Good point Winner. NTA is only good if the property market holds and with some leverage involved if it doesn't the effect is magnified.
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Don't forget the recent property rises haven't been accurately reflected in the NTA and hardly into the unit pricing, OCA has quite a bit of headroom.
I also suspect FHBs will help add support to the property market and plenty of 'amature' investors will look to buy as kiwis just can't help themselves when it comes to property.
Looks like Harbour Asset / Jardens bought 13 million plus shares in the placement
Jeez - they buying heaps of My Food Bag and Oceania lately
http://nzx-prod-s7fsd7f98s.s3-websit...970/343377.pdf
Firstly, I applaud all of Beagles opposing ideas of mine and others.It is most healthy to question everyone's assumptions. I have the greatest respect for him and his contributions on ST.
What is not healthy though is just how much frequency and volume we are currently experiencing to one mindset thumping a message home to such dominance on this thread. So much so that anybody without a strong grasp on their own OCA opinions would assume his opinion “you must surely be right”, therefore leading to selling out.
I don't want to make this a pissing contest. Again, I fully respect Beagles enormous value that he brings to the thread but I feel I must respond to his many and lengthy posts to bring some form of balance.
“This is a no growth company, you either see it or you don't”
I strongly disagree. Oca is expected to deliver growth 2022 (the FY we are currently in as of last week) by ALL analysts including myself. Note these estimates are before the tax changes last week:
UBS project underlying profit of $66m . Up 33.3% from their FY21.
Forsyth project underlying profit of $61.1. Up 22.7% from their FY21.
Credit Suisse project underlying profit of $56. Up 30.7% from their FY 21.
I project underlying profit of $66. Up 32.2% from my FY21.
So we are ALL seeing significant growth working its way through the P+L of around 30%. My own patience is not as great as Beagle credits me for, it's just that I and ALL the analysts can see within the numbers that large underlying profit rises are already in play and happening.
“Continuing out of control Health care costs will always eat any other profit gains away.”
Not true. Health care profits are on the rise steadily from 1HY21, this is proven and will continue to rise linearly according to Earl`s statement and my workings.
Large health worker cost rises have been well discussed ad-nauseum on this forum about a year ago and fully anticipated as part of the redevelopment programme.
"If HPI stops rising then that's a head wind and will seriously effect profitability."
Rising HPI is only one tailwind of the sector. After the recent tax changes and the possibility of falling house prices since I have run an extreme case of zero growth HPI senario through the spreadsheets of the next 7 years, and writing off this year's HPI of 20% increase.
While I don't personally believe shifting out property investors for new house buyers is going to crash the market at the top end I would be foolish not to entertain the idea.
With HPI running at my own expectations of 2.5% including this year , my CAGR for 7years is 19%.
With HPI running at 0% including this year, my CAGR for 7years is 14%.
The Share price could possibly fall to $1
Anything is possible but I don't see this even remotely possible.
The share price has fallen 20% from its February peak. Circa 3 times as much as SUM and RYM.
One will note OCA turnover since 24th (tax change and acquisition announcement day) has roughly tripled while the other players are steady.
I've thought hard about this oddity;
Possibility 1... People hate the acquisition and are getting out.
Possibility 2... Beagle has had enough and is getting out.
Possibility 3... Bear with me here, it's a bit complicated….
Part1-Dumping $80m of new shares into the market the day after the tax change is a recipe for loose , non OCA believers, to sell out . New owners were able to flood the market with their newly acquired $1.30 shares from 29th March, either initially for a quick stag profit and thereafter possibly in fear of the new tax legislation or simply just moving on from what now seems a dud opportunity.
Now remember many of these new share owners won't have any understanding of OCA as they are not necessarily existing OCA holders, just Jarden / MAQ clients.
Part 2- Buyers are simultaneously sitting on their hands GUARANTEED the shares will be the same $1.30 price at worst or even cheaper in a week. The only reason an existing OCA owner would buy on market over the last and next week is fear of scaling of their offline final allocation.
I think OCA`s tokenism of throwing a small portion ($20m) of shares to existing shareholders at a guaranteed lower price ( 2 weeks later than the $80m) has temporarily messed the rational market function up here.
So the imbalanced market of significantly more sellers and simultaneously less buyers one may understand why the current SP falling like it has.
It is a smaller , far more harmless rerun of the COVID situation after MAQ dumped $300m last year followed up 2 weeks later by Covid.
The SP being 20% down is way out of whack from its peers and I personally expect it to quickly recover soon after 12th April.Frankly I think a existing shareholder can beat the big boys this time.
There you have it….
I'm saying I see this is a fantastic time to BUY, ( perhaps the next week will be even uglier but will quickly head north again post 12th of April when the window of guaranteed cheap shares closes).
Beagle is saying its a terrible time to buy.
Both of us could well be right over different time frames but the point of this lengthy post is not to cause a bun fight with Beagle, again, who I deeply respect, but just to outlay my own thoughts in order to offer a balancing case.
DISC . I'm buying as many as I can get, admittingly having to wring blood out of a stone to do it.
I think there's a bit of scaremongering going on. Houses prices at OCA villages have increased since Feb/March on average they have gone up 40k and in all honestly they still seem reasonable cheap. The village I was at are still showing strong inquirys and sales as well on unfinished referbs and new builds. The new build prices will go up on any unsold once completed.
I'd be a huge buyer at $1.00 if it gets there again.. gosh I don't know whats happened here but I don't think the new rules will move prices that much lower. I still see stable increases in the low single digits still being a thing(the days of this unsustainable price increase are gone). The issue of supply isn't going away, then there's the issue once you get supply in the market, some people choose to just sit on their houses. The 2018 census confirmed this with 195k houses said to be unoccupied.
There's also the issue of the scarcity of land, and the practice of land banking being rife in New Zealand. I can't see a land tax being administered by the current government or future governments but the cost of land is really a big driver to house prices. I just don't see these current changes having a material impact on people getting out of investing in property in New Zealand.
On the share price, I still think the property revaluations will drive up prices from the last one and the NTA to grow over time. I think OCA have shown that they can build units at scale and at appropriate costs. A share price of $1-$1.10 represents great value if it gets there, the retirement sector is not going anywhere and the care side of the business will continue to grow. This still has great growth potential over the next few years, and the sector as a whole is a solid investment over time. I would load up the truck at that price.
Fantastic post Maverick as always, thank you.
I also want to add that a lot of the significant covid-19 costs won't be as prevalent in the next 12 months (touch wood). If there is no growth in underlying EPS this current FY (started 1st April) I'll be very disappointed. Don't forget the acquisition settlement is also just around the corner.