an attractive transaction for OCA and estimate it will contribute ~NZ$3-4m per
annum in annuity EBITDA, predominately arising from increased deferred management fees (DMF) albeit we expect resale gains to
become a bigger part of the picture as the village matures (we understand there was only 1 resale in FY20). An ~NZ$3-4m annuity
EBITDA contribution implies a ~20x EV/annuity EBITDA multiple which is relatively attractive in our view and below where the
market is currently valuing the aged care stocks.
Raising equity to buy land and accelerate development raises a few questions
In addition to the c. NZ$60m raised for the acquisition of the Waterford village, OCA raised an additional c. NZ$40m to buy a new
land site (for NZ$17m) and to provide "capacity to consider future growth opportunities". Future plans are light on detail but we did
not consider OCA over levered prior to the equity raise and expect more details on its accelerated development pipeline at its FY21
result in May.
Posted on the 27th Match from For Bars view on sector.
This is what For Bar had to say on "Aged Care Sector" after last weeks events. They still have as outperform $1.70
Potential significant impacts to the Aged Care sector
This announcement is likely to have the most significant near term impact on the Aged Care sector through three vectors. Firstly,
expectations with regards to long term residential house price inflation is likely to moderate. Secondly and related, significant
uncertainty with regards to near term house prices may result in increased lead times for selling residential homes, and by
implications lead times to settle on acquired aged care units. Finally, looking at fundamentals, versus a counterfactual of no tax
change there is likely to be more modest price increases put through by the aged care operators in the near term. We estimate that
a 1% change in unit price growth impacts sector annuity EBITDA by c.1%.
Sharing of capital gains would in my opinion have the impact of radically altering the business model. The simple truth is that the weekly fee that many residents pay often does not cover the full cost of the services residents enjoy and certainly does not provide an acceptable return on capital for all the community facilities they enjoy. Unfortunately after last weeks serious fiasco its clear the inexperienced socialists in charge have no real understanding of the implications of the radical changes they're making and appear to be initiating populist politics and the consequences be dammed. The result of this is surely a radical increase in weekly fees for villages going forward but what of existing license to occupy contracts and fixed for life weekly fees of existing residents ? Its not as though the Govt have been "kind" to existing residential investors have they so maybe existing license to occupy contracts fall under their new socialist agenda of capital gain sharing too and retirement village operators are left carrying the baby with fixed low weekly fees for life ?
If John Ryder is worried then we should all be deeply concerned too. One wave of Cindy's magic socialist wand and the fundamental's of investment are changed. It couldn't happen again ?, surely not... or does their recent radical bludgeoning of rental property investors rights to fair and reasonable investment terms actually make an overhaul of the retirement sector by extension, frankly, quite likely ? :eek2: Its not like we can depend upon this lot to have an understanding of fair and equitable principles for business investment is it !
Yet another SERIOUS risk to this sector to consider....Hmmm