Thanks so much Maverick, & Beagle for excellent analysis, untangling all the convoluted tricky bits & so generously sharing with us. Really appreciated.
Printable View
Thanks so much Maverick, & Beagle for excellent analysis, untangling all the convoluted tricky bits & so generously sharing with us. Really appreciated.
Yes many thanks again for putting your time in and giving your views thanks to all.
Thanks for your hard work going through and trying to make sense of the accounts. It seems to me that Beagle and yourself have more or less come to a similar long term conclusion.
That is a sad list of NZX company listings many of which had a SP built on "hot air" that went cold. OCA did have a bare-knuckle moment when Covid seemed to be starting its spread in NZ. I am not sure if OCA, and its shareholders, are altruistic inso far as they do expect a reward for offering what is shaping up to be great accommodation and care! The government may wish to save a bob by forcing a measure of altruism onto them though...
Given my minuscule holding I really don’t count, but I’m more than happy to be an altruistic shareholder. Sure I hope to do well out of OCA long term, but I’m not greedy. I chose OCA over all the others because of their care focus. I would rather see lower care profits/shareholder returns, but quality, personal, meaningful care; rather than huge profits and mediocre/poor quality care.
Sometimes money isn’t everything.
Nice post Maverick. Even with 40 years professional experience OCA accounts make my brain hurt in a way no other listed company comes close so you do incredibly well to do your best to decipher them. On Friday I had an hour or two to think about it and I've come up with a preliminary estimate of $60 underlying for FY22 (8.55cps on the new 701.7m issued number of shares) so I do believe we're on the same page in that regard.
The question of what multiple the market will ascribe to them will be something of discovery during the year and will undoubtedly be affected by sentiment towards the sector and perceptions about where the real estate market is headed. My instincts tell me the current multiple is about right all things considered and we the shares will be in a range of 16-17 times 8.55 cps in a years time ($1.37-$1.45).
Based on long experience I believe for us to see PE multiple expansion beyond that we will need to see more than a story about the future prospects, we will need to see concrete evidence of earnings growth which I am hoping will show itself in FY23. Long term this is a sound hold but as mentioned before, (and something you've alluded too) this is a get rich slowly company and shareholders will need many more years of patience to see the full fruit of the business transformation program.
Julian Cook once told me you don't make any serious money out of a village until its ten years old, (average term of tenancy in a SUM village is 9 years). When I thought about it afterwards it was a real eureka moment for me. This is the golden nugget of information all investors in this sector need to understand that I am sure you already do. The serious money is not in care, its not in developing new villages and selling down units and realising development profits, its not in the deferred management fees earned each year under occupation right agreement models...where the real money is at, its in reselling those units to the next lot of residents with an input cost (repayment to the outgoing resident's estate) of just a mere fraction of the resale price. We will see this effect start to play itself out in the years ahead as the likes of the Sands and Meadowbank apartments and care suites come back up for resale, (average anticipated stay for residents at OCA is a lot less than SUM's business model), and that's where the magic really starts to happen. I will hold my very modest stake long term to see this magic play itself out and add to it, perhaps in a significant way if we get a bit closer to the new NAV of $1.28, (we're pretty close already).
My caution to investors is this is likely to be a fairly quiet year with the share price and it may essentially just track sideways for a while. Plenty of patience is required. Sometimes patience is the hardest investment skill of all to truly master, but nevertheless one must try their best to master it. (I wrote that last sentence mainly as a reminder to myself, hope its useful for others too).
Perhaps your understanding of the concept of altruism is different from mine. Would you continue to hold your investment if it lost money and the value of your investment reduced continually? If you would not, then your investment in a business with a focus on caring is conditional on your own reward. If you would, then your investment altruism could be short lived.
After the IPO you're buying a peice of paper from someone else based on speculative expectations.
It's not an investment, perse, unless you were part of the original crew .
That’s not what I meant. I was referring to frequent comments that the care side of the business isn’t making enough money. As a shareholder that doesn’t bother me. As long as my investment is giving me a better return on my money, than the banks would be (and keeping up with inflation), I’m happy to hold for the foreseeable future. Yes, of course I need a return on my investment. Obviously if the day comes where I am not getting that I would reconsider my position. I’m not stupid. But as someone who has (as you say) an emotional connection to aged care, I am happy to be involved in a company that shares some of my personal philosophies on care.
I don’t see any reason why, in this particular holding, I can’t be both. An investor looking to make money on my investment, and an investor who actually cares about the business from a secondary social conscience perspective.
I don’t expect anyone here to “get it.” It’s not how investing generally works. But I’m giving it a whirl ;)