The dirty tax bomb has crushed my hope. Where's the earnings growth ?
Quote:
Originally Posted by
Waltzingironmansinlgescul
"We all have good reason to be worried about what happens as the next wave of their socialist wealthy redistribution ideology hits."
DTB.....
If you cant leave then sing along to Beagle Hymn...
"There will come a dayyyy when earnings grow"
I dont think MR B is emotional at all. He just sees debits and credits in a profit and loss and its wider implications. All accountants in the country may well now have to hire professional business councillors for their investor clients mental health....:eek2:
But when will it be, that's the $64,000 question ? Folks please feel free not to read this if you want to filter out my genuine disappointment.
In 2017 when this listed we were told of their 6 year business transformational program that promised to deliver real growth. Taking average analyst forecast for 2022 of underlying eps of 9 cps (issued before last weeks dirty tax bomb) as Gospel, lets have a wee look at projecting how they might be going 5 years into this radical business transformation program.
In May 2022 they are forecast to deliver underlying earnings of 9 cps 5 years through this program (according to average analyst forecasts).
In July 2017 they announced their maiden listed profit for the year ended 31/5/17 of $45m underlying earnings which based on the number of shares at the time was...drum roll please...9.14 cents per share.
Oh my goodness surely this cannot be right ? I am afraid it is all there in its naked and ugly truth, 5 years into a 6 year business transformation program there is no growth in earnings !! Surely not !!. Have patience I can hear the baying in my head they say. Why should I ? Does this super high care model even work in terms of delivering earnings growth ?
To answer this question one must consider the most extreme opposite, very light care model of Summerset and examine how they performed in their first 5 years as a listed company.
They listed in late 2011 at $1.35 if my memory serves me correctly and in February 2012 reported underlying earnings of $8.08m, 35% ahead of prospectus forecast which amounted to 3.4 cps for the 2011 year. NTA was $1.09.
In February 2017 for the year ended 31 December 2016 they reported underlying earnings of $56.6m for underlying eps of 22.7 cps and NTA of $2.50 per share.
SUM grew underlying earnings 567% in their first 5 years and OCA are forecast to have contracted underlying earnings by 1.5% in their first five years. WOW...just WOW. I am pretty sure if I went back far enough and ran the same analysis on RYM's first 5 years I would get a pretty similar result to SUM.
Does OCA's model even work when it comes to underlying earnings growth and with no earnings growth forecasted after 5 years why should we take it on faith and hope any longer ? Isn't one's money simply better off in a business model that does grow earnings ? Aren't OCA just a no growth company until they can prove otherwise and why should they command a growth PE when there hasn't been any ? A no growth PE of 11 on next years 9 cps suggests fair value of just ~ $1 and with all the political risk and interference I am really struggling to see any reason to subscribe for shares at anything above that value. I have done well out of OCA due to buying when fear ruled the market last year and the market believing the growth story.
Mav and others can project out eps growth further into the future, 2023, 2024 and beyond if they like but 40 years of bean counting tells me the most likely predicter of the near future is the most recent past and the further out your projections go the degree of reliability in them drops exponentially. I see this really struggling in the current political environment (with a serious blow torch being applied to real estate investors), to achieve meaningful earnings growth any year soon. Oh dear, it pains me greatly to say that. Plain fact is I was closest to the mark with estimating FY20's underlying earnings and again closest by a wide margin with predicting 1H FY21 underlying earnings. Not intended to be skiting just putting it on record I am pretty comfortable with my own ability to forecast out earnings for this one as compared to some others consistently very optimistic forecasts so if I am pessimistic I will leave it to others to decide for themselves what weight they put on that, if any.
I really would have expected to see results in terms of eps growth 5 years into a six year transformational plan. Its a real case of what the heck happened and of course with the $30m annual wage cost increase the answer lies right there. I don't have infinite patience, that's not me and not how I am wired up and I can't change that. This hound must hunt, I cannot sit still indefinitely and eat miserably small unimputed dividend feeds, its not in my nature.
I need to see the eps numbers growing and it isn't happening and isn't likely to happen in the foreseeable future so I can't hold onto hope indefinitely, (there are quite obviously other investment opportunities out there). The model hasn't worked in terms of achieving growth and is unlikely to work in the near future because its handicapped by massive human resource cost inflation sucking all the wind out of the sails. Justakiwi and her mates and the residents are all doing very well out of this but nothing left over for earnings growth for investors is a very sad state of affairs. I'm afraid in yachting terms the boat has come down off the foils and with no decent tailwinds anytime soon will struggle to get going again. I think I'm getting out completely, there's much easier ways to build wealth where the growth is something much more tangible than empty promises, fancy transformational plans and false hope.
Occupational hazard of being a bean counter I suppose is that when all the fancy on trend ESG and development talk has been all said and done it all comes down to the bottom line which really isn't that impressive at all. Happy to leave all the ESG and save the planet zero carbon emissions nonsense to others, I want eps growth.
Very high level's of high quality late stage care and eps growth do not appear to be obviously congruently achievable outcomes.