Originally Posted by
Beagle
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).