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New low today. Could it be because of the measly care funding increase on the table? A more interesting thing to consider is at what point could it be better to sell OCA and rotate into ARV...

Quote from: Plata on Jul 19, 2022, 12:22 PMNew low today. Could it be because of the measly care funding increase on the table? A more interesting thing to consider is at what point could it be better to sell OCA and rotate into ARV...

I see absolutely no point in rotating from OCA into ARV, the whole market excepting the likes of SPK is rubbish at the moment so new low nothing unusual.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/395444/374780.pdf

Page 4 shows the effect of the acquisition of villages last year driving down the percentage of care units and beds to just over 28%.  Not bad but SUM is lower so better positioned to weather the cost of care crisis.

Its important to understand that as of 31 March 2022 the ratio of care units to independent living units in OCA is 61:39.  61% care !!!!!  That leaves OCA really exposed to the absolute bludgeoning the Govt is giving to the care part of retirement sector's operations.
Below is a copy of a post I made on the other dreadful forum on why I sold out of OCA #12931 dated 27/05/2022.  I sold two thirds of my holding quite a while back averaging $1.40 and the rest in late May averaging $1.03.  Needless to say I am very pleased to be out.

QuoteOCA - Any is too many - I'm out !
I have finished my 5 years overview and a very brief synopsis is as follows.

The Float and Business Case
OCA floated on the premise that the new product called care suites would be transformational and generate far superior returns for investors.
As you can see from the presentation on page 19 http://nzx-prod-s7fsd7f98s.s3-websit...382/370976.pdf
the exact opposite of what was promised has occurred and returns on care have nearly halved from an EBITA margin of 21% to just 12%. Importantly returns were declining rapidly before Covid came along but its clear that Covid has exacerbated the issues.

Some of the reasons that explain this spectacular failure in execution of their business case as promoted at the time of the IPO appear to include:-
1. Rampant increases in the cost of human resources in the business with spectacular growth in employee costs from $103m when they listed to $156m last year an incredible 51.5% increase in staff costs.
2. A much slower increase in revenue growth from $171.8m to $231.1m over the 5 years period (34.5%).
3. Government underfunding has seriously undermined their business case and the premiumization of care hasn't worked.
4. Care suites have not met wide market acceptance and there are a total of ~ 450 unsold units inclusive of ILU units as at balance date 31 March 2022, a whole years stock. (Care suites are often initially let out as premium accommodation until they are sold, see footnote at bottom of page 31).

As a result of the spectacular failure of care suites and the systemic underfunding by the Govt of basic care (which and I am going off memory here was just on $100m in 2022 so is a huge part of their business model) underlying eps has declined from 8.60 cps in their first full year of listed operations in 2018 to 7.98 cps in 2022 and decline of 17.5% in real terms if you account for inflation.
As I have pointed out before the company has no pricing power with care suites which were only up 1-2% last year and have not kept pace with the real estate market.
Ultimately from personal experience with my Mum I believe customers are reluctant to commit to an ORA model when they don't know their longevity.

Looking forward to the next 5 years
I expect the cost of provision of care services to continue to experience rampant inflation pressures as a worldwide shortage of care and nursing staff causes huge issues with demands for more money and staff shortages. I also expect the Labour Government will play hardball with retirement village companies and continue to make them heavily subsidise care operations from other parts of their business.
This is going to cause an indefinite period during which OCA will generate very low and completely unsatisfactory returns from care.

So how long will it take OCA to execute their Pivot to independent living units so they represent more than 50% of the business model ?

Looking at page 31 and the PIE charts.
Its important to understand that currently the ratio of care to independent living units is 61:39
There are 1957 units in their development pipeline and 71% of them have already been designed and consented so it would be very difficult to change consented developments.
If they can execute at a sustained rate of 300 units per annum the pipeline will take 6.5 years to complete, a total of 11.5 years since they listed. (Please note that at the time of the listing we were told the business transformation would take 6 years)
As a result of a further 6.5 years of development they will end up with a care to independent living unit ratio of 55:45
In other words it takes a full year to move the needle one percent from care to ILU.

Conclusion
The business case upon which OCA floated has not worked. Its actually been a very poor failure in a period of strongly rising house prices, (DYOR on how much SUM grew underlying earnings in their first 5 years by way of comparison)
Care suites are not meeting wide market acceptance and OCA has no pricing power with them or basic care which combined is currently 61% of their business model.
Despite this they continue a heavy development pipeline of more care suites with most units in FY23 being care suites.

Its one thing to say you are going to pivot to independent living units but it would appear it will be 7-10 years before they have more ILU units than care, (barring major ILU village acquisitions which could somewhat speed up the process)

Seeing as this is an incredibly intense care focused business model and will be for the foreseeable future investors need to decide for themselves whether the intense cost pressures faced by those providing care services will abate anytime soon so that OCA will earn a materially better margin on its services. I think this is extremely unlikely as shortages of staff is a worldwide issue and Covid isn't going away anytime soon. Its very important to understand that even in 2028, (barring major acquisitions which might change the mix a little) OCA will still be predominantly a care based business operation.

People who believe that there is more money to be made in independent living focused business model's can execute their own pivot in less than a minute on the market, not the decade it will take OCA !

Going forward I think this will seriously underperform the others in the sector for the foreseeable future so I completed my exit from the company this week. I think the whole sector faces very serious headwinds for 2022 and potentially 2023 as well so I may remain on the sidelines for some time. In addition the Government review of this sector is very concerning and serious Government underfunding is highly likely to continue under Labour into late 2023 at least.

When the time is right I will invest the proceeds of my sell down in SUM with its well proven business model that has generated an average annual compound growth rate of 33% per annum since it listed.

I will leave you folks in peace on this thread now and conclude by wishing shareholders good luck.

I know some will hate my post and have counter points and that's fine. For the foreseeable future my time with OCA and debating it is over.
I certainly won't miss the headache's of interpreting their financial statements !

First preference in this sector is Cash.
then
SUM
ARV
RYM
OCA

ARV has way less care while maintaining continuum of care, and yet is priced quite similar to OCA. Do you hold ARV kasper? Do you think OCA will out perform ARV going forward, if so why?

Quote from: Plata on Jul 19, 2022, 01:08 PMARV has way less care while maintaining continuum of care, and yet is priced quite similar to OCA. Do you hold ARV kasper? Do you think OCA will out perform ARV going forward, if so why?

No I don't hold ARV only OCA and RYM, I think any of these stocks are a very good long term hold and because I make my decision based on an inside view of the sector I prefer OCA/RYM, if I had to go into care I would choose OCA and for the combo of care/independent living I would choose RYM.

Quote from: Basil on Jul 19, 2022, 12:50 PMIts important to understand that as of 31 March 2022 the ratio of care units to independent living units in OCA is 61:39.  61% care !!!!!  That leaves OCA really exposed to the absolute bludgeoning the Govt is giving to the care part of retirement sector's operations.

I'm not so emotionally invested in OCA as a stock that I really care, but interested to know why you think this "absolute bludgeoning" will be worse than the "absolute bludgeoning" that RV ILUs are going to take from the downturn in the housing market??

Buying into an ILU is a highly discretionary decision.  Most people in the target socio-economic demographic for the listed players will have a perfectly good [or more than perfectly good!] house, they can defer the decision to leave until they feel they're getting "full value" for it (whatever that concept is).

Care is non-discretionary.  If you're assessed for care then you objectively **NEED** care.
Premium care (i.e. with development margin, DMF, and resale gains) is still a reasonably profitable endeavour last I checked.

I'd rather have a portfolio of premium care fully occupied than a whole lot ILU stock sitting unsold.

Quote from: Whacc on Jul 19, 2022, 02:55 PMI'm not so emotionally invested in OCA as a stock that I really care, but interested to know why you think this "absolute bludgeoning" will be worse than the "absolute bludgeoning" that RV ILUs are going to take from the downturn in the housing market??

Buying into an ILU is a highly discretionary decision.  For most people that age they will have a perfectly good house, they can defer the decision to leave until they feel they're getting "full value" for it (whatever that concept is).

Care is non-discretionary.  If you're assessed for care then you objectively **NEED** care.

I'd rather have a portfolio of premium care fully occupied than a whole lot ILU stock sitting unsold.

OCA are reducing their care % as time goes on, will probably end up around 50% like RYM and care hasn't stopped RYM from having returned the most profit to shareholders since its inception than any other listed company in the sector when you take the share split they had into account.

Quote from: kasper on Jul 19, 2022, 03:02 PMOCA are reducing their care % as time goes on, will probably end up around 50% like RYM and care hasn't stopped RYM from having returned the most profit to shareholders since its inception than any other listed company in the sector when you take the share split they had into account.

Difficult to compare them from inception ... given that they all started at different (not comparable) times.

However - if I compare just the share value over the last 5 years, then the market treated OCA even slightly better than Ryman, and this despite OCA paying ways superior dividends. (Slightly) more capital gain plus more dividends - juicy!

OCA (the orange line) is clearly the better option... just look at the facts :) ;

RYM-OCA.JPG

nice chart peter ..... but I prefer the SUM / OCA one

SUM is the blue line by the way

000000sum.JPG

Quote from: BlackPeter on Jul 19, 2022, 03:53 PMDifficult to compare them from inception ... given that they all started at different (not comparable) times.

However - if I compare just the share value over the last 5 years, then the market treated OCA even slightly better than Ryman, and this despite OCA paying ways superior dividends. (Slightly) more capital gain plus more dividends - juicy!

OCA (the orange line) is clearly the better option... just look at the facts :) ;

RYM-OCA.JPG

Yes but what i was referring to was that RYM at its peak had returned around 55 times its initial investment for those long holders which is far superior to any other listed company in the sector and far outstripping even SUM by a country mile (And i highly doubt SUM will ever match it even given the same time frame)

Quote from: Whacc on Jul 19, 2022, 02:55 PMI'm not so emotionally invested in OCA as a stock that I really care, but interested to know why you think this "absolute bludgeoning" will be worse than the "absolute bludgeoning" that RV ILUs are going to take from the downturn in the housing market??

Buying into an ILU is a highly discretionary decision.  Most people in the target socio-economic demographic for the listed players will have a perfectly good [or more than perfectly good!] house, they can defer the decision to leave until they feel they're getting "full value" for it (whatever that concept is).

Care is non-discretionary.  If you're assessed for care then you objectively **NEED** care.
Premium care (i.e. with development margin, DMF, and resale gains) is still a reasonably profitable endeavour last I checked.

I'd rather have a portfolio of premium care fully occupied than a whole lot ILU stock sitting unsold.

The market evidence is that OCA are the ones with a whole lot of care suites unsold...450 units unsold as at balance date, a whole years worth of sales.  The care suite thing hasn't worked as fully explained in the other forum.  Earnings growth is zilch with OCA and in the same period of time SUM have grown earnings by ~ 2.5 times and the results are presently graphically above in Winner's post.  The best guide to the future is the past.  SUM business model is working and OCA isn't and will continue to underperform as care cost growth outstrips funding costs.  The DMF thing for care suites is almost a red herring because they simply aren't selling in sufficient numbers to outstrip the care costs associated with running them.
OCA share price is in the doldrums for profoundly good reasons.  ARV not much better with an unproven CEO.

Over the last 5 years underfunding of care has ~ halved OCA's ROI in the care sector.  This looks set to potentially worsen with even greater level's of underfunding.  On the other hand SUM's ILU's have not kept pace with the growth in the real estate market and recent broker research showed that their current pricing was at a very low historical point relative to house prices.  Simply put they can capture huge embedded value in future resales and I believe they won't need to adjust their prices down whereas OCA have a LOT of unsold care suite stock they can't seem to sell and are locked in with heaps more consented care suite developments set for delivery in the years ahead.

RYM also now with an unproven CEO...first mover advantage and the supreme leadership excellence of Simon Challis are advantages they lost a long, long time ago.  I'd own ARV ahead of RYM.  Notice that all listed RV companies have relatively new unproven new CEO's except SUM.  Notice too that SUM has outperformed everything else under Julian and Scott's leadership in the last 5 years both in terms of earnings growth and share price growth.

Stick with the Winner but wait for the tide to change first !

Quote from: Basil on Jul 19, 2022, 04:52 PMThe best guide to the future is the past.  SUM business model is working and OCA isn't.

Well that's called hindsight bias and isn't necessarily true.

Do you expect HPI to continue as it has in the past in a rising rate environment, which we haven't seen for... 40 years?

Quote from: Basil on Jul 19, 2022, 04:52 PMOCA share price is in the doldrums for profoundly good reasons.  ARV not much better with an unproven CEO.

Com'on man, they're all in the 'doldrums' if you use 12 months ago as the basis.

Quote from: Basil on Jul 19, 2022, 04:52 PMNotice that all listed RV companies have relatively new unproven new CEO's except SUM

I don't disagree with the first half of that statement but I'm not entirely sure why you think Scoullar is 'proven'.  He hasn't been in the seat much longer than anyone else in the sector, if at all (only March last year).
So he's proven on the basis of 9 months of record HPI growth and all the embedded gains that occurred prior to that?

Quote from: Basil on Jul 19, 2022, 04:52 PM450 units unsold as at balance date, a whole years worth of sales

Are you including transferred residents in this figure?  If so I don't think that's fair criticism.  Those suites are not available for sale and are likely providing a positive earnings contribution (certainly compared to the counterfactual of opening a care facility empty).

I'm not even a cheerleader of any of these stocks, I just think this bogus rationale is pretty funny to observe.

Scott  Scoullar was appointed CFO in 2014 and deputy CEO in 2018.
He has been deeply involved in the business for 8 years.  I know he is responsible for many of the pricing decisions on villages that have been driving the growth in earnings over many years.

I put a lot of stock on my FA analysis of underlying eps over a period of time, usually my starting point is a 5 year timeframe.  SUM is smashing it out of the park as it consistently has since it floated in late 2011 whereas OCA has no growth in underlying eps despite being listed for more than 5 years now.

I look at long term trends to see what's working and what isn't because they're usually very reliable indicators of what's going to work best in the future.  For example ARV has had very modest underlying eps growth in its time as a listed company and I think that's a pretty reliable indicator for the future.

OCA's unsold stock is straight from the most recent call.  They fill some of their care suites on a temporary basis with people paying a PAC until they can sell them under a DMF.  If you strip out the care suites being temporarily occupied in this manner you get 450 unsold units.  I think that's a really big problem.  There's another 113 being delivered this half at Lady Allum village in Milford.  I believe they have a real problem with market acceptance of the care suite model... but I sold most of my shares at $1.40 so what would I know...

My research based on known information at the last result shows they can only reduce their ratio of care suite to independent living units by about 1% per annum with their current consented pipeline, (barring other village acquisitions).
By 2028 they might get to 55:45 Care beds and suites to independent living units.
In other words OCA are front and central for many years to come when it comes to the impact of the Govt's underfunding of care costs.
Unless OCA radially change their business model and / or their future build program I think they will continue to perform in a "runt of the litter" manner in this sector.  They have a shocking track record when it comes to human resource costs growing at vastly higher than the inflation rate and I believe its a systemic issue going forward.  Maverick on the other forum in one of his last posts simply dismissed the seriousness of this issue with a statement to the effect that staff costs will come down at some stage.  I think this is just wishful thinking.  Objectively the long proven trend of OCA in that regard is deeply concerning as its basically halved their returns in the care sector since they listed despite all the much touted benefit's of their care suite transformation process.

Even on a cursory glance at OCA's presentations and reports you will read significant self congratulatory statements about how they're growing DMF this and EBITDA that and how they're doing so incredibly well on the ESG front.  There's nothing whatsoever on how costs are growing rampantly year on year every year or that underlying eps is in the doldrums and has been for years.

At the end of the day the market is a weighing machine and SUM companies are growing earnings per share nicely and others...oh dear...

 

Quote from: Basil on Jul 21, 2022, 12:29 PMScott  Scoullar was appointed CFO in 2014 and deputy CEO in 2018.
He has been deeply involved in the business for 8 years.  I know he is responsible for many of the pricing decisions on villages that have been driving the growth in earnings over many years.

It's funny because Jeremy Nicoll at Arvida followed **exactly** that same path but you specifically said  "ARV not much better [than OCA] with an unproven CEO".

Quote from: Basil on Jul 21, 2022, 12:29 PMI look at long term trends to see what's working and what isn't because they're usually very reliable indicators of what's going to work best in the future. 

It's not actually, that's why all investment advisors and wealth managers include the following statement in all their disclosures: "Past performance is no guarantee of future results"

Quote from: Basil on Jul 21, 2022, 12:29 PMMy research based on known information at the last result shows they can only reduce their ratio of care suite to independent living units by about 1% per annum with their current consented pipeline, (barring other village acquisitions).
By 2028 they might get to 55:45 Care beds and suites to independent living units.

My point is who cares?  ILUs are hardly a wonder product compared to care as I outlined previously.
They're in essence just a straight bet on the residential housing market.
If ILUs are such a fail-safe strategy then why was MET such an abject failure with 95%+ ILUs?

I'd prefer to watch the the next 6 months play out before making bold statements and aspersions on any given strategy.
I'm still a big fan having a mix of product and the full continuum of care model.

Hard to believe it was all the way back in 2014 when ARV listed.  Suppose its easy to overlook when the share price has been so lackluster.  Listing at 95 cents in late 2014 and seven and a half years later its only $1.43 (up 53%) and the vast majority of that time the real estate market has been booming.
Pretty lackluster stuff...suppose a lot of that based on decision making by the CFO.
Better than OCA though only up 17% in over 5 years in a booming market, oh my goodness !

SUM were ~ $2.75 when ARV listed in late 2014 and now $10.15...not quite four times your money but pretty close. 
I guess some on here are naïve enough to think this sort of outperformance happens by accident.

Like I said earlier today, some people are proven performers and others...   Each to their own.

My point is who cares?  ILUs are hardly a wonder product compared to care as I outlined previously.
They're in essence just a straight bet on the residential housing market.
If ILUs are such a fail-safe strategy then why was MET such an abject failure with 95%+ ILUs?

I'd prefer to watch the the next 6 months play out before making bold statements and aspersions on any given strategy.
I'm still a big fan having a mix of product and the full continuum of care model.



Whacc, interesting you should mention MET because they are actually in the process of increasing their care footprint so looks like they agree with your sentiment.

Easy to pick time frames to suit performance but obviously SUM has been a strong performer the last few years.

Both Ryman and Arvida have been hurt by prospects of poor care returns dragging on them but at $9 and $1.40 that is a good opportunity to me looking forward.

The way I see it is the level of care represents the extent of handbrake being on in a car.  The returns simply are not there in care other than in a way that creates a marketing platform for selling ILU's as a continuum of care.

High care, = high handbrake effect and little progress. (OCA)
Medium care = medium handbrake effect and medium progress (RYM ARV)
Modest care rate = modest handbrake effect and good progress  (SUM)

I did really well out of MET x 2 but acknowledge the market perceived their almost complete lack of care as being unattractive.

SUM have the business model that shows enough care to provide a sufficiently marketable proposition that they do have the full continuum of care covered without having so much care that its ruins their bottom line.  That's how I see it. Once we eventually start coming out the other side of this housing correction I reckon they will really shine.    Too early to be backing the truck up yet but I've put it in for a service and new COF so its ready to go when the time is right :)

Quote from: Basil on Jul 24, 2022, 10:19 PMThe way I see it is the level of care represents the extent of handbrake being on in a car. 

The value of care in a portfolio will only become truly evident when the bow-wave of the boomer demographic hits that acuity level.

How do you think things will play out when the wealthiest generation in history will be scraping with each other over not-nearly-enough beds like a giant high stakes game of musical chairs?

Quote from: Basil on Jul 25, 2022, 10:03 AMWow, that's quite a statement.

Do you disagree with it?

All that money being spent on European holidays right now will be redirected into care in 5-10 years time.
That's not something they will have discretion over, it's something they will have no choice over - and they all will want the best.

The only thing worthy of further discussion from your post is when the baby boomer population might really start to have a dramatic effect on care, i.e. when the concept of care suites might really take off, (assuming and I don't think for one minute that's a safe assumption, that refundable deposit schemes like RYM's and simple daily rate charges for premium rooms are not significantly more attractive than care suites).

I can't speak for ARV's thinking but I know from a presentation Earl Gasparich gave to the Auckland branch of the NZSA that they are targeting the 85+ age group.  Its widely recognized that the boomer generation really started with the post world war 2 baby boom in the middle of last century, more here https://en.wikipedia.org/wiki/Mid-20th_century_baby_boom but well worth noting for investors that the first of those baby boomers born in about 1946 won't be 85 years old until 2031.

My expectation is that if there is a scramble for care services that otherwise are not available from one of the other providers on more fair and reasonable terms such that people won't have any option but to buy care suites under the DMF model, the demand curve won't start to really accelerate until the 2030's, 8 years away.  On the other hand the demand curve for independent living units targeting people 70+ is really starting to kick into gear now (1946 + 70 = 2016).  Evidence from all the providers shows most people don't move into retirement villages until their late 70's so in terms of peak inflows to ILU units we're looking at between now and about 2044.

Quote from: Basil on Jul 25, 2022, 10:52 AMThe only thing worthy of further discussion from your post is when the baby boomer population might really start to have a dramatic effect on care, i.e. when the concept of care suites might really take off, (assuming and I don't think for one minute that's a safe assumption, that refundable deposit schemes like RYM's and simple daily rate charges for premium rooms are not significantly more attractive than care suites).

I can't speak for ARV's thinking but I know from a presentation Earl Gasparich gave to the Auckland branch of the NZSA that they are targeting the 85+ age group.  Its widely recognized that the boomer generation really started with the post world war 2 baby boom in the middle of last century, more here https://en.wikipedia.org/wiki/Mid-20th_century_baby_boom but well worth noting for investors that the first of those baby boomers born in about 1946 won't be 85 years old until 2031.

My expectation is that if there is a scramble for care services that otherwise are not available from one of the other providers on more fair and reasonable terms such that people won't have any option but to buy care suites under the DMF model, the demand curve won't start to really accelerate until the 2030's, 8 years away.  On the other hand the demand curve for independent living units targeting people 70+ is really starting to kick into gear now (1946 + 70 = 2016).  Evidence from all the providers shows most people don't move into retirement villages until their late 70's so in terms of peak inflows to ILU units we're looking at between now and about 2044.

Quote from: Basil on Jul 25, 2022, 10:52 AMThe only thing worthy of further discussion from your post is when the baby boomer population might really start to have a dramatic effect on care

That was the main point of my post, so happy to make that the only thing.

Agreed, ILUs are benefiting from that demographic tail-wind right now, but it still remains that the decision to purchase an ORA over an ILU is a discretionary decision - you can defer it until you're happy with whatever your thoughts are on timing for maximising value etc.
Care is not, if you need it then you need to go in there and then.

~85 is the average ingoing age for care, sure, but the distribution really kicks up after age 80 - given the size of the boomer demographic the need for beds will still be far greater than historically required from ~4 years from now.
It's not like a switch flicks at 85 years old.

Question is, do you want to write-off care as a strategy (which you seem to) ahead of this value realisation?  It's not like stock prices are going to magically come to this realisation 4-8-whatever years from now, it will get priced in ahead of time when people click that this is will happen.


It's all very well to judge management teams and the validity of their strategy on sales that are happening today, but those sale and the type of product being delivered to market are based on strategic decisions that were set in motion 4-5 years ago.

If you're an operator that wants to participate in the care wave then you need to at least have the land in your pipeline now earmarked for care because the runway to develop and open a greenfield site is at least 4-5 years - so when we're assessing the value of listed players it is very much a discussion that needs to happen now. 

Tilting away from care now might make sense on what you're seeing right now in terms of an underfunded sector.
But the more that underfunding situation continues, and the more the sector tilts away from care now, then the greater the opportunity is for those who retain care to profit in future from this known & certain demographic wave.

So it's a case of how far beyond your nose are you willing to look.

Its clear I don't think care suites are an attractive option and I believe they will remain unattractive until such time as there is no other realistic option for those looking for premium care.
The extraordinary pressure the care sector is under in terms of underfunding is something I think that continues for the foreseeable future.

ARV's recent village acquisitions moves its business model (72% ILU v 28% care) a lot closer to SUM's in terms of the ratio of care to ILU's and they also have a lot more facilities with the 4 year Gold standard MOH audit cycle than OCA.

Based on a share price in the very low $1.40's ARV would be my clear favorite in this sector of the companies trading at a discount to NTA.  That said I prefer SUM with its long proven history of much stronger underlying eps growth, vast landbank, low gearing, proven high margin development model and huge potential growth in Australia.  Its worth a modest premium to NTA in my view based on 33% CAGR in underlying earnings over the last decade, a growth rate over that time period that to the best on my knowledge is unmatched by any other listed company.

Watching for a change of tide and then backing the truck up on SUM.  In my view their business model is most fit for purpose in terms of delivering outperformance in this sector for the foreseeable future. 

 

Good update today. Sales going well......BUT

Paying out a greater percentage of earnings to maintain dividend at comparable level.  Costs are eating into profits.

Interesting to include broker target prices. If they are so cheap where is the insider buying.

Interesting the way they called out the intense underfunded cost pressures in care and how they continue to reduce the care side of their operation and also that care suites provide an "acceptable" return.  Hardly a ringing endorsement for care suites is it !
ARV have 28% of their business model in care and are clearly aiming to reduce this further.
Its crystal clear the care side of their operation is really dragging down the whole business.
The implications for another company in this sector which has nearly 70% of their units as care should be clear to all and not require any further barking from this Beagle.  http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/399910/380409.pdf

Quote from: Shareguy on Oct 04, 2022, 11:51 AMGood update today. Sales going well......BUT

Paying out a greater percentage of earnings to maintain dividend at comparable level.  Costs are eating into profits.

Interesting to include broker target prices. If they are so cheap where is the insider buying.

Seems they going to get $15m more realised gains then last year but 'hinting' divie same and that's a greater %age of profit

Sort of says most the $15m gone into the increased costs

Quote from: Basil on Oct 04, 2022, 12:02 PM... and also that care suites provide an "acceptable" return.  Hardly a ringing endorsement for care suites is it !
ARV have 28% of their business model in care and are clearly aiming to reduce this further.

Basil, genuine question, have you ever knocked up a simple cash flow model comparing a care suite to an ILU?

Quote from: winner (n) on Oct 04, 2022, 12:16 PMSeems they going to get $15m more realised gains then last year but 'hinting' divie same and that's a greater %age of profit

Sort of says most the $15m gone into the increased costs

That's a LOT when only 28% of your business model in total is in care.  Care suites provide an acceptable return and we're selling down non care suite care....clearly because that gives them a completely unacceptable return.

Quote from: Whacc on Oct 04, 2022, 01:15 PMBasil, genuine question, have you ever knocked up a simple cash flow model comparing a care suite to an ILU?

Models are only as good as the assumptions behind them and therein lies the problem with people following one who spends endless amounts of time on his.  Its plain for all to see that the returns on care are very poor and only "barely acceptable"  Its clear ARV think care is a HUGE problem from comments today.

While OCA's real underlying profit has declined 17% since they listed SUM's underlying profit has increased 140%.  That's comparing the most care intense business model with the least intense care model.
That's the real world....others build theoretical models to get whatever answers they're looking for maybe because they have most of their eggs in the one basket.   

Quote from: Basil on Oct 04, 2022, 01:27 PMModels are only as good as the assumptions behind them

I'll take that as a 'no' then.
Just a vibes operator.

I don't follow whoever you're talking about following.
It's not clear that ARV think care is a huge problem.
They explicitly stated that care suites yield an acceptable return.
Government funded care is a problem, yes.  Every operator is slowly decreasing their government funded care portfolios.


You can also put the most punitive assumptions you want into a model too.

Sure, ILU have gone well in recent years, due to HPI increases and a demographic bow-wave.

You seem certain that will continue.  Like a model, you're basing that on assumptions, the principal one seemingly that history just repeats?
You don't think that's a little... simplistic?

Quote from: Whacc on Oct 04, 2022, 01:15 PMBasil, genuine question, have you ever knocked up a simple cash flow model comparing a care suite to an ILU?

An interesting question to which I suspect you already know the answer.  The capex cost and/or sale price for a suite would be half or less than an ILU.  Both are subject to 30% ORA, although a term under 3 years would not see the full 30% realised.  A care suite with a tenure of 2.5 years would have a management fee of 15% year 1 + 10% year 2 + half of 5% for year 3 = 27.5%.  Average tenure for an ILU is say 7.5 years.  It appears the management fees for a suite would recycle almost 3 times faster than an ILU.

Let's test that.

In 7.5 years an ILU at a sale price of say $500k would earn ($500k x 30% ORA=) $150k in Management Fees.  Average of $20k p.a.

In 7.5 years 2 x suites at a sale price of say $250k each would earn ($250k/suite x 2 suites x say 27.5%ORA x 3 rollovers =) $412k in Management Fees.  An average of $55k p.a.

So the management fees would be 55/20 = 2.75 times higher for the capital invested, assuming both had a similar development margin.

To put this into a cashflow would require assumptions around development margins.  To avoid that, I will work on sale prices instead.  The ILU returns 30% of the sale price over 7.5 years in cash.  Whereas two care suites with the same total cost as the ILU returns 82.5% of the sale price over the same time period.

Interesting indeed.

Seems the market has interpreted this extract as a veiled profit warning / maybe cut in dividend - after all it did start with that ominous phrase 'However, with headwinds ...'

However, with the headwinds encountered over the first half, in order to retain the full year dividend at a
comparable level to FY22, a payout ratio around the mid-point of the distribution band is forecast based on
the current trading conditions

A complicating factor for F23 is they gave a huge number of extra shares. Back of the envelope sums says a 5.5 cents dividend (same as last year assuming comparable means same) at 50% payout implies EPS 11.0 cents v last years 12 cents..... is about an increase in $ terms of 10% though

So EPS less then last year .... wasn't acquisition to be eps accretive?

Nice of them to give an update but being rather obtuse has created uncertainity. A pity really because ORA sales are going well .... but those costs must really be hurting

Hopefully they will be more specific (and upfront) when half year result is announced in November

Share price recovering after sinking into the 130's

What was the price of those cheap shares in the cap raise about a year ago?

Whacc - "Just a vibes operator"  Nothing could be further from the truth....read some of Beagle's 20,000+ posts on the other site on this sector and its participants....  There's very little money in care, ARV have said as much today.  OCA's inflation adjusted underlying eps has fallen 17% since they listed 5 years ago.  That's all the evidence I need right there.  Read SUM's last half year report.  DYOR.

Ferg, all very well in theory.  Change your model to assume it takes on average 18 months to sell a care suite in the first instance, that they don't ever go up in line with inflation, that's there's a 18 month vacancy period between when it becomes vacant and resells again and servicing the resident needs in there costs the company $100 a week in underfunded Govt care, (all of these assumptions look reasonable to me) and then tell me they make more money than ILU's.
Even Maverick admits the real money is in ILU's.  Trouble is OCA are saddled with 69% of their units being in care.  The real problem for them by my estimate is they can only move the needle about 1% per annum and the extent of the growth in the seriousness of the underfunding of care is moving much faster than that.

At least ARV acknowledge there's a problem with returns on care and are looking to divest themselves of basic care facilities.  Good for them. 

Quote from: Basil on Oct 04, 2022, 05:00 PMFerg, all very well in theory.  Change your model to assume it takes on average 18 months to sell a care suite in the first instance...[snip]... that's there's a 12 month vacancy period between when it becomes vacant and resells again

So with 18 months to sell, occupation of 30 months and a resale vacancy of 12 months, that gives occupied 30 months of a total 60 months - i.e. a 50% occupancy.  Have you got a source for that?  Last time I checked the RV companies were 90%+ occupied.  Edit: I see you edited your post to have 18 months unoccupied post departure which puts occupancy at 45% (being 30 of 66 months) - where did that come from?  If Arvida are 45% occupied then that is a major issue.

While I am editing:

Quote from: Basil on Oct 04, 2022, 05:00 PMservicing the resident needs in there costs the company $100 a week in underfunded Govt care

Have you got a source or workings for this?

450 units unsold as at balance date (OCA most recent analysts call, M admitted to me he didn't listen in)  Most were care suites, from memory about 380 of which about 80 were rented out temporarily under a PAC.  Analysts were shocked and asked for second confirmation of figures, I was shocked.  Amounts to a whole years worth of sales (of all unit types) carried as stock.  No other RV company is carrying anything like that in stock. 

Here's the extent of the problem.  Last year they sold 174 new care suites and there were 66 resales see annual report page 7 here http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/392386/370979.pdf
Resale stock will keep coming available, (for obvious reasons).  At current new care suites sales rates as at 31 March 2022 they had more than 2 years of stock.  They disguised part of this by renting some of them out as PAC rooms.  The problem isn't getting better anytime soon because they're supposed to have delivered another 113 care suites at Lady Allum last half.  Assuming new care suite run rate has continued as per last year the current problem in terms of unsold care suites is likely to be worse than as at balance date.

Why aren't they selling you might ask ?  Something I have answered already in dozens of posts so won;t repeat. Maybe there has been a transcript of the call published somewhere ?  If not you'll either have to take my word for it or give the CFO a call.

The back of the envelope model you drew up has more holes than a sieve, sorry, I have to call it how it is.
$100 per week is an estimate. Noone is making money on care.  OCA's increased DMF fees which have been growing nicely in recent years, my calculations are that 90%+ of all DMF growth is eaten up by rampant care cost inflation so I'm not making that estimate without any underlying knowledge. The company won't give you commercially sensitive data on that but have a look at what ARV had to say today.  Its clear their care is dragging the company down and returns on care suites is merely "acceptable"  The EBITDA margin on care has gone from 19% when OCA listed down to 12% despite the so called transformation of their business.  In other words, the business transformation to care suites hasn't worked because the rate of increase in the cost to provide care has outstripped the gains from the transformation process.  (Ever worsening underfunding of care).

To ARV's credit at least they recognize they have a problem with the returns on care, unlike OCA who appear committed to doing more of the same, which is likely to result in a very similar outcome to what they've achieved to date, (no growth, or bottom quartile growth in eps going forward).

The definition of insanity is to keep doing what you've always done and expect a better result going forward.  Known consented developments appear to move the needle by on average 1% per annum over the next 6 years.  By about 2028, (barring further primarily ILU village acquisitions) I estimate OCA will be about 63% care and 37% ILU.    That's still a VERY poor position to be in my opinion.
On the other hand ARV are already at least 72% invested in ILU and keen to increase that as quickly as possible by the looks of it.
They also sell at a hefty discount to NTA and would be my pick of the discounted RV companies if SUM were not such a juggernaut when it comes to growth.

Question 1 for you.  Can you name me any other company on the NZX with a CAGR of 31% over the last decade other than SUM ?
Question 2. Would you be surprised to learn you can invest in SUM on a forward PE of only 13 ?
Question 3. Given that why would you bother with a super high care model, OCA, that has proven to date it can't grow earnings but is trading on very similar metrics ?

Quote from: Basil on Oct 04, 2022, 05:44 PMThe back of the envelope model you drew up has more holes than a sieve, sorry, I have to call it how it is.

Sorry to disappoint you but that was not a model by any definition.  It was a back of the fag packet estimate.  Your rebuttal was also full of holes.  I'm waiting for the sources for 45% occupancy and the losses of $100/week.  My "BOTFP" workings already had no inflation so maybe you didn't understand what I wrote.  Yes you correctly identified no vacancy between occupancies, but then you omitted to mention occupancies for ILUs.  If you want to construct a proper model then go for it but make sure you bring in all the variables and you treat them alternatives consistently.

Results speak for themselves, no model is required and answers to above questions are self-evident.
SUM up ~ 780% since they listed less than 11 years ago, OCA up just 14% in ~ half that time.  I rest my case which business model works better for shareholders.

Quote from: Basil on Oct 04, 2022, 07:00 PMResults speak for themselves, no model is required and answers to above questions are self-evident.
SUM up ~ 780% since they listed less than 11 years ago, OCA up just 14% in ~ half that time.  I rest my case which business model works better for shareholders.

Hmm - not very convincing - is it? Just check out slowly SUM's grew in the first half of their respective listing period (admittedly, more than 14% in total, but this was in the middle of a wild bull run). Some posters at that time worked as hard on down ramping SUM as you are now trying to down ramp OCA.

However - if we follow your argumentation, than the juicy time for OCA is now while SUM might well do a Ryman on its holders.

Quote from: Basil on Oct 04, 2022, 05:44 PM450 units unsold as at balance date (OCA most recent analysts call, M admitted to me he didn't listen in)  Most were care suites, from memory about 380 of which about 80 were rented out temporarily under a PAC.  Analysts were shocked and asked for second confirmation of figures, I was shocked.  Amounts to a whole years worth of sales (of all unit types) carried as stock.  No other RV company is carrying anything like that in stock. 

Here's the extent of the problem.  Last year they sold 174 new care suites and there were 66 resales see annual report page 7 here http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/OCA/392386/370979.pdf
Resale stock will keep coming available, (for obvious reasons).  At current new care suites sales rates as at 31 March 2022 they had more than 2 years of stock.  They disguised part of this by renting some of them out as PAC rooms.  The problem isn't getting better anytime soon because they're supposed to have delivered another 113 care suites at Lady Allum last half.  Assuming new care suite run rate has continued as per last year the current problem in terms of unsold care suites is likely to be worse than as at balance date.
grow earnings but is trading on very similar metrics ?

...

Not quite sure what your obsession with M and his attendance to this analyst call is all about. If you have a beef with him I propose you sort that out with him personally instead of consistently attacking him on a forum where he is not posting. Feels quite awkward. How do you feel about people telling questionable facts about you behind your back?

Apart from that - there are obviously other ways to get the facts but attending to a specific analyst call, however - the version you are telling re this call is not consistent with the version M told me. Given that I see him as quite careful related to facts would I trust his story, but maybe you just misunderstood him?

Some of your other OCA related claims (e.g. re vacancy rates) are so far out of this world that it is quite ridiculous. Just do some basic maths with their occupancy rates and you would not make such outrageous statements related to vacancy times. It just does not add up.

You don't seem to understand either, that the out renting of new units as PAC rooms is not a disguise of not selling them, but something they have to do when they knock down old buildings and building new units. Should they wait with the conversion until all old residents have died or should they alternatively just put these old residents on the street?

If they would do that we would hear your howling all across the globe.

I think it might be time for the beagle to let go and reconsider why he put his teeth into this particular leg in the first place ... while you did raise in the beginning (long time ago in the other forum) some valid concerns impacting all Retirement villages ... it feels like you are moving more and more to OCA specific alternative facts combined with a personal vendetta against a poster from a different forum.

Not a pleasure to read ... 

Quote from: BlackPeter on Oct 05, 2022, 11:16 AMHmm - not very convincing - is it? Just check out slowly SUM's grew in the first half of their respective listing period (admittedly, more than 14% in total, but this was in the middle of a wild bull run). Some posters at that time worked as hard on down ramping SUM as you are now trying to down ramp OCA.

However - if we follow your argumentation, than the juicy time for OCA is now while SUM might well do a Ryman on its holders.

Assumed you were referencing earnings - if not my apologies

If it was earnings not quite true

Chart is of each EPS indexed to time of listing

SUM might have been a 'beginner' growth wise lol but OCA has yet to cross the start line

00000ocasum.JPG

BP in case you were referring to shareprices here's how share prices have gone since listing

I'm getting worried about you as well - you seem to have become enamoured with this Oceania and maybe lost your normal objectivity about things. Not like you to so stringently defend your new love when its criticied

0000oca sum sp.JPG

Whoa that's a telling EPS chart, thanks for posting Winner.

Love your work Winner.  Picture says a 1000 words.

BP I couldn't disagree with your post above more.    I see no need to defend myself against such baseless allegations you've made.

Back to focusing on Arvida

Guru analysts at Jarden's kept their overweight rec.



Nevertheless, they retained their "overweight" recommendation on Arvida shares, saying near-term earnings would be offset by longer-term gains as Arvida executes on its strategy. "Importantly, we assume the key drivers of the downgrade to full-year 2023 are transitory," they said. They actually raised their 2024 forecast by $1m to $111m. But they shaved 2c off their 12-month target share price, to $1.58.

Arvida's profit downgrade seen as 'transitory'

https://businessdesk.co.nz/article/infrastructure/arvidas-profit-downgrade-seen-as-transitory

What happened to all the talk about acquisitions being eps accretive ?
What happened to the increased build rate adding to underlying eps ?

All the talk that FY23 was going to see huge growth in eps has come to nothing.

Quote from: winner (n) on Oct 05, 2022, 12:28 PMBP in case you were referring to shareprices here's how share prices have gone since listing

I'm getting worried about you as well - you seem to have become enamoured with this Oceania and maybe lost your normal objectivity about things. Not like you to so stringently defend your new love when its criticied

0000oca sum sp.JPG

Yes, I was talking share prices ... and while the OCA line is clearly lower (as I said in my post as well) - they had their first half in a different time (including Covid et all).

Not falling in love with OCA either ... and always interested to hear the other side of any argument. It is just - if the counterargument is starting to sound like a broken record and not even factual correct, than I start to wonder. Wouldn't you?

It would be nice to read about Arvida in the Arvida thread and people building on other work etc. Yet again it has degenerated into OCA versus SUM when that was not what was being discussed in earlier posts.  It's actually kind of sad.  It would be nice to learn something from learned posters so thanks to those for trying to bring it back on track with facts rather than hyperbole.

Back to talking about Arvida

Arvida getting into the habit of talking really positive and setting high expectations and then not delivering on them.

Like at the time they announced the Arena acquisition they indicated FY22 Underlying Earnings would be $67m plus 5 months of Arena. FY22 proforma guidance for Arens was $32m-$34m so lets say Arvida would have got $14m giving total group profit of $81m

They delivered $73.5 Underlying Earnings - a miss of $7.5m. Arena contributed $14.9m (a better than expected) which means the rest of the business contributed $58.6m - some 13% short of the expected $67.0m though was 13% more than the FY21.

Come FY23 Arvida still talked growth etc etc etc setting expectations of Underlying Earnings of at least $105m. This assumed modest growth as well as 12 months of Arena.

The news yesterday showed that first half realised gains on sales are likely to be 70% up on last year - so good start to the year but then they gave that veiled profit 'downgrade' for the full year.

Working with those statements about dividends etc it seems that FY23 Underlying Earnings will be about $83m (my workings)

Jardens reported that what was said could imply $86m and reduced their forecasts from $101m to $88m

Whatever eventuates its clear that Arvdida missed FY22 earnngs expectations big time and are on thrack to miss FY23 expectatons big time as well.

Not  very good record Arvida - no wonder your share price was in the 130's yesterday

Last year when the share price was over $2.00 I was inclined to believe TraderJackson and think ARV was very undervalued

The Arena acquisition seemed exciting and from the Arvida talk at the time I put a value of about $2.70 on them. The capital raise was at $1.80 so even more of a bargain I thought But with many cap raises the share price weakened before the due date which put me off as often prices continue to fall even further. So it has happened.

The EPS trend that backed up my $2.70 valuation is shown below --- not going to get anywhere that F23 forecast.

One day ARV might be a good buy again .... wait and see is the game

0000arv.JPG

Quote from: winner (n) on Oct 06, 2022, 12:05 PMLast year when the share price was over $2.00 I was inclined to believe TraderJackson and think ARV was very undervalued

The Arena acquisition seemed exciting and from the Arvida talk at the time I put a value of about $2.70 on them. The capital raise was at $1.80 so even more of a bargain I thought But with many cap raises the share price weakened before the due date which put me off as often prices continue to fall even further. So it has happened.

The EPS trend that backed up my $2.70 valuation is shown below --- not going to get anywhere that F23 forecast.

One day ARV might be a good buy again .... wait and see is the game

0000arv.JPG

I agree with you Winner. Only have a small holding which I will sell if I don't see any improvement.

Quote from: Ferg on Oct 04, 2022, 03:14 PMAn interesting question to which I suspect you already know the answer.  The capex cost and/or sale price for a suite would be half or less than an ILU.  Both are subject to 30% ORA, although a term under 3 years would not see the full 30% realised.  A care suite with a tenure of 2.5 years would have a management fee of 15% year 1 + 10% year 2 + half of 5% for year 3 = 27.5%.  Average tenure for an ILU is say 7.5 years.  It appears the management fees for a suite would recycle almost 3 times faster than an ILU.

Let's test that.

In 7.5 years an ILU at a sale price of say $500k would earn ($500k x 30% ORA=) $150k in Management Fees.  Average of $20k p.a.

In 7.5 years 2 x suites at a sale price of say $250k each would earn ($250k/suite x 2 suites x say 27.5%ORA x 3 rollovers =) $412k in Management Fees.  An average of $55k p.a.

So the management fees would be 55/20 = 2.75 times higher for the capital invested, assuming both had a similar development margin.

To put this into a cashflow would require assumptions around development margins.  To avoid that, I will work on sale prices instead.  The ILU returns 30% of the sale price over 7.5 years in cash.  Whereas two care suites with the same total cost as the ILU returns 82.5% of the sale price over the same time period.

Interesting indeed.

Yup, even moreso when you run an IRR across those calcs (and even if you assume an ILU tenure of ~5 years for apartments).

I take the point that models are only as good as the assumptions but, whichever way you cut it, care suites are vastly superior to ILU on a time-value-of-money basis.  Forget about fake metrics like 'underlying profit', this game is all about recycling cash flow.

Jeez, RV share price closed at $1.38

Spent most of 2019 around this level .....spiked to 190 odd at end of December - collapsed due to Covid but got to 213 mid 2021 and been down hill ever since

Update not well received

Update is hard to understand eh Winner.  You've got a full year contribution from the Arena acquisition in FY23 v part year last year, increased build rate, selling more units from a higher embedded value level and earnings per share are headed down ?  Hard to escape the conclusion that we were sold a 'pup" last year with that big placement.  Glad I took the hit on the chin like a man and sold a while back.  Something really not right here...

Not going there on the care suites v ILU's debate any further and wasting more of my time.  Results speak for themselves over the years.  If people want to believe it'll be different going forward, all power to them and good luck with that.  What's clear is the tide is going out on the whole sector with volumes of real estate sales and prices declining at a very rapid rate as well as all the other issues I've talked about at great length already.  All boats fall on an outgoing tide.... reluctantly I've come to expect that probably includes SUM.  I've decided to exit this sector completely and will revisit SUM when the TA looks better.
Swimming against an outgoing tide is very tiring and unrewarding.

This might shed a bit more light on the issue.  Auckland Catholic rest home losing $100,000 per month ponders closure, paywalled https://www.nzherald.co.nz/business/auckland-catholic-rest-home-ponders-closure-after-losing-100000month/RGEJ73DOH5VRUCCB7IOK7GOPWM/
Key Takeaway.  You just cannot get staff. 

Quote from: Basil on Oct 10, 2022, 11:33 AMThis might shed a bit more light on the issue.  Auckland Catholic rest home losing $100,000 per month ponders closure, paywalled https://www.nzherald.co.nz/business/auckland-catholic-rest-home-ponders-closure-after-losing-100000month/RGEJ73DOH5VRUCCB7IOK7GOPWM/
Key Takeaway.  You just cannot get staff. 

Another standalone old peoples home run by volunteers, on goodwill and by staff paid under market rates biting the dust.

Tragic for the organisation and for the residents.

However - it is times like these when in any industry the stronger competitors manage to build a base for further healthy growth. I recon this is a good sign for the big Four ;) , given that the demand for the offered services certainly won't go away.

Quote from: BlackPeter on Oct 10, 2022, 11:45 AMHowever - it is times like these when in any industry the stronger competitors manage to build a base for further healthy growth. I recon this is a good sign for the big Four ;) , given that the demand for the offered services certainly won't go away.

Exactly right.

It's like all the 1-ply toilet paper producers falling out of the market and leaving the 3-ply guys who only have so much stock.

What do you think is going to happen to the price of 3-ply?

ARV share price hit 135 earlier today

Made me think what the IPO price was

Late 2014 they raised $60m at 95 cents ... so those who bought in still ahead

That's about 5% pa ... with the dividends not too bad a return .... as long as you didn't participate in the other capital raises

Quote from: winner (n) on Oct 10, 2022, 03:51 PMARV share price hit 135 earlier today

Made me think what the IPO price was

Late 2014 they raised $60m at 95 cents ... so those who bought in still ahead

That's about 5% pa ... with the dividends not too bad a return .... as long as you didn't participate in the other capital raises

The IPO raised $80m.  Plus those who bought were encouraged to enjoy the feel good factor that 3 All Blacks were fellow shareholders.  All Blacks guaranteeing success in business... or something like that.

18/12/2014 they listed.
SUM were $2.77 and RYM were $8.52
Interesting to observe their relative performance since then.
Couple of prominent posters called RYM overpriced in the mid $8's in 2014 and reckoned they'd suffer from years of underperformance from there going forward.  Wonder if either of them thought it would go on for 8 years ?  (I'm a much older dog now and can't remember lol suppose we could go back and have a look but I can't be bothered).

Quote from: Hectorplains on Oct 10, 2022, 05:01 PMThe IPO raised $80m.  Plus those who bought were encouraged to enjoy the feel good factor that 3 All Blacks were fellow shareholders.  All Blacks guaranteeing success in business... or something like that.

You mean they are in business as successful as they are on the field  :o  ?

Goodness gracious me - Arvida share price closed today at $1.28 .... and looks like it's going to fall further

Glad I didn't get seduced into buying those cheap shares they hocked off a year ago - $1.85 not a bargain after all. And even more glad I quit the few I had at the time around $1.95 when the market reaction to the Arena acquisition wasn't all that enthusiastic.

What's incredible is that the current market cap of $926m is $187m less than what it was at the time of announcing that acquisition .... and that's after raising $330m of new capital - massive loss of market value eh

Probably a case of no worries - it'll be all OK one day

I wonder if it heads down as low as $1.00 and I also wonder if it does whether it might be worth buying then ?

Quote from: Basil on Oct 19, 2022, 07:23 PMI wonder if it heads down as low as $1.00 and I also wonder if it does whether it might be worth buying then ?

Getting close to being 'train wreck' material methinks

Once that happens very dificulta-te get the market back on side .....confidence is lost.

Arvida May end up as Oceania MK2 ....one of those gunna stocks with 'huge potential' that never seem to deliver.

Yes, only time will tell how ugly this gets.  One thing's for sure the chart looks really ugly.  No way I am going to stand in front of this train rolling downhill at 100 miles an hour.

Quote from: Basil on Oct 19, 2022, 08:22 PMYes, only time will tell how ugly this gets.  One thing's for sure the chart looks really ugly.  No way I am going to stand in front of this train rolling downhill at 100 miles an hour.

When you two experienced old campaigners are so negative on a company it piques my interest  8)

Are we up to the capitulation market phase yet? Asking for a friend.....

Quote from: Crackity on Oct 20, 2022, 10:48 AMWhen you two experienced old campaigners are so negative on a company it piques my interest  8)

Are we up to the capitulation market phase yet? Asking for a friend.....

You should ask our mutual friend KW what she thinks about buying in a downtrend 😁
Better to wait for TA to confirm the typhoon strength headwinds are over.
Personally speaking I think this statement by Winner hits the nail on the head, grammar and spelling improved by me, hope you don't mind Winner

Quote"Once that happens it very difficult to get the market back on side .....confidence
is lost".

This flea and mange ridden mutt cost me $17K earlier this year with all their B.S. eps accretive talk with the placement, (worst loss for me for many years).
Definitely a case for me of once bitten twice shy !  I'd need to see a VERY deep discount to NTA to be interested in backing this unproven nag for another round at the races.  These days whenever I see talk in a placement funding an acquisition and the directors say its eps accretive, I think to myself, yeah right, can I have a Tui to go with that !

Quote from: winner (n) on Oct 19, 2022, 08:07 PMGetting close to being 'train wreck' material methinks

Once that happens very dificulta-te get the market back on side .....confidence is lost.

Arvida May end up as Oceania MK2 ....one of those gunna stocks with 'huge potential' that never seem to deliver.

Oh my goodness, we need another dog like that like we need around few rounds of impacted wisdom tooth surgery.
They certainly talked the acquisition up big time and are not delivering this year.  It's certainly opened up a huge question as to the integrity of what they said and what they're delivering, and institutions appear distinctly unimpressed.  On the face of it with only 28% of their units in care and 78% independent living units the care tail should not be wagging the dog as much as ARV suggest it is.

There's something else going on here that a lot of people don't like which is perhaps why institutions are dumping this in big volumes.  I've seen windows on toilets that are less opaque than their statement the other day.  People are shooting first and asking questions later and can you blame them ?

Might be some value here if it gets down to a dollar but then again lots of people thought that with OCA so maybe not ?

I send an email to Jeremy Nicoll CEO over the weekend with my concerns. Very pleased to report that I'm impressed that he replied. Here's his reply

Thanks for the email

Over the past 12 months we have seen all share prices in the sector come back significantly, as the market prices in concerns on the housing market, interest rates and a potentially recessionary environment. We are always focused on making sure that we look after shareholder interests, as well as those in our team and that live with us.

Share buybacks do send a positive signal to the market on where the company sees value, however they also erode gearing capacity. On that topic I cant say much more than that.

Kind regards

Jeremy

Our half year results are out on 29 November and that will include a full picture on our performance and strategies.

Off another 3 cents to$1.26.  On my goodness, on a very strong market day too !...what is the market trying to tell us ?

Quote from: Basil on Oct 31, 2022, 10:21 PMOff another 3 cents to$1.26.  On my goodness, on a very strong market day too !...what is the market trying to tell us ?

Jeez --- $1.25 today

Back to 2018/2019 levels ... and they've raised $450m since March 2019

Book Value March 2019 was $1.33 and now its $1.87 plus what they've made since March

And upcoming result going to be a record

Yes Basil - market trying to tell us something

Quote from: Shareguy on Oct 31, 2022, 03:55 PMI send an email to Jeremy Nicoll CEO over the weekend with my concerns. Very pleased to report that I'm impressed that he replied. Here's his reply

Thanks for the email

Over the past 12 months we have seen all share prices in the sector come back significantly, as the market prices in concerns on the housing market, interest rates and a potentially recessionary environment. We are always focused on making sure that we look after shareholder interests, as well as those in our team and that live with us.

Share buybacks do send a positive signal to the market on where the company sees value, however they also erode gearing capacity. On that topic I cant say much more than that.

Kind regards

Jeremy

Our half year results are out on 29 November and that will include a full picture on our performance and strategies.

You suggest a share buy back?

Even though Jeremy didn't say so he does seem to agree with me in thinking that's not a good idea

Quote from: winner (n) on Nov 02, 2022, 12:40 PMJeez --- $1.25 today

Back to 2018/2019 levels ... and they've raised $450m since March 2019

Book Value March 2019 was $1.33 and now its $1.87 plus what they've made since March

And upcoming result going to be a record

Yes Basil - market trying to tell us something

Supply and demand currently in a major state of imbalance?  (see post in other retirement thread)

Suppose NTA currently $1.90.  Buy units at $1.25 = 190/125 = 52% instant tax free value accretion to remaining shareholders, more than triple their historical development margin if they invested the capital in new units instead.  Hmmm

Tuesday will be fascinating.  What exactly has the market been trying to tell us ?  Wonder what has the market so spooked sending this to another multi year low on Friday at $1.22 ?  Only 28% of their business is care so something else must be worrying the market ?  RYM managed to increase NTA this week with its result and this already has an NTA of $1.84 so if that goes up by a similar amount as RYM's did it should be about $1.95 so a prospective discount to NTA of 73 cents or ~ 37.5%.  Hmmm...not sure what to make of that ?  Anyone brave enough to share their thoughts before the result ?

Sounds like you have a few Shareguy, what do you make of this situation ?

Arv already signaled that realised gains in first half >70% than last year

That's implies big increase in Underlying NPAT - unless the shortfall/loss on day to day operations is very significant.

What we might see in the numbers and the narrative is that care costs in particular are pretty dire

Quote from: winner (n) on Nov 19, 2022, 04:41 PMArv already signaled that realised gains in first half >70% than last year

That's implies big increase in Underlying NPAT - unless the shortfall/loss on day to day operations is very significant.

What we might see in the numbers and the narrative is that care costs in particular are pretty dire

Care costs would have to be profoundly shocking (only 28% of their business) to drag the whole operation down.  Must be something else, only thing I can think of is development margins have come under brutal pressure...but we didn't see that with RYM so go figure ?

Market is saying this result will be ugly and the market is seldom wrong.  Its going to be interesting to see the detail....something wrong here, some big part of this puzzle that I can't sniff out...which worries me because I can usually sniff out trouble.  If care costs despite being just a modest part of their business model really are so diabolically bad, they're the culprit here what does that suggest about how bad OCA's result will be on Wednesday?

Quote from: winner (n) on Nov 19, 2022, 04:41 PMArv already signaled that realised gains in first half >70% than last year

That's implies big increase in Underlying NPAT - unless the shortfall/loss on day to day operations is very significant.

What we might see in the numbers and the narrative is that care costs in particular are pretty dire

Did they not say in the investor newsletter that the div payout ratio % would increase to sustain the same dividend? IE underlying profit increase is less than number of new shares vs the last comparable period? Big increase in realized gains getting eaten up by dilution and care?

Could it be the big purchase of Arena living. The at the time "bargain" of some Stella properties with only a few leaking. From memory were we not promised 12 cents additional earnings?

OR

Is it just the general negativity that overhangs this sector for all the reasons mentioned.

OCA next Wed and ARV on 29th

Só we can see what happens to OCA and chew the fat for a few days before we hear the bad or good news from ARV

Opps, thought they were reporting this coming Tuesday :-[

 

Quote from: Plata on Nov 19, 2022, 05:40 PMDid they not say in the investor newsletter that the div payout ratio % would increase to sustain the same dividend? IE underlying profit increase is less than number of new shares vs the last comparable period? Big increase in realized gains getting eaten up by dilution and care?

I think they said that in order to maintain dividend at 5.5 cps for 2023, that they would pay out approximately 50% of underlying profit. From this I think we can calculate that they expect underlying profit for FY23 to be 11c per share or $80m. FY22 underlying profit was $73.5m so, on the face of it a 10% increase. On a per share basis, would need to account for 3m shares issued under DRP so slightly less than a 10% increase in underlying profit per share. Or am I misreading their announcements?

What they actually said in their most recent investors news.
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/399910/380409.pdf
What they said about the dividend looks quite opaque to me.
What is crystal clear is they think there is very little money in basic care services and that care suites will provide only an "acceptable" return. 

What I read into that is it would appear care suites are okay but there are much better returns with independent living units....but make of everything they said in that newsletter what you will...

ARV being bashed with the ugly stick too.  Hope that acquisition they did pays off with the big eps accretion talk they said would happen.  Suckered a lot of people in with that eps accretive talk including this dog. Definitely a case for me of "Once bitten twice shy!"
I will leave this alone, despite appearing to be cheap, until TA confirms a bottom is definitely in.
Who knows where or when that will be or how low it will go ? I'll let the market tell me that.

Pretty amazing half year result

Almost spot on as they indicated in recent newsletter

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/403208/384609.pdf

Going through it now. Looks good to me.

Acquistions not quite EPS (Underlying NPT) accretive yet but give them time - early days yet

Seems they did OK on he sales side but day to day costs are hurting them. The difference between realised gains on sales and Underlying NPAT is a negative $4.8m - over the last few years its has averaged positive $5m

I call this the 'Operating Surplus from Day to Day Operations'. Recent numbers are

H119    6,179
H219    5,396
H120    5,466
H220    6,964
H121    5,250
H221    4,388
H122    3,258
H222    1,624
H123    -4,282

I think recent numbers is the impact/cost of all the things like wages/costs/govt subsidiies they keep talking about - it is becoming a real drag on earnings

Anyway EPS chart still healthy looking


0000arveps.JPG

Some very clear and distinctly different characteristics between this result and the OCA one.
Cash flow was satisfactory, earnings per share growth was also okay and NTA increased to about what I expected.
I'd give this result a pass mark but I expect headwinds in this sector to remain strong for the foreseeable future.

https://www.rnz.co.nz/news/business/479714/arvida-s-interim-profit-grows-despite-covid-19-related-challenges?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Wednesday+30+November+2022

Trades at a 35% discount to NTA (OCA 37.5%*) I like how they are completely transparent about the number of units they have available for sale (2%) of their stock, how they are honest about the challenges ahead and preapred to be proactive in slowing the build rate if its deemed prudent, how they're reviewing the level of care in their business model which is already at quite a modest level but most of all I like that they have a multi year history of growing underlying earnings per share.

Metrics.  I think we're looking at underlying around 11.5 cps for the full year, perhaps 12 which puts them on a forward PE of 10.6.
OCA I see on a PE of 10 so there's not much of a premium for ARV and yet they have obvious advantages with their business model, (far less care) and a proven track record of growing underlying earnings.

If one feels compelled to go bottom fishing in this sector I think this is a substantially better company than OCA and you're only paying a miniscule earnings premium and a very slightly lower discount to NTA than OCA, (but there are some serious questions about the veracity of OCA's NTA in my opinion, see below).. 

* OCA have 10 retirement villages for sale which have been deemed unsatisfactory to hold.  Any deal to sell them could be at a significant discount to NTA.
OCA also have hundreds of care suites they are struggling to sell so real questions hang over the value of those assets too. 

The post announcement excitement seems to have died

Share price back to where it was earlier in the week ...but not back to 112 like last week.

Retirement sector still not wanted

But Arvida does look like one to do well when sector comes back into favour ....methinks the best performer when it does.

Fbar latest

We reiterate our OUTPERFORM rating and maintain our view that ARV provides one of the most attractive risk rewards in the New Zealand market.

Disc, Will keep my holding, thought result was good.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/403208/384608.pdf

Interim report.  Looks satisfactory to me and I think they are managing the business prudently.  Arena acquisition has clearly paid dividends and was eps accretive.  Queenstown Country Club looks very nice.  Embedded value per share of $1.53 is very interesting.
My opinion: Would make a nice complimentary holding to SUM and for those looking to apply fresh capital to this sector it could be a good idea to very gradually dollar cost average into this and SUM over the next 12-18 months.
Others in this sector face too many headwinds for my liking.

Jarden says

Arvida's 1H underlying NPAT of $37.7m fell below analysts'
estimate. Jarden analyst Andrew Steele commented,
"ARV highlighted the outlook has an increasingly
negative bias, with regulatory, funding, housing
and healthcare factors presenting challenges."
Dividend outlook for FY23F reiterated with ARV
expecting a payout towards the middle of its payout
range (40-60% of underlying NPAT). Jarden estimate a
dividend close to 5.5cps, which implies an underlying
NPAT range of $80 88m (~4% downgrade).
"ARV expects to deliver 270 units and care suites
in FY23F although the medium-term target has been
lowered to 250+ units and suites, down from 300+.
We reduce earnings 6-10%, which largely reflects lower
development delivery assumptions for FY24F and
FY25F."
Jarden believe valuation upside and balance sheet
strength outweigh ARV's large aged care asset base,
which they expect to "remain a drag on earnings in
the near to medium term, and its modest development
pipeline relative to its in-place asset base.
Target price NZ$1.50 (was $1.58). Rated
Overweight.

https://www.marketscreener.com/quote/stock/ARVIDA-GROUP-LIMITED-20708484/consensus/

Analysts like it.

Quote from: Basil on Dec 06, 2022, 12:02 PMhttps://www.marketscreener.com/quote/stock/ARVIDA-GROUP-LIMITED-20708484/consensus/

Analysts like it.

The pale line hasn't caught up to the dark line yet lol

But the $2.04 one is very conservative still

A guy from Oceania said in an investor webinvar today that the 'market went to sleep' in the later bit of half one - hence the shortfall in new sales. But its all back to normal now so big catch up in second half

Went to sleep for all in the sector I reckon, so Arvida will be busy selling new ORAs as well this summer

Quote from: Basil on Dec 06, 2022, 12:02 PMhttps://www.marketscreener.com/quote/stock/ARVIDA-GROUP-LIMITED-20708484/consensus/

Analysts like it.

Agree, they are actually quite comparable to OCA, though started with some still scruffier sites and somewhat dishonest marketing during IPO.

Anyway - long time ago, and these days there is not a lot of difference between ARV and OCA in my spreadsheets - I am sure both will do fine.

Anybody who likes OCA should like ARV as well :) ;

Hope you are not copying Mav's spreadsheets.

Quote from: Basil on Dec 06, 2022, 04:40 PMHope you are not copying Mav's spreadsheets.

Does he have a spreadsheet about ARV as well?

Anyway, as far as I am concerned is his OCA spreadsheet quite accurate capturing the past as well as the ongoing business. But to predict the future you need as well a crystal ball which is not supplied by Microsoft ... but I recon we all tend to have problems when making statements about the future, don't we?

Quote from: BlackPeter on Dec 06, 2022, 05:06 PMDoes he have a spreadsheet about ARV as well?

Anyway, as far as I am concerned is his OCA spreadsheet quite accurate capturing the past as well as the ongoing business. But to predict the future you need as well a crystal ball which is not supplied by Microsoft ... but I recon we all tend to have problems when making statements about the future, don't we?

Hey Peter ==  There is an add-in in Excel called Crystal Ball .... works wonders in Excel and does millions of simulations in a few minutes .... and intuitively calculates CAGR over different periods to give the best results

Mav probably uses this Crystal Ball

You need to get with the program BP, I've been using Microsoft's crystal ball to good effect for years now  :P   https://apps.microsoft.com/store/detail/crystal-ball/XP99X23CPNJZPS

Quote from: Basil on Dec 06, 2022, 06:22 PMYou need to get with the program BP, I've been using Microsoft's crystal ball to good effect for years now  :P   https://apps.microsoft.com/store/detail/crystal-ball/XP99X23CPNJZPS

This helps me to better understand some of your predictions :P ;

OMG the worlds gone mad ....ARV close at 109

Just as well one can't predict the future else we might predict sub 100 by New Years

I should have kept my powder dry until a confirmed bottom was in.  Lowest gearing in the sector, sales holding up really well but headwinds are simply too strong for the entire sector.  Glad I only put my toe in the water with a 2% portfolio position which is getting rebalanced lower all by itself lol.

Nice comeback today (so far). Just as dramatic as yesterday's drop.

Love this from yesterdays marketbroundbup



Retirement village developer Arvida Group also had another good day, up 6.4% to $1.16. Arvida has been consistently near the top of the leaderboard this week.

LOL, yeah I saw that too, that was a good one.  If only it was true  :(

Director Ridley-Smith doing a great job in supporting the share price from falling more.

But then some would say it's a goodvsign ..insider buying and all that.

Jeez, if seemed ARV was going to close at 111 but somebody saved the day and it got back to 113

52 week low is 109 ...hope it doesn't go below that

Unloved and not wanted

Need to come out with a Happy New Year news letter with some good sales numbers included in it. I'll shoot them off an email to suggest it

Feels like a lifetime ago since the days of $2+ eh...and yet it was just 14 months ago.
No idea why OCA gets so much air time on the forums and why despite this being fundamentally cheaper and far less challenged in terms of its business model it hardly gets any love.  Go figure?

This has been under review as it no longer meets my primary investment goal in 2023 and beyond, retirement income, and fails miserably my 8%+ minimum gross yield investment filter, (current yield 4.9%).  In terms of the only other prospect to get out of this hole, holding for a share price recovery, its hard to see what the catalyst is for any near-term meaningful recovery, and I note both ARG and KPG pay well over 8% gross effective yield for 33% taxpayers and trade at similar, quite substantial discounts to NTA so I have actioned a switch from this to ARG.  Both companies share tickers start with AR so it seemed like the natural switch to make  :)   

In a major change to my primary Invesment objective going forward I reckon when you hit 60 you might as well rejig your portfolio for maximum income and enjoy whatever expensive hobbies you like for as long as you still have the health and wellbeing to do so.  No point being the richest person in the rest home having your nappies changed for you is there!

Yes, well said Basil

Geez Basil, you need your own entertainment channel.

Under review!!! You only bought them in December 2022 @$1.20 with a strategy to dca over 2023/24 alongside your favoured Sum.
ARV was never going to meet your 8% div criteria...I have no idea why you bought them other than you thought they might be oversold

I'm following KW technical analysis thread...unfortunately I couldn't use the 50 or 200 day ma as you didn't own them long enough


Basil ARV chart below

Perhaps the Christmas/New Year trading halts allowed some time for reflection.
Basil did say,
"In a major change to my primary Invesment objective going forward I reckon when you hit 60 you might as well rejig your portfolio for maximum income and enjoy whatever expensive hobbies you like for as long as you still have the health and wellbeing to do so.  No point being the richest person in the rest home having your nappies changed for you is there!"

Quote from: Raven on Jan 18, 2023, 06:21 PMPerhaps the Christmas/New Year trading halts allowed some time for reflection.
Basil did say,
"In a major change to my primary Invesment objective going forward I reckon when you hit 60 you might as well rejig your portfolio for maximum income and enjoy whatever expensive hobbies you like for as long as you still have the health and wellbeing to do so.  No point being the richest person in the rest home having your nappies changed for you is there!"

Exactly.  Having a very expensive hobby you enjoy tends to sharpen one's focus quite considerably!  ARV was the only share I held that didn't fit the yield criteria and yes, on reflection over the holiday period I decided it was a mistake to get back in.   
 

Good on you Basil. You make whatever decisions you want for your investments.

ARV certainly outside your normal div hound forays like GNE, WHS, TRA etc

You'll be alright TRA div yield going up everyday.

I'm actually getting more interested in ARV...reckon I can get better than your 8%...will take some as div and the rest as capital growth. Actually wish they didn't pay any div at all and just reinvested in growing the business

My investment window for retirement stocks 20yrs+ or until the graph showing aged population growth demand bends the other way

Good luck with ARG..Hope it meets you expectations

Yeap, horses for courses mate.  If I was still in my thirty's, forties or even fifties I reckon the original strategy for ARV as earlier articulated late last year for ARV is a very good one.  It was only a very small toe in the water 2% portfolio position.  Best to stick to what you believe in, "To thy own self be true" philosophy 101, as well as adapting your investment strategy as you journey through life.  In my professional career I have watched so many retirees be asset rich and too cash flow poor to enjoy themselves in their retirement years it makes me cringe now whenever I see it and it's definitely not a trap I'm going to fall into ! 

If you are a dividend hound at heart stick with it I reckon.  The former user handle of Beagle was chosen for a good reason, they're obsessed with where their next feed is coming from lol

P.S. I believe TRA can maintain their 10% gross yield but its been very painful seeing past unrealised profits being whittled away. 

This Arvida village sounds a bit munted

At least residents OK even though some have lost everything

https://www.stuff.co.nz/national/300795202/92yearold-blacks-out-as-floods-devastate-auckland-retirement-village

Must be really traumatic for the old folks.  I really feel sorry for them.

Quote from: Basil on Jan 30, 2023, 04:50 PMMust be really traumatic for the old folks.  I really feel sorry for them.

Probably one good reason for living in a retirement place ....... In times like this likely to be looked after etc instead of being scared out of your wits alone at home.

After reading through the MetLifecare announcement along with all other information decided to add to my position today. For long term holders don't think you can go far wrong at $1.

I'm thinking limited downside from here.

At this level considering the last stated NTA was $1.93 there's an AWFUL lot of bad news already fully priced in and this would be my only buy in this sector if I was to action anything at this point.  Floated at 95 cents in December 2014 on a prospective yield of 5.9% its now ostensibly done a full boomerang trip back to where it started.  To get back to that float yield with 5.5 cps in annual dividends it would need to be 93 cents.

My view is in the short term a retest of the float price is likely.  Why?
I believe the huge Ryman cash issue is acting like a giant Dyson vacuum cleaner sucking all the wind out of the sails of the other companies in this sector and to some extent the market as well.  My view is this is FAR better buying at $1 than RYM at $5 but so much energy is being sucked out of the market by so many investors thinking RYM at $5 is cheap.

Long term, its hard to see anyone going wrong at $1.  I like ARV's business model and management are executing well. 
Very cheap at $1 but the headwinds are so fierce in this sector....and while the massive RYM vortex is sucking all the energy out of the market its hard to see this gaining traction before that's over on 6 March.

I do agree that downside should be limited from here in a rational market but sentiment often isn't rational.


 

Quote from: Basil on Feb 22, 2023, 07:44 PMAt this level considering the last stated NTA was $1.93 there's an AWFUL lot of bad news already fully priced in and this would be my only buy in this sector if I was to action anything at this point.  Floated at 95 cents in December 2014 on a prospective yield of 5.9% its now ostensibly done a full boomerang trip back to where it started.  To get back to that float yield with 5.5 cps in annual dividends it would need to be 93 cents.

My view is in the short term a retest of the float price is likely.  Why?
I believe the huge Ryman cash issue is acting like a giant Dyson vacuum cleaner sucking all the wind out of the sails of the other companies in this sector and to some extent the market as well.  My view is this is FAR better buying at $1 than RYM at $5 but so much energy is being sucked out of the market by so many investors thinking RYM at $5 is cheap.

Long term, its hard to see anyone going wrong at $1.  I like ARV's business model and management are executing well. 
Very cheap at $1 but the headwinds are so fierce in this sector....and while the massive RYM vortex is sucking all the energy out of the market its hard to see this gaining traction before that's over on 6 March.

I do agree that downside should be limited from here in a rational market but sentiment often isn't rational.


 

There will be plenty of time to decide what RV's to invest in and when, the muck in this sector is far from over and some will be happy to wait on the sidelines for the TA to invite them in, whether already invested or not. The FA, well, it's going to take a bit longer to shake out, so let the TA do the talking in the meantime, there's no need to anticipate or make any moves too early. Fabulous buy-in opportunity will come for the long term portfolio, but not just right now.

I tend to agree and whilst the property market still declines one would be brave to step in even at current SP levels (sector wide)
 

Quote from: Shareguy on Feb 22, 2023, 05:47 PMAfter reading through the MetLifecare announcement along with all other information decided to add to my position today. For long term holders don't think you can go far wrong at $1.

I'm thinking limited downside from here.

ARV has always been seen as the 'ugly duckling' of the sector and despite a bit of enthusiasm for them early last year nothing seems to have changed ......remains a market pariah and even more so than Oceania

There's an old saying 'once a market pariah always a market pariah'

Hard to see this changing any time soon ....no compelling story to make them great

Hard to see this changing any time soon ....no compelling story to make them great
[/quote]

What about 1/2 price asset sale!

You wonder if any of those big offshore pension funds that like buying long term companies backed with hard assets might find this a compelling buy?

MET was an once an ugly duckling of the sector...probably still is...lol

Imagine if OCA or ARV got taken out at 20% north of todays prices

There would be howls of we was robbed..again.

Quote from: Perky on Feb 23, 2023, 02:54 PMHard to see this changing any time soon ....no compelling story to make them great


What about 1/2 price asset sale!

You wonder if any of those big offshore pension funds that like buying long term companies backed with hard assets might find this a compelling buy?

MET was an once an ugly duckling of the sector...probably still is...lol

Imagine if OCA or ARV got taken out at 20% north of todays prices

There would be howls of we was robbed..again.

ARV (and OCA) have rarely ever traded above its Book Value and have always been rated (multiples) much lower than RYM and SUM - probably because of perception and performance, who knows

That's unlikely to change

And don'tf orget that 'fair value' or whatever you want to call it is essentially a guess to what NTA might be in a few monthsplus/lessthe present value of future gains/losses from day to day looking after and caring for people .... and these days that is a big cost (loss) to operators

But then again some outfit might be prepared to take on this 'liability' and but ARV out at current price plus 20%

Could perceptions change though?
RYM does not (at least for the moment) appear to be perceived particularly favourably after their recent manoeuvring. Anecdotally speaking of course.

Forbar and their clients still in love with ARV

12.388% is a deçent chunk

Quote from: winner (n) on Mar 01, 2023, 04:34 PMForbar and their clients still in love with ARV

12.388% is a deçent chunk

They are not the only ones who have been buying more. Is ridiculously cheap for a long term portfolio. Just thinking they normally do Investor update in March.

Jeez 25 million at days end at $1.00

Might be something to do with that 'adjust' session they said was today ...what ever that means

But $1.00 doesn't look too bright does it ...be $1.05 again on Monday though

Depends on your time line W69. I really don't worry about this too much. This is certainly part of my Retirement Portfolio so long term for me.

Just be good to see there update. Be due soon followed by F/Y in May.

Trading was extended to meet the quarterly rebalancing of the NZX and FTSE Russell Indices, with Arvida Group, Serko, Tourism Holdings and Vista Group falling out of the FTSE Small Cap Index, and Channel Infrastructure entering the NZX 50 in place of Restaurant Brands.

Quote from: Greekwatchdog on Mar 17, 2023, 06:16 PMTrading was extended to meet the quarterly rebalancing of the NZX and FTSE Russell Indices, with Arvida Group, Serko, Tourism Holdings and Vista Group falling out of the FTSE Small Cap Index, and Channel Infrastructure entering the NZX 50 in place of Restaurant Brands.

Other stocks like SPK also had big volume on close, I suspect there is a bit of end tax year squaring going on also.

Quote from: Greekwatchdog on Mar 17, 2023, 06:12 PMDepends on your time line W69. I really don't worry about this too much. This is certainly part of my Retirement Portfolio so long term for me.

Just be good to see there update. Be due soon followed by F/Y in May.

Investor Newsletter any day now ...last year was first week April.

Number to look for is Total Gains on Sales. They don't usually say the $ and you have to add it up from the chart they put in.

Gains on sales +/- a few million gives you Underlying Profit for the year

Let's hope it's a lot more than $73.5m  achieved in F22

Quote from: winner (n) on Mar 19, 2023, 08:18 AMInvestor Newsletter any day now ...last year was first week April.

Number to look for is Total Gains on Sales. They don't usually say the $ and you have to add it up from the chart they put in.

Gains on sales +/- a few million gives you Underlying Profit for the year

Let's hope it's a lot more than $73.5m  achieved in F22

If we use SUM's result which I thought was outstanding given all the Macro Head winds against the sector this past 12 months. To me this points to a solid full year for ARV. Not that solid results are doing anything for share price currently. However I do enjoy buying at lows...

Quote from: Basil on Feb 22, 2023, 07:44 PMAt this level considering the last stated NTA was $1.93 there's an AWFUL lot of bad news already fully priced in and this would be my only buy in this sector if I was to action anything at this point.  Floated at 95 cents in December 2014 on a prospective yield of 5.9% its now ostensibly done a full boomerang trip back to where it started.  To get back to that float yield with 5.5 cps in annual dividends it would need to be 93 cents.

My view is in the short term a retest of the float price is likely.  Why?
I believe the huge Ryman cash issue is acting like a giant Dyson vacuum cleaner sucking all the wind out of the sails of the other companies in this sector and to some extent the market as well.  My view is this is FAR better buying at $1 than RYM at $5 but so much energy is being sucked out of the market by so many investors thinking RYM at $5 is cheap.

Long term, its hard to see anyone going wrong at $1.  I like ARV's business model and management are executing well. 
Very cheap at $1 but the headwinds are so fierce in this sector....and while the massive RYM vortex is sucking all the energy out of the market its hard to see this gaining traction before that's over on 6 March.

I do agree that downside should be limited from here in a rational market but sentiment often isn't rational.

It took a full month but it happened.  Half last stated asset backing of $1.93 = 96.5 cps so at 94 cents it closed at that's under half NTA and under the float price of 95 cents more than 8 years ago!

I think management are executing far better than is reflected in the share price, their business model is sound and leverage is lowest of the sector but with sentiment in this sector so negative I struggle to see what's the catalyst for any near term recovery?  Thoughts ?

Quote from: Basil on Mar 22, 2023, 05:42 PMIt took a full month but it happened.  Half last stated asset backing of $1.93 = 96.5 cps so at 94 cents it closed at that's under half NTA and under the float price of 95 cents more than 8 years ago!

I think management are executing far better than is reflected in the share price, their business model is sound and leverage is lowest of the sector but with sentiment in this sector so negative I struggle to see what's the catalyst for any near term recovery?  Thoughts ?

Well yes but your predicted 60c for OCA hasn't happened yet, under the right circumstances any sp could go to zero couldn't it. Bit like a monkey chucking darts at a dart board, if he throws the dart enough times then the occasional bulls eye is quite likely. I like ARV and OCA for long term plays from here and at current prices and see no advantage buying RYM or SUM over the former.

If a high quality well managed, modestly geared company like ARV can trade at under half NTA...

Never thought it would go this low, thankful I took my losses and left on this sector. Is this being weighed down by market blues...other property stocks are not fairing as bad, is this being weighed down by banking woes...banks are not fairing as bad, is this being weighed down by political woes... hmmmmmm. Do you think a labour government will be empathetic and pragmatic when the news starts being flooded with headlines about shortages and vulnerable elderly getting "fleeced" by greedy retirement companies. Too many loaded guns in the room with ARV, I dare not get shot again...

Price/Book (NTA) multiples in this sector continue to decline

This trend been going for over 7 years

The secular bear market is now 7 years old ....and showing no signs of ending

Quote from: Basil on Mar 22, 2023, 05:42 PMI struggle to see what's the catalyst for any near term recovery?  Thoughts ?

At the risk of stating the obvious, in the absence of any different news there is currently no catalyst.  What you are hinting at is 1 possibility but the horse will have bolted by the time such news makes it to the market.  Another will be a flattening of interest rates (or a reduction greater than the market expects) or maybe even a change in Government or a boost for the opposition in a reliable poll.  All property/RV stocks are currently heavily discounted without any sort of catalyst on the short term horizon.  Provided a business is not rotten, then these are good buying opportunities but trying to pick the bottom..?  We all know how that ends....

Quote from: winner (n) on Mar 22, 2023, 08:02 PMPrice/Book (NTA) multiples in this sector continue to decline

This trend been going for over 7 years

The secular bear market is now 7 years old ....and showing no signs of ending

7 is the number of completeness so its likely near its end and 8 is the number of new beginnings so there you go.

Quote from: Basil on Mar 22, 2023, 05:42 PM...

I think management are executing far better than is reflected in the share price, their business model is sound and leverage is lowest of the sector but with sentiment in this sector so negative I struggle to see what's the catalyst for any near term recovery?  Thoughts ?

I am pretty sure the catalyst will be a turnaround in the property market combined with a general recovery of the economy.

When this is going to happen will be anybody's best guess. Economists continue to talk about a likely recovery later this year (and I do see their points). If anybody wants to know how fast the price recovery can be ... just look at the price recovery after the COVID dip. Might be difficult for all these clever people waiting for a confirmed bottom to get their fill (at bottom prices) after the rocket has launched ...

Obviously -

If Putin's dear friend Xi joins him and North Koreas Dear Leader in increasing their dirty war games ... then things might look quite different.
 
If the global debt mountains are not just rocked but crushed by deep biting interest rises, things might look quite different as well.

Who knows when it happens, but it will - and this is in my view the most likely trigger for the trend to turn. 
 

Maybe an Investor News will come out next week

Once market sees they are going well with increased sales and margins share price will recover a lot of recent losses

It was about $1.25 was announced .....financials probably better state now so could get back to that level pretty quickly.

Quote from: winner (n) on Mar 30, 2023, 06:45 PMMaybe an Investor News will come out next week

Once market sees they are going well with increased sales and margins share price will recover a lot of recent losses

It was about $1.25 was announced .....financials probably better state now so could get back to that level pretty quickly.

I don't know W69. SUM result hasn't done much for their share price and I thought that was pretty good considering head winds and SUM's commentary was positive. Its been nice adding under a $1.

Like you say we must be due a Investor Update. What is it? Heads you win, tails you win?

With the lowest gearing in the sector I think their bonds (ARV010) are quite good buying at around 7% yield to maturity.  Expecting a March quarter sales update in early April and to hear that sales have been quite good in the circumstances of a weak market overall.
Bit sad to see the shares where they are.
Disc: Have a decent sized holding in the bonds, no shares at this point, waiting for a confirmed new uptrend in the shares before buying them again....once bitten twice shy....

Quote from: Basil on Mar 31, 2023, 12:26 PMWith the lowest gearing in the sector I think their bonds are quite good buying at around 7% yield to maturity.

Yes I agree but think the market is worried about ARV breaching debt covenants. 

From FBar report

ARV's published covenants are the most onerous as they (1) are the highest (2.25x); (2) currently do not include all development gains; and (3) no part of the capitalised interest expense is excluded. Assuming ARV gets the technical amendment relating to its development gains (both OCA and RYM include almost all development gains), our modelling suggests that ARV will be close to but not below its covenants. However, should it need to, we expect a similar amendment to RYM. Longer term, for both RYM and ARV, they would likely need to either move some debt into a dedicated development facility like OCA or reduce the level of net debt in relation to EBIT.

Hopefully we get a update soon

Acknowledge their debt covenants are the most restrictive in the sector which gives plenty of scope for it to be renegotiated whilst also ensuring they make prudent decisions around the timing of progress on new developments.  Worth noting ARV have already signaled they are throttling back on new developments for FY24 with the previous target of 300 coming back to circa 250.  They also noted in the late Nov 2022 call they have the ability to tailor and adapt their development pipeline to changing economic conditions i.e. throttle things further back if need be.

Yes the covenants are nothing to worry about in my opinion.  To me its a screaming bargain.  Back to float price.

Announcement

Arvida Group Limited (NZX:ARV) advises that an extension to its current bank debt facility was executed yesterday. The bank facility limit has been increased by $100 million to $675 million and ASB has been introduced to the syndicated facility alongside ANZ and BNZ. The additional $100 million has a 3.5 year tenure.

In addition, an amendment to the interest coverage ratio (ICR) has been approved by the syndicate members. The ICR is amended to 1.75x for the next four financial reporting periods to and including 30 September 2024 and is calculated based on an adjusted EBITDA with all interest cost included. All development gains are now included in the calculation. All other material terms and conditions remain unchanged.

As at 31 March 2023, $500 million of bank facilities were drawn.

Total facilities (inclusive of $125 million of retail bonds) are $800 million. Interest rate hedging of $220 million is in place at a weighted average interest rate of 2.8% (excluding margin and line fees).

Quote from: Greekwatchdog on Mar 31, 2023, 03:54 PMAnnouncement

Arvida Group Limited (NZX:ARV) advises that an extension to its current bank debt facility was executed yesterday. The bank facility limit has been increased by $100 million to $675 million and ASB has been introduced to the syndicated facility alongside ANZ and BNZ. The additional $100 million has a 3.5 year tenure.

In addition, an amendment to the interest coverage ratio (ICR) has been approved by the syndicate members. The ICR is amended to 1.75x for the next four financial reporting periods to and including 30 September 2024 and is calculated based on an adjusted EBITDA with all interest cost included. All development gains are now included in the calculation. All other material terms and conditions remain unchanged.

As at 31 March 2023, $500 million of bank facilities were drawn.

Total facilities (inclusive of $125 million of retail bonds) are $800 million. Interest rate hedging of $220 million is in place at a weighted average interest rate of 2.8% (excluding margin and line fees).

Funny. Just talking about that impediment.  Now its gone.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/409324/391872.pdf
Nice, headroom of $175m looks quite comfortable to me.

I doubled my holding today. It's way undervalued in my opinion. Based on last year we should have an update next week.

Best value of the sector by miles in my opinion.  Good luck with it mate.
I'm happy to wait until its confirmed headwinds have abated and we have a new uptrend.

Quote from: Basil on Mar 31, 2023, 05:25 PMBest value of the sector by miles in my opinion.  Good luck with it mate.
I'm happy to wait until its confirmed headwinds have abated and we have a new uptrend.

Yes buying in a downtrend not good. After debt covenants sorted I thought why wait. Still only a small holding for me. Also thinking update should be positive. April normally a great month for shares.

Quote from: Shareguy on Apr 01, 2023, 07:27 AMYes buying in a downtrend not good. After debt covenants sorted I thought why wait. Still only a small holding for me. Also thinking update should be positive. April normally a great month for shares.

Doesn't really matter, cheap is cheap.

I agree it screams "cheep" louder than a budgie :)
Closing at 93 cents for the quarter a full $1.00 below last stated NTA of $1.93.
From my perspective as a significant bondholder, (bought at ~ 7% gross yield to maturity), I am happy with how they are managing their debt and plenty of talk in recent presentations about their ability to adapt and slow their development pipeline gives me a lot of comfort they are managing their business well.

FY23 development pipeline was heavily skewed to the second half with a target of 270 units, only 51 of which were delivered in the first half so if they built ~ 220 in 2H the bank debt rising from $430m at 30 Sept to $500m confirmed yesterday looks satisfactory to me.

I would expect their sales will have been affected by the much slower real estate market this summer just like the rest of the sector. 
 

Why I added to my position.

The stock hit a low of $.91 on Friday and looking at the buyers I thought may go down into the eighties. Once the announcement re funding was announced buyers returned and the share price ended at $.93

FB have a target price of $1.80 AND SAY

We reiterate our OUTPERFORM rating and maintain our view that ARV provides one of the most attractive risk rewards in the New Zealand market. However bear in mind they own a good chunk of the company based on last disclosure (12.3 percent as at 1/3/23) so got to be careful with what they say. With that in mind they did add 8 m shares to last disclosure.

Also take comfort that some of the directors thought buying at $1.16 in December was good. Also ACC buying 4m shares in Feb 23 at $1.16

The fundamentals speak for them selves. A PE of 7.9 based on EPS forecast FY23 of 11.7 cps at Fridays close of $.93. Last stated NTA of $1.93

Talking of NTA.

I hear you all saying devaluation on the cards. I point out that MetLife recent results point to a positive increase in assets and the same valuer generally does many of the listed retirement businesses.

From MetLife's result

The net profit after tax includes a fair value gain on investment property of $46.7 million (compared to a fair value gain of $129.6 million at 31 December 2021). This gain was largely driven by strong resale and new development pricing during the period, which supported growth in the valuation of Metlifecare's existing portfolio.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MET/407101/389050.pdf

As far as demand is concerned every report I have seen shows increased demand with shortages unless more units are built than forecast.

Now I thought it was good value at $1.00 and now we are at $.93 and we all no it's not good to buy in a down trend.

I'm picking that unless there are some cockroaches lurking this weeks update should be positive and the downside is very limited.

Having such a good rating and being best in class also adds to my opinion that I'm on the right track.

https://www.canstarblue.co.nz/home-garden/retirement-villages/

Hopefully we will soon see.

Disc, I could be wrong so do your own research.

Must admit I can work out in my head why all the other companies in this sector are priced where they are but this one has me quite perplexed.  Actually, I can't work it out.  Nothing much wrong with their business model that I can see, pretty modest care ratio which is really good in the current "extreme care cost" environment and most villages are full feature with all the bells and whistles which is what's really in demand.
Further, at their most recent call on 29 November 2022 they said 2H had started well with strong sales in October and November, although there are delay's with settlements for obvious reasons with the slowing real estate market.

The only weakness I can see in their model is the relatively weak development margin compared to the rest of the sector, which did improve to 20% in the first half which was a notable improvement with very high construction costs but this is still at quite a divergence to the sector and has been for some time.

Possible reasons I have tried to think of to explain the apparent extreme bargain share price level, noting the market is always looking forward.
1. Further significant construction costs increases in the year(s) ahead that are unable to be passed onto buyers in a weaker real estate market leading to a considerable reduction in development margins for the foreseeable future.
2. A significant reduction in the build target for FY24 and FY25 because of a very weak real estate market leading to much lower development numbers as well as a much lower development margin per unit.
3. Significant further weakness and slowness in the real estate market with the 40 year low in the level of transactions in February 2023 continuing through FY24 and possibly into FY25 leading to much lower new sales and resales going forward potentially quite significantly impacting earnings.
4. Continuing escalation in the cost of providing care far above the rate of inflation. (I think this is highly likely).
5. Cost escalation elsewhere in the business above the rate of inflation that is unable to be recovered due to their fixed fees for life business model leading to increasing operational losses at a village level, (excluding gains on new sales and resales).  (Highly likely).

Debt doesn't look like a concern for any reasonable person, anymore.

The share price graph looks incredibly weak and the downtrend is deeply embedded so no follower of technical analysis will touch this until there are at least the first makings of a bottoming out.  I would have thought all of this is already fully baked into the share price??? hence why I am perplexed... but these are strange times so in the short run who really knows?    (Noting that Forbar are by no means out on a limb with their share price target of $1.80...the average of 4 analysts is $1.78).  Go figure...
For what its worth, (which isn't much because I have got this one wrong twice already which is why I won't buy a third time until it's proven from a TA perspective to be in a new uptrend), I think all the analysts are far too optimistic thinking this is going back to ~ $1.80 within 12 months but surely we are somewhere near the bottom and as soon as the market sees house prices stabilize, whenever that is, surely there's a decent sized feed to be had here on a 3-5 year view?
At this stage my fear of getting bitten a third time outweighs my desire for a feed.  I'm happy to wait for a new uptrend to start.  Acknowledge others are braver than me with this one and good luck to them I say.

Interesting debate.

I thought prior to RYM CR announcement that OCA, ARV and SUM were sort of finding there way back up. Post RYM CR its been back down.

I added more $0.92 on Friday prior to ARV debt announcement. Have been since they hit $1.05. That was the major concern for me, now they have that sorted I can only see this nudging upwards, but this market is difficult to work out. I do look forward to that Investor Update given they FY result was skewed to the 2nd half after a OK HY.

Both RYM and SUM posted solid sales numbers despite the apparent head winds. I don't expect that to be any different for ARV or OCA for that matter when they report FY.
 

Quote from: Basil on Apr 01, 2023, 03:46 PMMust admit I can work out in my head why all the other companies in this sector are priced where they are but this one has me quite perplexed.  Actually, I can't work it out.  Nothing much wrong with their business model that I can see, pretty modest care ratio which is really good in the current "extreme care cost" environment and most villages are full feature with all the bells and whistles which is what's really in demand.
Further, at their most recent call on 29 November 2022 they said 2H had started well with strong sales in October and November, although there are delay's with settlements for obvious reasons with the slowing real estate market.

The only weakness I can see in their model is the relatively weak development margin compared to the rest of the sector, which did improve to 20% in the first half which was a notable improvement with very high construction costs but this is still at quite a divergence to the sector and has been for some time.

Possible reasons I have tried to think of to explain the apparent extreme bargain share price level, noting the market is always looking forward.
1. Further significant construction costs increases in the year(s) ahead that are unable to be passed onto buyers in a weaker real estate market leading to a considerable reduction in development margins for the foreseeable future.
2. A significant reduction in the build target for FY24 and FY25 because of a very weak real estate market leading to much lower development numbers as well as a much lower development margin per unit.
3. Significant further weakness and slowness in the real estate market with the 40 year low in the level of transactions in February 2023 continuing through FY24 and possibly into FY25 leading to much lower new sales and resales going forward potentially quite significantly impacting earnings.
4. Continuing escalation in the cost of providing care far above the rate of inflation. (I think this is highly likely).
5. Cost escalation elsewhere in the business above the rate of inflation that is unable to be rec overed due to their fixed fees for life business model leading to increasing operational losses at a village level, (excluding gains on new sales and resales).  (Highly likely).

Debt doesn't look like a concern for any reasonable person, anymore.

The share price graph looks incredibly weak and the downtrend is deeply embedded so no follower of technical analysis will touch this until there are at least the first makings of a bottoming out.  I would have thought all of this is already fully baked into the share price??? hence why I am perplexed... but these are strange times so in the short run who really knows?    (Noting that Forbar are by no means out on a limb with their share price target of $1.80...the average of 4 analysts is $1.78).  Go figure...
For what its worth, (which isn't much because I have got this one wrong twice already which is why I won't buy a third time until it's proven from a TA perspective to be in a new uptrend), I think all the analysts are far too optimistic thinking this is going back to ~ $1.80 within 12 months but surely we are somewhere near the bottom and as soon as the market sees house prices stabilize, whenever that is, surely there's a decent sized feed to be had here?
At this stage my fear of getting bitten a third time outweighs my desire for a feed.  A feed is coming here but my sense is its still cooking in the kitchen and needs some more time for preparation.

Good points Basil. I agree with all of your points and agree that the risks are real and that the market is expecting a very bad result going forward. Is the lower development margin lower because of remediation costs being high? A number of the Arena villages were leaky. Negative cashflow not a good thing with expenses and cost of care hurting. I agree with you that surely this is all priced in. I'm not going to buy anymore until after the update.  If it's a good update well.........

My late Mum was at the Peninsula Club and the block of units she was in, (she had a lovely large 110 square meter unit with a sunroom had a very, very slight leak in it).  I think her block was scheduled for a complete rebuild once all the residents passed on / moved on.  Arena paid us out as a corporate buy-back 4 months after she vacated the unit so that suggests they are buying back every unit in that block as residents pass on or leave. The problem with buying villages with leaks is once you start scratching beneath the surface of the problem you can unearth a scale that's very easy to outstrip previous remediation cost estimates.
Who knows, maybe that's one of the reasons why the share price is where it is too?

Provided you take a medium to long term view its hard to see how you guys could not do well buying here.
Even if it took 5 years to get back to $1.80 and you collect 5.5% yield that's a decent annual return.
As soon as this shows some life from a technical perspective, I'm favorably inclined towards holding a modest equity stake in tandem with my decent sized bond investment.   I think ARV will post pretty reasonable sales numbers this coming week.  We'll see how OCA go when they report.

Am I correct in thinking that in the last half result, if you remove resale gains and development margin then operating cashflow was basically 0? I'm not an expert on this sector so could be wrong, but I don't like that all of their existing assets seem to make no money unless prices continue to rise.

ARV never really been liked by the market - ask it's greatest advocate in t_j_jackson. WILL THINGS CHANGE?

Market never really liked numerous capital raises to buy things, especially as they under water on all of them - PROBABLY NEVER CHANGE

EPS acquisitions that were not EPS accretive ..... hmmm NOT GOOD

Increase in Book Value per Share last 5 years about 10% pa. About the same as OCA and significantly below that of RYM and SUM. CAN THEY EVER OUTPERFORM RYM AND OCA - PROBABLY NOT

Takes a lot to change the pecking order - old timers say once a market pariah always a market pariah .... no wonder how cheap they appear to be

etc

etc

etc

ARV probably be a profitable investment over time ....but probably not as profitable as others

Quote from: Plata on Apr 01, 2023, 04:53 PMAm I correct in thinking that in the last half result, if you remove resale gains and development margin then operating cashflow was basically 0? I'm not an expert on this sector so could be wrong, but I don't like that all of their existing assets seem to make no money unless prices continue to rise.

Most in the sector are like this ...some worse than others

Profit / Cash Flows from looking after people and running villages at the moment negative

Quote from: winner (n) on Apr 01, 2023, 05:06 PMMost in the sector are like this ...some worse than others

Profit / Cash Flows from looking after people and running villages at the moment negative

By the looks of it this is going to be an increasing problem going forward.  Fixed fees for life and costs rising at a rate greater than 7.2% inflation is not a good mix.

Quote from: Basil on Apr 01, 2023, 05:29 PMBy the looks of it this is going to be an increasing problem going forward.  Fixed fees for life and costs rising at a rate greater than 7.2% inflation is not a good mix.

Agree Basil. Only Summerset has had the foresight to give themselves the option to increase weekly fees in line with Superannuation %increase. RYM, OCA and ARV have all fallen into the fixed weekly fees for life/tenure hole which will be detrimental in inflationary times as you say

Quote from: Mos on Apr 01, 2023, 07:37 PMAgree Basil. Only Summerset has had the foresight to give themselves the option to increase weekly fees in line with Superannuation %increase. RYM, OCA and ARV have all fallen into the fixed weekly fees for life/tenure hole which will be detrimental in inflationary times as you say

There were a few who were strong vocal advocates for 'fixed fees for life', even lobbying the CEO's. Doesn't look so smart in an inflationary environment anymore, does it. From a shareholders perspective.

I believe SUM could ask considerably more for their units if they did offer fixed fees for life or offered that as an option under a hybrid model.  SUM are winning now that inflation is where it is but I believe they were losing out when inflation was 2%. 

For example the average price of a 2 bedroom ILU in a RYM Auckland village today is ~ $1.4m whereas for SUM its ~ $1.0m, that's a huge $400,000 difference.  Some of that is to do with the relativity of the pricing of villages being in different suburbs, some of it reflects the pricing power RYM confers upon themselves with their lower 20% DMF fee, (their lower fee is not something they give away for free), and some of it is centric to the pricing power RYM's enjoys with offering fixed fees for life.

Nobody can reliably say whether SUM holding out with fees tied to the change in super has advantaged or disadvantaged them over their 11 years in business.  There are some VERY powerful emotional and psychological factors at play in people's minds when you offer to lock down and fix their biggest weekly outgoing for life.  Its an extremely powerful marketing tool and confers significant pricing power in my view.  RYM use that and their 20% DMF fee to leverage super premium pricing for their units.

FB note out today

Outperform $1.80

ARV is still attractive, trading at ~0.5x book, but FY24 focus will be on debt
The amendments to the ICR covenants remove a key near-term concern that ARV would undertake a dilutive rights issue. At ~0.5x book value, the lowest in the sector, we view ARV as highly attractive

I agree at this level.

Quote from: Shareguy on Apr 03, 2023, 08:17 AMFB note out today

Outperform $1.80

ARV is still attractive, trading at ~0.5x book, but FY24 focus will be on debt
The amendments to the ICR covenants remove a key near-term concern that ARV would undertake a dilutive rights issue. At ~0.5x book value, the lowest in the sector, we view ARV as highly attractive

I agree at this level.

Seems too goo to be true!

ARV share price on fire today ........near top of NZX leaderboard

Finally getting some love

Go you good thing

Quote from: winner (n) on Apr 03, 2023, 11:09 AMARV share price on fire today ........near top of NZX leaderboard

Finally getting some love

Go you good thing

Hmm - looks like somebody invested from petty cash into ARV instead of re-stocking the coffee. Surely - you had a look at the volume, did you?

Good on you shareguy for asking Jeremy when

Amongst the good stories and pretty pictures hopefully they'll give an indication of realised gains on sales. I reckon that could be over $50m for the last six months

That would mean for the full year realised gains of at least $93m and indicate underlying profit will be about about the same (probably more)

So lets say $95m Underlying Profit - pretty good compared to last years $73m

That should get some positive momentum into a rising share price

What was Forbar's target again?

Underlying Profit say $95m pretty good - esp compared to F22

However if you believe all the crap they came out with when acquiring Arena F23 should be about $110m

So in my books still not delivering as they should .... seems to be a bad habit of theirs

Hopefully market has a short memory and they start thinking they are the bees knees

Share price really on fire now

On trajectory to 100 plus by end of week ...or earlier if Jeremy prints a good newsletter

Jeremy (CEO) says

Morning ...., yes, our usual investor newsletter is due to come out mid-week, so you should see it in the next couple of days.  cheers

I doubled my holding again today.

Disc. Now have a sizeable holding

Share price on the up. Brought some today.

I agree that they are good buying. Interest rate increases coming to an end. Immigration on the up and just heard today that house prices may be on the turn earlier than expected.

A buck beckons tomorrow

And what was Forbars target?

Quote from: Shareguy on Apr 03, 2023, 03:17 PMJeremy (CEO) says

Morning ...., yes, our usual investor newsletter is due to come out mid-week, so you should see it in the next couple of days.  cheers

I doubled my holding again today.

Disc. Now have a sizeable holding

You know the old saying mate.  Big bait's catch big fish.  Good luck.

Tomorrow we will find out assuming that's what they meant by Investor update middle of the week. Target $1.80 Brief summary below.

Arvida Group (ARV) has announced an amendment to its interest coverage ratio (ICR) covenant for its next four reporting periods, as well as the inclusion of all development gains into its earnings for its ICR calculations. This is in-line with our expectations as laid out in our report, "Tide is Going Out; Debt Coming to the Surface" published 23 March 2023. This should put to rest any near-term concerns that ARV would be pushed to raise capital at its current deep discount to book value by its banking syndicate. In addition, ARV increased its bank facility by a further +NZ$100m. ARV also commented that it has NZ$500m of drawn bank debt as at 31 March 2023 (FY23 year end), implying net debt of ~NZ$615m, ~+NZ$75m above our estimates and ~+NZ$55m above Visible Alpha consensus estimates. The deviation from our and consensus estimates is likely a consequence of higher capex rather than lower new-sales cash flow, but both could be contributing factors. We will await ARV's Q4 sales update (normally published in April) for a clearer picture.

What's changed?
Earnings: Underlying earnings -1%/-2%/-2% in FY23/FY24/FY25 on higher interest costs and slightly higher property related costs
Interest coverage ratio covenants now more in-line with peers
As stated in our report, "Tide is Going Out; Debt Coming to the Surface", ARV's ICR covenants were the most onerous in the sector. These amendments bring ARV closer in-line, its temporarily lowered ICR covenant to 1.75x adjusted EBITDA is the same level as RYM's. The inclusion of all development gains into its adjusted EBITDA (flagged at its 1H23 result) is now consistent with OCA and RYM. These changes greatly reduce ARV's risk of breaching its covenants over the next two years, and give it room should interest rates rise further. We estimate ARV's ICR at ~2.5x/~2.2x in FY23/FY24, sufficiently above its now 1.75x covenant. Come FY25, with a covenant return to 2.25x, we estimate ARV to be close should interest rates remain at these levels and net debt continue to grow.

Net debt higher on more capex
There are two main drivers of net debt build up; (1) lower new-sales cash flow, or (2) increased capex. We have assumed the latter with our capex estimate increasing +NZ$75m, allocated to land acquisitions and the seasonal effect of financial year end spending accelerating to meet delivery targets. Our net debt estimates increase by +13%/+13% in FY23/FY24 to NZ$609m/NZ$654m.

ARV is still attractive, trading at ~0.5x book, but FY24 focus will be on debt
The amendments to the ICR covenants remove a key near-term concern that ARV would undertake a dilutive rights issue. At ~0.5x book value, the lowest in the sector, we view ARV as highly attractive. In order for this substantial discount to unwind in FY24 we believe ARV will have to focus on stabilising or reducing net debt.   

Quote from: Basil on Apr 04, 2023, 05:31 PMYou know the old saying mate.  Big bait's catch big fish.  Good luck.

Indeed. I don't think I will loose my rod, but I could loose my hook.

Tomorrow we will find out. Also interest rate decision (25 BP expected) but it's all about the commentary.

Will Arvida can the divi. Makes sense to me, certainly for next year, Otherwise build rate has to drop.

Will be an interesting update.

Yes, looking forward to the update.  I am a significant stakeholder through the bonds so am following this with interest, (pardon the pun)  :)

Update

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/409551/392164.pdf

Read well to me.
In fact very positive.

Quote from: winner (n) on Apr 03, 2023, 01:24 PMGood on you shareguy for asking Jeremy when

Amongst the good stories and pretty pictures hopefully they'll give an indication of realised gains on sales. I reckon that could be over $50m for the last six months

That would mean for the full year realised gains of at least $93m and indicate underlying profit will be about about the same (probably more)

So lets say $95m Underlying Profit - pretty good compared to last years $73m

That should get some positive momentum into a rising share price

What was Forbar's target again?

Going from the chart in Investor News seems my 'forecast' is about spot on

So Underlying Earnings in F23 likely to be at least 20% up on F22

Pretty healthy eh

Betcha the likes of OCA won't be doing as well.

Quote from: winner (n) on Apr 05, 2023, 02:17 PMGoing from the chart in Investor News seems my 'forecast' is about spot on

So Underlying Earnings in F23 likely to be at least 20% up on F22

Pretty healthy eh

Betcha the likes of OCA won't be doing as well.

I wouldn't bet on it, ARV down 3% as we speak and OCA up, market giving middle finger to ARV.

I am happy. Based on this and SUM/RYM result sector seems to be handling head winds ok.
 
We will just have to wait on OCA and see what they have got going on.

I will be adding more ARV should there be any more weakness below $0.90. Surely not?? Who knows.

H223 number of sales 298 but down from 327 same period last year

Resales up 3 on pcp but new sales fell from 123 to 91. They were down in first half as well

Just as well they were getting good prices and gains from resales otherwise full year result would be rather disappointing

What will be interesting is how much Arena contributed to full year results

Numbers indicative as per Newsletter

Quote from: Breezy on Apr 05, 2023, 02:35 PMI wouldn't bet on it, ARV down 3% as we speak and OCA up, market giving middle finger to ARV.

Looks like eh

But somebody buying reasonable chunks to keep the price from falling too much

Interestingly they were talking at the half year of 270 new units this year, they somewhat disingenuously referred to 250 in this update and have "delivered" just 215 and have wound back FY24's target build rate to about the same down from an earlier indication of ~ 250.  Seems prudent in the circumstances.
Business seems to be travelling okay-ish considering the strength of the headwinds.
Best value of the sector by a very long way in my opinion but I still see no obvious catalyst for much of a share price recovery in the short term. 
Hard to know what the final result will be like, need to have a good look under the hood at the financials'.
Fortunately, with this one, they are an easy read.

Looked a bit harder into all this and gosh they really have wound back the build rate for FY24.
Stated to be about 250 as at late November 2022.
New number is the equivalent of FY23, i.e. about 215 units but that includes the 57 apartments at Aria Bay which were originally intended to be delivered in FY23 so actual new / new build target for FY24, (excluding projects that were originally intended for FY23 completion which are late), is only 158, nearly 100 lower than what was estimated in Nov 2022 !

Bit more...of the 215 new units "delivered" in FY23 63 are care suites and dementia units that while technically built and I suppose if you get creative you could say delivered... are still going through soft fit-out and audit compliance which isn't expected until June 2023 so actually can't be physically sold and handed over to new incoming residents until then.  Getting a little bit creative with the term "delivered" in my opinion....mind you I think most in this sector do similar creative things with their so called deliveries.  Lot of work to remediate all flood damage at Parklane.

With Adrianne Orr of the RBNZ seemingly determined to engineer a very hard economic landing and protracted recession, can they maintain earnings in FY24...that's the $64,000 question...applies to the whole sector in my opinion.

For Bars update. Outperfrom Target $1.75

Arvida Group's (ARV) 4Q investor update gave us three main takeaways; (1) demand remains strong with the number of resales largely flat versus 2H22 (albeit we acknowledge two extra months of Arena Living), with both margins and price coming in ahead of our expectations and up versus last year. This bodes well for the sector overall and needs to be viewed against a backdrop of record low housing turnover. (2) New sales were weaker than anticipated with substantially fewer unit sales at lower margins but at higher prices; we believe the miss relative to our expectations relates to fewer care suites sold and a large proportion of deliveries weighted towards the very end of the financial year. (3) ARV is slowing down development. ARV delivered 215 units in FY23, below our 270 unit forecast and its 250 unit guidance as the delivery of 57 apartments in Aria Bay has been pushed to June 2023. More significantly, ARV guided to a similar delivery number in FY24, including Aria Bay. This suggests a material slowdown in build run-rate in FY24. We think this is the right thing to do and will look for more details on the implications for capex and free cash flow at the FY23 result.

What's changed?



Earnings: FY23/FY24/FY25 underlying profit +2%/0%/-1%. Annuity EBITDA +6%/-1%/-2%.
Target price: Decreased to NZ$1.75 (from NZ$1.80).


Prudent development management


ARV will complete 215 units in FY23, below its 250 target and our forecast of 270 units. The -55 deviation relative to our expectations reflects delays experienced at its 57 apartment Aria Bay apartment development (Browns Bay in Auckland). This is now expected to be completed in June 2023 (1H24). ARV moderated its FY24 build rate expectations to be "equivalent" to FY23. This will comprise of the 57 Aria Bay apartments, with the remainder being villas. With rising debt levels (and investor scrutiny), we view ARV's tempering of its build rate profile as prudent to manage forward debt levels. We lower our FY24 and FY25 net debt estimates by -2% and -4% respectively, reflecting lower capex.

Suppose it's a result of being a guru analyst but Forbar lowered target to $1.75

$1.75 awesome target ...assume that's what they reckon share price will be in years time.

Seems too good to be true

A few additional thoughts.  Lot of care suites in the pipeline....I think these will be VERY slow sellers.
Makes no sense whatsoever to me, (from a capital management and efficiency perspective when the cost of capital and interest rates are this high) that they bought a whopping 55 hectare site in Warkworth with planning and resource consenting progressing and then they will sell the surplus land in due course.
This is a massive site and there will be a lot of surplus land.    What's it going to be worth when they try and resell it?  Its clear to me we are already in a recession and the Reserve Bank wants to make it a deep and very protracted one.  In this sort of environment development land prices can suffer really big falls.

Questions that present.
Why are they not using their capital more efficiently and stopping land purchases at elevated prices especially when the site is vastly bigger than they need ?
Why are they not buying their own shares back at half price getting a 100% instant return on capital ?


 

I think you're wrong. Care suites will be the new "go to" for those who are considering a move to an RV in their 80s and older. If ARV's care suites are similar to the OCA model, where they are "for life" with increasing levels of care/nursing support as needed, they will become a very attractive option. Continuity of care is already a huge "carrot" especially for couples. People don't want to have to move out of their "home" if they require a higher level of care, nor do they want their spouse moving. They will pay for the peace of mind that Care Suites provide. If I were in that position it would be a no-brainer.

Quote from: Basil on Apr 06, 2023, 09:39 AMA few additional thoughts.  Lot of care suites in the pipeline....I think these will be VERY slow sellers.
Makes no sense whatsoever to me, (from a capital management and efficiency perspective when the cost of capital and interest rates are this high) that they bought a whopping 55 hectare site in Warkworth with planning a resource consenting progressing and then they will sell the surplus land.
This is a massive site and there will be a lot of surplus land.    What's it going to be worth when they try and resell it?  Its clear to me we are already in a recession and the Reserve Bank wants to make it a deep and protracted one.  In this sort of environment development land prices can suffer really big falls.

Questions that present.
Why are they not using their capital more efficiently and stopping land purchases at elevated prices especially when the site is vastly bigger than they need ?
Why are they not buying their own shares back at half price getting a 100% instant return on capital ?


 

Those Forbar targets

Are they really serious or just dreaming

Some might say its irresponsible for outfits like Forbar saying (by way of recommendation) you could double your money in 12 months ... when its highly unlikely it will happen

I'll do a Forbar

Target $1.00 by Easter

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/403208/384609.pdf
Care suite sales, we will see but the facts are they only sold 19 in the first half down from 39 in the PCP.
Reflecting on this a bit more and I see in the last presentation they also bought land at Lincoln in Caterbury, 11 hectares, in Nov 2022.  So two expensive land acquisitions this half, one for far more land than is what's needed tying up expensive debt for years when they already have a development pipeline of over 2100 units which is ~ 10 year pipeline at the current build rate !  WOW!  Where's the sense in that when they could be buying back their own shares at half price ? 

It seems to me they seem to be in some sort of state of denial that anything they are doing inefficiently is affecting the share price.  You can see that in the latest investor news when they blame the Ryman capital raise for the depressed share price but what they don't say is that no other company in this sector is trading at half the asset backing so there is no acknowledgement of their own part in this.
Heck, even OCA is trading at a lower discount to NTA than ARV so the market is obviously saying they're not executing efficiently or with significant development margin or that's its unloved for some other reason or combination of reasons. 

Winner - Forbar were the lead on the original float of ARV so you have to consider their recommendation in that context and of course they never stuff their discretionary fully managed client portfolios with shares they couldn't place elsewhere do they....  What surprises me the most is the other three analysts seem to be following along like obedient little puppy dogs with their price targets and the average price target 12 months hence is $1.78 !
https://www.marketscreener.com/quote/stock/ARVIDA-GROUP-LIMITED-20708484/consensus/
If I thought in a deep and protracted recession, there was any realistic chance of it getting anywhere near that within 12 months I'd be backing the truck and trailer up...  I'm not.

They're going to face a significant increase in interest costs in FY24 due to higher interest rates and holding too much development land, a likely material reduction in development margin, likely slow sales on care suites, likely much higher costs for running villages and providing care for residents...all with the economy in deep recession.  On the balance of probabilities, I foresee a material reduction in earnings per share in FY24.  The shares are cheap, but they are cheap for some pretty good reasons and until we see the real estate market pick up I see very little chance of a meaningful share price recovery.
Happy to hold my bonds with a 7.2% yield to maturity.  Just calling it as best as I see it for the year ahead. 
Disc: No shares held, no short position, substantial holding in the ARV010 bonds bought at ~ 7% yield to maturity.
Others will see it differently and that's fine.

Basil said 'It seems to me they seem to be in some sort of state of denial that anything they are doing inefficiently is affecting the share price.'

I tend to agree with that sentiment. As I've said a few times before they seem to talk a lot but don't always deliver. And it shows in their financial performance.

Mark from Listers said that the March quarter was quite lucrative for investors - the NZX50 was even up 3.6% ....but poor old Arvida was down 18% ..... far worse than OCA at -4% and SUM down a fraction.

That's a pretty big under performance.

They blame RYM but I reckon this under performance is their own doing

Does it make ARV really really cheap - not compared to the others in the sector
And no matter how hard that Aaron from Forbar raves about them (gets a lot of media as well) no way is the share price going to $1.75 and even OUTPERFORM might be pushing it.

Anyway thats how I see it

At the current SP of $0.97 at 50% of NTA, surely ARV buying back shares will create more shareholder value than new developments and paying dividends that are subject to tax. Why can't the Board see this and act on it?

Quote from: Basil on Apr 06, 2023, 02:00 PMReflecting on this a bit more and I see in the last presentation they also bought land at Lincoln in Caterbury, 11 hectares, in Nov 2022.  So two expensive land acquisitions this half, one for far more land than is what's needed tying up expensive debt for years when they already have a development pipeline of over 2100 units which is ~ 10 year pipeline at the current build rate !  WOW!  Where's the sense in that when they could be buying back their own shares at half price ?

Maybe they are a bit more farsighted than just assuming that every trend knows only one direction (currently downwards). Being for some time in this business they might know that real estate is cyclical and that prices are unlikely to drop much further when the demand is high.

Lincoln is one of the centre pieces of the fastest growing district in New Zealand (Selwyn District) - good public transport, a university, good medical services, a mayor wearing pink sneakers - and yes, NZ's second largest city is just a short bus trip away.

I think their acquisition makes a lot of sense, and just because Auckland house prices are crumbling does not mean that they do the same in more desirable parts of the country. Not everybody wants to live every couple of years through a five hundred year cyclone (and they will come more often ...).

Did you look at the house price trend in Canterbury before you made you comments? Looks like the markets are already speaking.

Typical of them not delivering what they say they will is the F22 result

At the time of the last capital raise late 2021 they indicated / guided that the current business was on track to achieve underlying profit of $67.0m - full year F22 result would be this plus what Arena contributed over 4 months.

Well that $67.0m ended up as $58.6m - a 13% miss

But never mind the contribution made the total bottom line more respectable and some thought the result was great but the market has spoken with share price down to where it is today

Yeap, this dog got suckered into all the talk of the placement and acquisition of Arena villages being eps accretive.   Burned up "low five figures" on that before I woke up and smelled the coffee. Thing is it was eps accretive but the result itself, as you've pointed out above, doesn't speak well as to how well the rest of the business performed in FY22 does it!   Care suites being rolled out across the business now...hmmm...haven't we seen this movie before and know how that goes...

At the last call on 29 November the CEO and CFO were asked by one of the analysts (share price at the time was ~ $1.20 ~ 38% discount to NTA), at what point does it make more sense / would you consider buying your own shares back? It was clear from the long pause and puzzled type response this was something that had not been considered at that point.  Why wasn't it considered by the board at some point in the last half ?  Subsequent to that they've gone ahead and purchased a whopping 55 hectares just out of Warkworth of which they will only use a fraction and then once consented (2 years?), will try and sell the rest...all the while funding this using expensive floating rate debt and also already carrying a development book of 10 years at the current build rate.   What part of this makes common sense with the cost of funds where they presently are ?

Not sure the whole "too much expensive debt" issue really dawned on them until very late in the half...maybe a reaction to the RYM debt fiasco?  I prefer management being proactive rather than reactive...isn't that what they're paid the big bucks to do ?

BP - I am not going off on a tangent debating the merits of different regions.  I'm looking at this from a top down approach.  Massive 10 year development book being added too, using expensive floating rate debt when their shares are half NTA.  They then blame shift to RYM as to why their shares are in the dog box.    They go on to talk a lot about playing defensive now and using capital efficiently in their investor news having just blown a huge amount on two very expensive land acquisitions.  Their talk and their actions don't appear to line up...,

Buy back ......what ......borrow more to buy back your own shares when heavily indebted already?

Not suggesting that mate.  Simply saying buy back shares at half price instead of land that won't be developed for many years, at full price.   Its all about eps accretive acquisitions don't you know  ;)

thanks everyone for some good reading........I like to keep it simple.....leveraged developers are going to get crushed in the current macro environment. The heads winds could not be worse at the moment and foreseeable future 

Have been away and have just been having a look at the update.  Pleasing to see margin up and demand strong. Seems prudent to cut built rate and conserve cash until we see house prices stabilising and interest rates coming down.

Forbar have a vested interest in being positive given they own over 12 percent of the company. They are also sitting on a substantial unrealised loss at current prices.

I think all the retirement sector including Arvida should look at a pause on dividends and a cut back on build rates. 

The Arena living Acquisition has not lived up to expectations, as fas as EPS. I suspect that the leaky buildings they agreed to buy have needed a lot more spent on remediation than thought. Arv highlighted at the time the big discount to valuation that was achieved....but was it?

I don't see them as the same quality as Rym or Sum, however at current pricing can not see why the huge discount to NTA is warranted. Can't see anything in their update that changes my view that it is very good buying for a long term hold.

Time will tell.

Well I'm enjoying the negativity atm so I can accumulate below $1.00. Didn't hear a lot of criticism of the sector or Arvida when they were $1.80-$2.00 territory.

Accept the point about land banking but they still have relatively low gearing and by the time they develop this they can sell surplus land in 3-4 years into a hopefully better part of the cycle.

Looking into this a bit deeper - Much of ARV's lending is floating and is based on the Bank Bill rate + a margin + separate line fees, (2022 half year report).
From that report funding costs ranged, up to 4.5%.
Have a look at this graph representing what's happened to the inter bank bill rate since 30 September. 
https://www.interest.co.nz/charts/interest-rates/bank-bill-rates
That's a scary looking chart for companies funding their operations using floating rate debt.

From the bank facility update the other day we know bank lending as at 31/03/2023 is $500m and $220m of that is hedged at 2.8%, (they didn't disclose for how long). By simple deduction therefore, $280m is unhedged. 
Looking at that graph, in FY22, for the vast majority of the year the bank bill rate was less than 1%. whereas the current spot rate is 5.5%, a whopping 4.5% more!

I estimate bank funding costs for FY24 will be a headwind of circa $280m of unhedged debt x 4.5% higher rate = $12.6m more than FY22 solely due to interest rate increases.
In addition, based on total debt as at 31 March 2023, $500m + $125m bonds = $625m compared to average debt in FY22 of $408m, (average of opening and closing external debt from balance sheet), if debt stays the same on average in FY24 as the opening balance they will be carrying ~ $220m more debt on average this year relative to FY22..  This would appear to be a mixture of bonds $125m raised at 2.87% and bank funding which I presume is the hedged amount at 2.8% so I assume the extra $220m debt being carried on the balance sheet has an average cost of 2.84% = annual extra of $220m x 2.84% = $6.25m

Extra debt burden funding costs of $6.25m + higher interest rates (assuming bank bill rate stays where it currently is for the whole year of $12.6m = $18.85m funding cost headwinds in FY24.  That's 2.6 cps estimated impact on earnings.  In addition, I can see from the investor news that while resale margins are strong, new sale margins are not and that's a trend I expect to see continue in FY24 which much higher construction costs impacting the development margin further. One broker forecast I saw for eps in FY24 yesterday, was 11.7 cps.  I think that's very optimistic.
I'm only doing this analysis because I have a lot of the bonds.  I think they can probably reasonably comfortably meet their new debt service covenants, but I totally get why they have wound back their development program a lot as they should.

One of the key strengths of ARV is due to the age of the villages after the Arena acquisition, (for example the Peninsula Club was N.Z.'s first ever retirement village, originally a timeshare village back in the day when that was popular), there is substantial embedded value (E.V.) in the shares of $1.34 per share as at the half year.  EV is the difference between current unit prices and what is repayable to exiting residents after deferred DMF fees are withheld when they leave the unit. If the average churn, (please excuse the expression but that's what it is), is every 10 years ARV can release about one tenth of that EV every year, approx 13.4 cps simply by running their villages, enjoying natural churn and doing no new developments.

The fact that they look set to earn a lot less eps in FY24 doesn't say much for the value of their development program with the lowest development margins in the sector or the operational losses from running the villages and head office costs overhead recovery.

I think the two key reasons the shares have the deepest discount to NTA in the sector are, the extensive use of unhedged floating rate funding and their weakest development margins in the sector.   

If the board, in due course can't see the merits of buying their own shares back at ~ half price as compared to buying excess land in Warkworth at full price, I'd have to conclude that their inappropriate non-shareholder centric focus will remain a serious handbrake on the company going forward.
Conclusion:  There are some very good reasons the shares are cheap, somewhat different reasons in some ways to OCA but good reasons, nonetheless.

I think provided people are extremely patient they should do okay in the long run with the shares at under $1 but I do note the bonds have a higher yield to maturity at 7.2% with good supply in the market at that level, than the shares at 5.6%.  Each to their own, I prefer the bonds at this level.
External interest bearing debt of $625m, including bonds as at 31/03/2023 looks okay to me compared to $3.6 Billion of assets reported (as at 30/09/2022)

Agree with you Basil in 'There are some very good reasons the shares are cheap'

Dig deeper and I fear more gremlins will come out

Maybe without Forbar cheerleading them the share price would be even lower than it is.

Quote from: Basil on Apr 08, 2023, 12:01 PMLooking into this a bit deeper - Much of ARV's lending is floating and is based on the Bank Bill rate + a margin + separate line fees, (2022 half year report).
From that report funding costs ranged, up to 4.5%.
Have a look at this graph representing what's happened to the inter bank bill rate since 30 September. 
https://www.interest.co.nz/charts/interest-rates/bank-bill-rates
That's a scary looking chart for companies funding their operations using floating rate debt.

From the bank facility update the other day we know bank lending as at 31/03/2023 is $500m and $220m of that is hedged at 2.8%, (they didn't disclose for how long). By simple deduction therefore, $280m is unhedged. 
Looking at that graph, in FY22, for the vast majority of the year the bank bill rate was less than 1%. whereas the current spot rate is 5.5%, a whopping 4.5% more!

I estimate bank funding costs for FY24 will be a headwind of circa $280m of unhedged debt x 4.5% higher rate = $12.6m more than FY22 solely due to interest rate increases.
In addition, based on total debt as at 31 March 2023, $500m + $125m bonds = $625m compared to average debt in FY22 of $408m, (average of opening and closing external debt from balance sheet), if debt stays the same on average in FY24 as the opening balance they will be carrying ~ $220m more debt on average this year relative to FY22..  This would appear to be a mixture of bonds $125m raised at 2.87% and bank funding which I presume is the hedged amount at 2.8% so I assume the extra $220m debt being carried on the balance sheet has an average cost of 2.84% = annual extra of $220m x 2.84% = $6.25m

Extra debt burden funding costs of $6.25m + higher interest rates (assuming bank bill rate stays where it currently is for the whole year of $12.6m = $18.85m funding cost headwinds in FY24.  That's 2.6 cps estimated impact on earnings.  In addition, I can see from the investor news that while resale margins are strong, new sale margins are not and that's a trend I expect to see continue in FY24 which much higher construction costs impacting the development margin further. One broker forecast I saw for eps in FY24 yesterday, was 11.7 cps.  I think that's very optimistic.
I'm only doing this analysis because I have a lot of the bonds.  I think they can probably reasonably comfortably meet their new debt service covenants, but I totally get why they have wound back their development program a lot as they should.

One of the key strengths of ARV is due to the age of the villages after the Arena acquisition, (for example the Peninsula Club was N.Z.'s first ever retirement village, originally a timeshare village back in the day when that was popular), there is substantial embedded value (E.V.) in the shares of $1.34 per share as at the half year.  EV is the difference between current unit prices and what is repayable to exiting residents after deferred DMF fees are withheld when they leave the unit. If the average churn, (please excuse the expression but that's what it is), is every 10 years ARV can release about one tenth of that EV every year, approx 13.4 cps simply by running their villages, enjoying natural churn and doing no new developments.

The fact that they look set to earn a lot less eps in FY24 doesn't say much for the value of their development program with the lowest development margins in the sector or the operational losses from running the villages and head office costs overhead recovery.

I think the two key reasons the shares have the deepest discount to NTA in the sector are, the extensive use of unhedged floating rate funding and their weakest development margins in the sector.   

If the board, in due course can't see the merits of buying their own shares back at ~ half price as compared to buying excess land in Warkworth at full price, I'd have to conclude that their inappropriate non-shareholder centric focus will remain a serious handbrake on the company going forward.
Conclusion:  There are some very good reasons the shares are cheap, somewhat different reasons in some ways to OCA but good reasons, nonetheless.

I think provided people are extremely patient they should do okay in the long run with the shares at under $1 but I do note the bonds have a higher yield to maturity at 7.2% with good supply in the market at that level, than the shares at 5.6%.  Each to their own, I prefer the bonds at this level.
External interest bearing debt of $625m, including bonds as at 31/03/2023 looks okay to me compared to $3.6 Billion of assets reported (as at 30/09/2022)

Great post Basil. You could be on the money here.

That's an interesting and considered write up, Basil.  Appreciate your insights. 

Not that it matters but... I think Selwyn might have pipped Peninsula to the post in 1953 with NZ's first village title.

Jeez $625m debt at March ...that's about $170m more than a year ago .....and they  keen to borrow more

If $625m ar March debt ratio over 30% and getting up RYM levels

Thanks for your kind words guys.
Its actually a bit worse than what I posted because their hedged funding of $220m @ 2.8% is a rate that's subject to "plus margin and line fees", (which are not separately disclosed being commercially sensitive), but as a best guess I would expect their hedged rate funding to be costing them a bit north of 4% all inclusive. The thing is when this hedging finishes, whenever that is, they'll be exposed to ~ $500m of debt that's potentially costing them somewhere around 7% with the bank bill rate at 5.5% + margin and line fees so they really need to get on top of this.

Obviously they will be hoping that the bank bill rate has already peaked and will soon be coming down a lot and they could be right because the way Adrianne Orr of RBNZ is taking such an incredibly hawkish approach, we're probably headed into a serious recession and he'll probably need to be cutting interest rates sooner rather than later.

Good old not for profit Selwyn, been around since the 1950's as you say mate.  My late Mum worked there for many years in the 1960's and told me they do some fabulous work.  She used to tell me about the tremendous loneliness a lot of old people feel.  I see the Selwyn Foundation part fund 40 drop-in centers for people over 65.  WOW, that's awesome!  https://www.selwynfoundation.org.nz/charity/  I see there's a way to leave them some money in one's will.
Bit more about the extent of and seriousness of the degree of loneliness for some older folks here https://www.selwynfoundation.org.nz/charity/social-isolation-loneliness/

Hey Basil ... when you do your interest sums do you break it down into what's expensed (in P&L) and what's capitalised (added to investments)

Seems the split is about 50/50

I assume the capitalised portion does impact current profits but in due course reduces the gains on sales made

Yeah I just commented to Shareguy by PM that I expect a lot of this interest to be capitalized as part of the normal accounting rules for new developments, so we won't see quite a bit of it in the P&L.  Its hard to know how much as they don't disclose the purchase price of the recent blocks of land acquired.  I haven't done any work on the split.  Yes quite right, the capitalized interest costs will impact development margin going forward...another material headwind to new village development costs.  Who knows though, maybe they think they can use some of that Paddison farm and flick the bulk of it off and get most of their money back ?  https://www.bayleys.co.nz/1270562
https://www.localmatters.co.nz/business/land-next-to-golf-club-looks-set-for-senior-living-village/

To be fair, they did more than okay flicking-off excess land from Waikani recently, (subsequent events interim accounts sale of Waikani land ~ $24m November 2022).  Maybe they repeat that and do well or maybe they get egg on their face this time...only time will tell but there's no question the holding costs are very high at this point in time, much higher than they have ever experienced before.

Also being fair about it, the Paddison farm site does look like a good one with easy access to Auckland down the new bypass set to open later this year.  I can see the attraction for people wanting ready access to the East coast beaches up there for their recreational activities in their retirement while still wanting to retain easy access to Auckland.
 
 

Tomorrows the day ARV share price will break through the 100 mark

Cool stuff eh

Quote from: winner (n) on Apr 12, 2023, 06:13 PMTomorrows the day ARV share price will break through the 100 mark

Cool stuff eh

Don't fret. ...we'll get there ...today

Quote from: Basil on Apr 09, 2023, 11:13 AMGood old not for profit Selwyn, been around since the 1950's as you say mate.  My late Mum worked there for many years in the 1960's and told me they do some fabulous work.  She used to tell me about the tremendous loneliness a lot of old people feel.  I see the Selwyn Foundation part fund 40 drop-in centers for people over 65.  WOW, that's awesome!  https://www.selwynfoundation.org.nz/charity/  I see there's a way to leave them some money in one's will.
Bit more about the extent of and seriousness of the degree of loneliness for some older folks here https://www.selwynfoundation.org.nz/charity/social-isolation-loneliness/

The Selvyn voundation is better vunded now.    Due to half of its villages being sold to Metlifecare!  Old news I know (01-03-2022), but maybe not everybody does?

https://www.selwynfoundation.org.nz/careers/about-us/news/successful-sale-equips-the-selwyn-foundation-for-major-philanthropy/

RB

Quote from: winner (n) on Apr 13, 2023, 12:49 PMDon't fret. ...we'll get there ...today

You are selling at $1, are you?

Anyway - you well might be right ... however, the much more interesting question is - will it go up to something like $1.04 just to bounce back into the so far unbroken downward channel ... or will it break out?

What trigger would you see for a potential break out?

I'd say the pivot level is $1.10. Should be sellers 1.08-1.10 after the dip under $1.00

Quote from: winner (n) on Apr 12, 2023, 06:13 PMTomorrows the day ARV share price will break through the 100 mark

Cool stuff eh

Pretty cool you picked that correctly  8)

Further to Basils post(210) I asked the ceo Jeremy for some clarification.

Jeremy's response as follows

Thanks for your email – I will try my best to answer your queries, however during the period between balance date and release of our year end results comments are limited to publicly available information.

 

Last week's announcement to NZX indicated drawn bank debt was $500m and bonds were $125m. Around 35% of drawn debt is hedged. The increased level of debt from FY22 mainly relates to development work in progress and therefore associated interest will be capitalised rather than expensed.

 

As noted in half year reporting and the Investor Newsletter, FY23 deliveries had been pushed into the 4th quarter as a result of an accumulation of delays through Covid and this year's very wet summer. That means at balance date we were carrying a higher level of work in progress and inventory than in FY22. During FY24, the expectation would be that that inventory is sold down reducing debt. We have also updated our delivery guidance for FY24 to a lower delivery target. This should also work to manage working capital levels.

 

An update on interest costs and hedging tenure will be provided in annual reporting.

 

In terms of new sales, we haven't provided guidance on 2H margins or gains. This is because an allocation of development costs needs to occur before those calculations can be made and we can report the results. We have only provided guidance on margins and gains for resales – which as you note, have improved on prior years.

 

Embedded value provides an indication of future cash flows from the current portfolio at the current prices (with changes from new units added or units sold or unit pricing). The Arena portfolio had significant embedded value relative to our existing portfolio. The realisation of that embedded value has helped to increase the resale margin experience being reported since completing the acquisition. The average tenure of villas is around 8-9 years. The average tenure of apartments, serviced apartments and care suites is broadly less. Again the mix of units resold impacts on the amount of embedded value released annually (embedded value between units can vary significantly too).

 

As noted in the Newsletter and reportings since 2020, we have had 3 years of Covid. Over this period very little sector support as been provided to assist with the additional costs incurred. We have also had to absorb government policy that underfunds aged care and has disrupted the care workforce (in addition to many other revenue and cost headwinds). This has not been a period of normal operation. And as highlighted in the Newsletter, we are moving into a more normalised period but expect care performance to continue to be challenged. The outturn from this is a lower care composition going forward.

 

One final point, development margins are best compared against prior years. Comparison of development margins between operators can be misleading unless you make adjustments to align the different calculations. As highlighted in the recent Summerset reporting, they are achieving similar project margins but reporting much higher development margins. An explanation would be a different methodology applied in calculation between the two operators

Thanks Shareguy for asking Jeremy for a response which was interesting.
Ostensibly Labour have hung this sector out to dry in terms of challenges with covid.
I see earlier this week, finally, after multiple interest groups and National calling for it for over a year, Labour have finally, only now after all this time and challenges with staff shortages put a group of occupations on the fast-track residency pathway, including Nurses.
Unfortunately, many other countries have done the same and pay rates across the Tasman remain considerably more attractive.

Your welcome. Yes it should of been one of the first things they did with the nurses. Terrible.

Good to see the share price back over $1.00. There is a lot to like about this company, including the CEO. Arvida is now my portfolios largest retirement stock. Go you good thing.

Good one shareguy asking for this stuff ... does show to them shareholders are keenly interested in how the company is going

Re In terms of new sales, we haven't provided guidance on 2H margins or gains.

However from the numbers given in the report and 'measuring' the total gains from the chart provided and filling in the gaps in the info one can make a pretty good estimate as to what the answer to that question is (of course indicative and subject to change)

I'd say H2 new sales margin was 15% - H1 was 19.9% which makes full year about 17% (F22 was 16.3%)

Just as well sales prices were well up so $ gains on new sales are up a few million.

Jeremy has a point about comparing margins on new sales to previous year (and not to others in sector). Need to trust them when they say they do calculate differently. Over the last 5 years the average margin on new sales has been 16%

Quote from: Basil on Apr 14, 2023, 10:25 AMThanks Shareguy for asking Jeremy for a response which was interesting.
Ostensibly Labour have hung this sector out to dry in terms of challenges with covid.
I see earlier this week, finally, after multiple interest groups and National calling for it for over a year, Labour have finally, only now after all this time and challenges with staff shortages put a group of occupations on the fast-track residency pathway, including Nurses.
Unfortunately, many other countries have done the same and pay rates across the Tasman remain considerably more attractive.



And  nurses living in Australia  are finding  wages in USA more attractive.....

QuoteOne final point, development margins are best compared against prior years. Comparison of development margins between operators can be misleading unless you make adjustments to align the different calculations. As highlighted in the recent Summerset reporting, they are achieving similar project margins but reporting much higher development margins. An explanation would be a different methodology applied in calculation between the two operators

Not sure i really accept that entirely at face value.  My understanding around the accounting rules for new developments is pretty rusty and I acknowledge there is a certain amount of judgement involved to assess stage of completion from one year to another and allocate costs appropriately, but how you assess stage of completion of a village washes through from one year to another and under or overestimates cancel things out over the years. 

There could be something to this in terms of how they allocate some overhead cost but in my (admittedly subjective opinion), there's probably two significant material factors in why SUM consistently achieve higher development margins over the years compared to ARV which Jeremy would never admit too.

1. Senior management with the development team at SUM are very highly experienced and have a very long track record at the company so their systems for managing staff, quality control and work throughput are probably extremely well honed.
2. I know from previous discussions with Julian Cook SUM place great emphasis on procurement cost efficiencies and use their buying power (building ~ 650 units a year about 3 times ARV's current build rate) to their advantage.  Put simply, they have a lot more negotiating power with suppliers, because of their size, to command better prices for materials.

Possibly worth noting, (in terms of the development programs of the two companies) that ARV had a pretty significant miss with their Aria bay development in FY23.  As recently as the call on 29 November 2022 management were confident thsi development would be completed by 31 March 2023, 4 months hence.  Now talking June which pushes the project back to 7 months hence from that call, a 3 month delay.
By comparison, despite all the vast numbers of challenges with staff, procurement supply chain problems and Covid, SUM have never missed with their development target ever since they listed.      They consistently do what they say they are going to do and make results while others make excuses.

Quote from: Basil on Apr 14, 2023, 10:25 AMBy comparison, despite all the vast numbers of challenges with staff, procurement supply chain problems and Covid, SUM have never missed with their development target ever since they listed.      They consistently do what they say they are going to do and make results while others make excuses.

...and the more I do on ARV the more they don't always achieve what they say they will do .......almost there but always come up  a bit short

Basil ....Jeremy seems to confirm you estimate of debt as at March ......well over $625m

Gives the reasons why but heck no worries as it'll fix itself up in F24 when things come right.

I'm comfortable with their debt level, lowest of sector.  Bought some more ARV010 bonds this morning at a 7.27% yield to maturity.
Huge volume in that security this morning, nearly 3m of the 125m issue traded, not all the buying was mine  ;)

From memory, ARV had some massive cost overruns on the main community center building in a couple of their villages a while back.  Talking millions of dollars extra per building.  I notice he is quick to blame shift / attribute the low development margin to accounting differences between them and SUM just like he was quick to blame shift the low share price to the huge equity raise RYM did recently.   

One thing I found interesting with his response.  Independent living units change hands every 8-9 years.  Care units and apartments more often.   
Embedded value last reported as $1.34 per share.  If on average that's released over a 7.5 year period, (which is what I think we can take from his response) that's ~ 18 cents per annum average in underlying earnings just from existing stock churn but the average estimate on market screener is for earnings this year of 11.6 cps, so more than 6 cps disappears.  Hmmm

Since June 2021 when share price was over 2 bucks it's behaved almost perfectly in a long downtrend

The share price has been contained in a linear regression channel being +/- 14 cents (+/- 0.4 standard deviations) from the trend line

currently 5 cents above the trend line and positive momentum .... heading to $1.13 which is upper band of the channel ..... break through that and one TA view is that breakout could go 28 cents higher and start a new channel - uptrend this time

So $1.40 here we come

As they say the strong hands are winning at the expene of the weak ends these days

Clear break up through 30 day MA probably getting some people excited.
Need a break above the 200 day, (just over $1.25), to confirm a new uptrend.

Quote from: winner (n) on Apr 14, 2023, 01:32 PMSo $1.40 here we come

As they say the strong hands are winning at the expense of the weak hands these days

They always do ... as long as they hold the right stock :) ;

Holding above 100 ...pretty strong

I reckon we'll never see sub 100 again

Almost like .'Arvida, can't have too many of them' is a good catch cry

Quote from: winner (n) on Apr 17, 2023, 01:33 PMHolding above 100 ...pretty strong

I reckon we'll never see sub 100 again

Almost like .'Arvida, can't have too many of them' is a good catch cry

I love your dry sense of humour.  You can't lose and what could possibly go wrong...pretty sure we've seen that movie before... lol

Quote from: winner (n) on Apr 17, 2023, 01:33 PMHolding above 100 ...pretty strong

I reckon we'll never see sub 100 again

Almost like .'Arvida, can't have too many of them' is a good catch cry

Oh no the kiss of death !!!

Quote from: Auto Rower on Apr 17, 2023, 02:57 PMOh no the kiss of death !!!

No no - this time is different

I predict share price over 130 by Kings Birthday week

Quote from: winner (n) on Apr 17, 2023, 03:30 PMNo no - this time is different

I predict share price over 130 by Kings Birthday week

LOL, sure...its time for a Tui.

Quote from: winner (n) on Apr 17, 2023, 03:30 PMNo no - this time is different

I predict share price over 130 by Kings Birthday week

I like your confidence Winner. 

Quote from: Shareguy on Apr 17, 2023, 04:31 PMI like your confidence Winner. 

Another 2 cents today

Might need to review that King's Birthday date for 130

No posts for a month eh and it's been on a tear

When does Charlie get a year older again?

Yes good to see. I think the bad old days of under a buck are gone, unless the review brings in some detrimental changes.

Arv to report Tuesday. EPS 22 $0.12 I'm thinking EPS 23 forecast $.11. Which is still a great result in my book. Will they cut the divi. Last year 5.5c

Thoughts ?

There should be no big surprises.
ARV communicate openly and transparently keeping the market updated on a quarterly basis.
Their recent update http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/409551/392164.pdf here indicates they are on track for a satisfactory result of about 11 cps.
I like the way they are proactively managing their debt situation with winding back their development program.

Results out....NPAT down 59%..... but underlying profit up by 20%.....sssooo otherwise all is fine?

https://www.nzx.com/announcements/412221

Highlights:
• Underlying profit[1] of $88.0 million, up 20%
• Total sales of $376.4 million, up 16%
• 215 new units delivered
• Gearing at 30.5%
• NTA at $1.90 per share
• Final dividend of 2.35 cents per share

NZX listed retirement village and aged care operator Arvida Group Limited (Arvida) today announced a record underlying profit of $88.0 million for the full year ending 31 March 2023, up 20% on FY22.

Net profit after tax at $82.5 million, which includes fair value movements in investment property, was 59% lower than FY22.

I don't hold so won't comment further ..... good luck holders.

Quote from: winner (n) on Apr 05, 2023, 02:17 PMGoing from the chart in Investor News seems my 'forecast' is about spot on

So Underlying Earnings in F23 likely to be at least 20% up on F22

Pretty healthy eh

Betcha the likes of OCA won't be doing as well.

And so it turned out to be ....UE up 20% and way better than OCA's few %

Still quite a long way short from where they said they would be when acquiring Arena

But times are tough so let's be nice about them.

I have a small holding.
Thought the result was outstanding in this market.

Underlying Earnings up from 12.0 cents/share to 12.2 cents/share (+1%) using weighted average number of shares

Suppose better than going backwards ....and suppose they can say Arena was EPS accretive .....but in saying that the rest of the business must be going backwards

Jeremy ...you need to do better ...but at least do a decent rave to the analysts and they and the market will love you and share price will head to 130 pretty soon ...but possibly not by Kings Birthday

Good result in this market.  Sales were quite good

• 59 resales from the Arena villages at an average resale margin of 53%, and price of $910k

That's pretty impressive

Doesn't that imply $58m of resale gains ....but total resale gains on 371 resales was $69m

Doesn't seem to make sense but I orobably a bit thick and read / understood that statement

Had a quick look and think the result is very good considering

UNPAT of $88.0m, ahead of consensus for $84.5m on stronger sales volumes in Q4. ARV missed its build target, as had been previously disclosed, with a block at Aria Bay now being completed Q2FY24, but has only maintained prior FY24 build rate guidance for c.200 units.

The "miss current year build target but maintain next year guidance" playbook has now been used by every retirement operator reporting in May, and to be clear amounts to a decrease in total new units completed over the two-year period.

EPS 11.4 with total divi at 4.85c

Gearing is good and cut to divi and build rate should mean no need to raise capital.

Happy I have taken a bigger position.

NTA $1.90 against FY22 $1.84

A bit of history re Underlying Earnings EPS

Suppose one could say its going up .... even though F23 was basically flat (in spite of a full year benefit (v 4 months in F22) of that big acquisition

0000arveps.JPG

Quote from: winner (n) on May 30, 2023, 12:41 PMA bit of history re Underlying Earnings EPS

Suppose one could say its going up .... even though F23 was basically flat (in spite of a full year benefit (v 4 months in F22) of that big acquisition

0000arveps.JPG

And hey - as we all know, the only thing which really matters is IFRS earnings. Not too flash this year, but much better than for some competitors.

Just imagine how they will rocket up as soon as the real estate market normalizes.

But yes, I forgot - beagle told us real estate will never go up again .... the coming recession will be the longest and most terrible recession in living memory, everybody will flee New Zealand or choose to live in caves and in some years people probably want to be paid for taking real estate off somebody else, if at all.

Quote from: BlackPeter on May 30, 2023, 12:47 PMAnd hey - as we all know, the only thing which really matters is IFRS earnings. Not too flash this year, but much better than for some competitors.

Just imagine how they will rocket up as soon as the real estate market normalizes.

But yes, I forgot - beagle told us real estate will never go up again .... the coming recession will be the longest and most terrible recession in living memory, everybody will flee New Zealand or choose to live in caves and in some years people probably want to be paid for taking real estate off somebody else, if at all.

You alright today Peter .... seem even more of a sour puss than usual

I'm worried about your welfare - reach out if you need help

Quote from: winner (n) on May 30, 2023, 01:05 PMYou alright today Peter .... seem even more of a sour puss than usual

I'm worried about your welfare - reach out if you need help

Cheers for asking - I am fine :) ;

Just try not to get pulled down by some of our "heroes" ...

That chart looks a lot more encouraging than the one you posted for another company recently.

If Craig's do one of those cash flows analysis like they did for Oceania we'll be getting another lecture on not being able to eat NTA

ARV operating cash flows on same basis just as bad.....cash from existing portfolio not supporting the valuations

No need for concern.
Craigs do not cover ARV.

But ARV are selling their units well that's one of the key differences in my opinion.

Key numbers for the 12 months ended March 23 compared with a year ago:

Arvida  FY23 VS FY22                                          Oceania FY23 VS FY22

Net profit $82.5m vs $198.9m                               Net profit $15.4m vs $61.1m
Revenue $222.0m vs $174.5m                              Revenue $247.2m vs $231.1m
Underlying profit $88m vs $51.7m                        Underlying profit $80m vs $76.2m
Gearing at 30.5%                                                  Gearing 36.9 %

Similar revenue but very different in net profit

I hold a significant stake in ARV bonds bought @ approx 7% yield to maturity. As a bondholder I am very comfortable with how they are running the business.  I also own a much smaller stake in OCA bonds. I'm not so comfortable there but believe the risk of default is low.

Interesting comparison the bonds around 7% and the stock likely to yield only 3-3.5% so at least you're getting a reasonable cash return on the bonds.

I prefer the shares as I think over the next 3-5 years they go back towards $2.00 again.

New sales F23 were 197 ...20% down from the 243 pcp

They have 245 new things unsold at end of March ....up from 159 year prior

Same problem as others ...excessive unsold stock of new units

No wonder debt increased significantly ....hope property market is on the rise.

So on your figures about 1.25 years of stock. OCA appear to have well over 2 years stock. No wonder OCA have the highest gearing in the sector and ARV the lowest gearing.

Looking ahead ARV are building about 1 year worth of new units in FY24, i.e. building at about the rate they have been selling so best guess is the extent of their problem won't get worse whereas OCA are building 200 -250 new units, at the top end of guidance, roughly twice the number of new units they sold last year!

 I foresee OCA's overstock problem and debt level getting materially worse in the year ahead.

Quote from: Arbroath on May 30, 2023, 06:13 PMInteresting comparison the bonds around 7% and the stock likely to yield only 3-3.5% so at least you're getting a reasonable cash return on the bonds.

I prefer the shares as I think over the next 3-5 years they go back towards $2.00 again.

That's a popular school of thought and you may be right. ARV still have a fairly high care aspect to their business model and quite a few of the villages from when they listed are oldish and care focused.

 If the Govt keeps strangling the listed operators with care funding as I suspect they will, I foresee them continuing to trade at a fairly significant discount to NTA for the foreseeable future.

In the very long term shareholders should do okay but in the meantime the revised yield is pretty miserable.
Well managed company but there are considerable headwinds is how I see it.

$1.20 go you good thing.

Quote from: Shareguy on May 31, 2023, 05:02 PM$1.20 go you good thing.

$1.30 next

Sector on fire ......property market turned and results produced no disasters so renewed confidence and enthusiasm for these RV stocks

Could be $1.40 by Matariki ...the stars are aligned

Nice to see the boost in these stocks for a change.

For anyone who is interested:

Arvida is included.

https://mailchi.mp/nzx.com/virtual-investor-event-19jul23?e=a16d6df77c

AGM today 3.30PM

Quote from: Shareguy on Jul 21, 2023, 10:43 AMAGM today 3.30PM

Look forward to your report later on shareguy ...assuming you back home or participating online

Not online ...seems you have to go in person

And 3.30 on a Friday seems a ploy to avoid meeting shareholders ...suppose they are a bit of a nuisance anyway

I was going to go,however the wife is taking me to 180 mins of Oppenheimer at 2.20pm.

Quote from: lorraina on Jul 21, 2023, 01:42 PMI was going to go,however the wife is taking me to 180 mins of Oppenheimer at 2.20pm.

Oppenheimer better choice i reckon

Going next week, just have to make sure I go the right theatre else it's Barbie

Did not attend. From notes not much to report not already known other than

From chair

Looking forward, Covid is expected to have a lesser impact on business performance as transmission rates decline. We are also seeing early signs of improved liquidity in the residential property market which is flowing through to sales activity. However, the general election in the third quarter is likely to result in a period of uncertainty for the market, this expected to have an impact on New Zealand's economic activity.
Acknowledging the uncertainties around economic and market conditions, we believe Arvida is well positioned to continue to progress and deliver shareholder value. We are rebalancing our focus across residents, teams and shareholders as we move out of the Covid environment and hopefully transition into a stronger residential market.
In concluding ladies and gentlemen, I would note that while market conditions remain challenging.

Outlook
• Indicators for economy and property market beginning to steady but still with challenges
• Shortages in care workforce stabilising
• Care funding rates increased by 8.6-11.3%
from 1 July
• Lower reported Covid infection rates positive for continued normalisation of care occupancy
• Pending regulatory reviews and sector focus
• Capital market sentiment continues to overhang total shareholder returns

Craigs have initiated coverage

Cheaper to buy than build? Initiate with Overweight and $1.43 TP
At $1.24, ARV is currently trading at a 35% discount to NTA, well below its five year average (of 1.1x NTA), and making it arguably cheaper to buy shares in ARV than to build a new retirement village. While ARV's discount is similar to OCA, with which ARV is most often compared, we strongly prefer ARV, given its lower risk development strategy, stronger balance sheet, stronger cash generation, and lower exposure to (low margin) aged care. With ARV also trading below our $1.43 DCF-driven target price, we initiate with Overweight.

Quite often lately ARV share price looks weak in the morning and even seems to be heading to 120 or below

How like a little warrior it resolutely fights back and hangs around the 125/126 mark

Good sign punters are supporting them

Quote from: winner (n) on Aug 18, 2023, 12:28 PMQuite often lately ARV share price looks weak in the morning and even seems to be heading to 120 or below

How like a little warrior it resolutely fights back and hangs around the 125/126 mark

Good sign punters are supporting them

Yes Winner it's been holding up well. Not long ago was under $1.

Wednesday is Sum HY which will give us a good idea on how the property market and cash flow is going for the sector.

Investor news out today and strikes a notably more cautious tone than SUM.
ARV is a far better comparison to OCA than SUM, in my opinion.
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/419731/404817.pdf

Gains on sales in H1 about $38m ...less than the $43m reported last year

This signals Underlying profit will be less (significantly?) than the $39m reported last year

Not a good result ....even if excuse is a lot of sales were made in last month of F23

This update might result in some of those optimistic price targets etc being changed (dramatically?)

Arvida proudly displayed this table in update

IMG_5509.jpeg

"ARV is a far better comparison to OCA than SUM, in my opinion."

can we get back to ...

CARS CARS CARS...

there is no fun in retirement homes compared to the mobility of cars...

Wheeled things in retirement homes are NOT very interesting either...

Quote from: Waltzing on Oct 10, 2023, 11:39 AM"ARV is a far better comparison to OCA than SUM, in my opinion."

can we get back to ...

CARS CARS CARS...

there is no fun in retirement homes compared to the mobility of cars...

Wheeled things in retirement homes are NOT very interesting either...

You realise that this is the Arvida thread, do you?

... and while fast cars may or may not have their attraction - for a fast growing share of our population is a safe home and good care more important :) !

I like fast growth ... particualarly when we are talking about market share and opportunities  :) ;

Quote from: winner (n) on Oct 10, 2023, 11:32 AMThis update might result in some of those optimistic price targets etc being changed (dramatically?)

Arvida proudly displayed this table in update

IMG_5509.jpeg

Agreed, Jarden have the best and brightest analysts.  $1.27 12 month price target with the low dividend yield suggests the shares are currently fully priced at $1.24 now.  Arvida's update does not bode well at all for OCA's half year result next month.

More sales than last year but for a raft of reasons gains less .....lnot good

Underlying profit likely to be down on last year ....not good

Definitely hasn't delivered on the eps accretive 'promise' made at that capital 2 years at $1.85

In my view Arvida continues to disappoint .......always showing promise but not delivering ....things don't seem to be getting better even though Jeremy did a bit of a rave about 'green shoots' ...and this Intergenerational Technology Learning sounds fun.

There's no money in care, NONE. 
ARV 43% care 57% ILU.
OCA even worse at about 60% care and 40% ILU.
Capital tied up in care is ostensibly dead money and NTA related to care facilities is almost meaningless and is tripping up a lot of inexperienced investors who think NTA really matters.  Its earnings that really matter, always has been and always will be.
There's a profoundly good reason ARV and OCA share prices both remain in the toilet and will do for the foreseeable future, (see first sentence).
The only company in this sector that is really fit for purpose with the massive costs of providing care going forward is SUM with its care lite business model.  Even RYM have too much capital tied up in care.    Not time to buy SUM yet though in my opinion.

I'm surprised that the ARV share price has held up so well after that rather dismal update the other day

Maybe Jeremy talking about green shoots gave holders the warm fuzzies

Banks sorted for a few more years

Interesting debt increased by $130m to $775m over last six months ...no worries. Debt ratio at September will be about 35%/36%


http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/420740/406096.pdf

Recent newsletter wasn't good news .....this announcement indicates more stress ......still surprised ARV share price has held up as much as it has last month

Newsletter indicated satisfactory sales in a very tough market.  What I found most interesting was that ARV care suites sold pretty well.  I know that ARV have the highest number of villages of the sector in the Gold Standard ministry of health 4 year audit cycle so maybe with ARV you really can believe in better...care.

In terms of this announcement this rejog of their bank funding and splitting it between development and core funding and rejigging interest coverage ratio's brings them into line with the rest of the sector so I don't have any concerns there.

Disc: I hold ARV bonds ARV010, not the shares.

First half satisfactory sales ......but realised margin and underlying earnings will probably print a lot lower than last year

My prediction is that they're not going to be the only company in this sector that prints a very ordinary number next month.  Hopefully we not all that far away from the bottom in real estate prices and turnover. I'm not sure we are so remaining with no equity exposure to this sector at this point.

Jeez, ARV share price down to 115

No worries ....the faithful will come out late afternoon and push the share price back to 120

Just as well those 6 villages they brought a while back were eps accretive eh  ;)

I here you re EPS Basil. A common issue it seems with acquisitions. Divi has been cut and should be cut completely in my view. Does not make sense borrowing to pay a divi at these rates.

Still a lot to like with retirement stocks in general. House prices looking positive and national have promised to offer incentives for nurses.

On saying that I don't have a big holding anymore of Arvida or the others.

The quality of the research from Jarden is certainly very high. All the brokers get it wrong some time and some a lot of the time. Gosh I notice Jarden have GNE at $3.05 outperform. :)  :) 

 

Thing is mate, this was one of the rare times when an acquisition actually did turn out to be eps accretive lol.  I hate to think what eps would be without that Arena acquisition.  Poor mugs like me that funded it though in the $1.85 cash issue.  Tried buying this twice and lost both times.  Should have learned the first time, once bitten twice shy and all that...I hate losses, so I am trying to get them back with the ARV bonds but I'm underwater on them as well lol

I have to disagree .......the Arena acquisition was NOT EPS ACCRETIVE.

Closed at $1.13🙈

Quote from: Shareguy on Oct 31, 2023, 06:17 PMClosed at $1.13🙈

Reading between the lines of that announcement todays share price action not surprising

That $130m increase in debt since March is pretty bad

Interesting to compare the price of GOLD  to many stocks on the NZX since 2004...

FB say today

Higher debt versus consensus forecasts. The higher than expected debt is likely predominantly driven by higher development capex, but also worse than expected cash collection from new sales and resales.

Good to see that FB still view the aged care sector as attractive in the context of NZ

Quote from: Waltzing on Oct 31, 2023, 09:31 PMInteresting to compare the price of GOLD  to many stocks on the NZX since 2004...

Why 2004?

Could try 2013 for a 10 year comparison?

Now Off Topic... probably should be a thread on one of those general ones...

2001...

Feb policy

money supply..

global risks

nothing much happened in 2010.... except you might say it was the start of the global rebuild in eco after the GFC but the troubles were brewing by the time of the DOT COM bubble and the trouble building in the mortage bond markets that took 40 years to expand into the GFC. That started with Lewis Renieri and his bond traders at Soloman brothers.

https://en.wikipedia.org/wiki/Lewis_Ranieri

and really is NZ just its own little version of that? 

Wealth in property of a huge over valued bubble... valued at a junk currency.

So much for wealth taxs based on valued property prices of a junk currency.

How does the reserve bank hold this gaint property ponzi scheme together...

Inside Job...

https://www.youtube.com/watch?v=tJQTzuv6SS4

now really everyone should watch this and bookmark it and  rewatch every year ... just to remind your self  of what markets really look like in the modern world of transactional finance at the speed of fibre. 

Want to see how complex the network is in the states; study the way the markets are linked by the communications networks...

Flash crashes are just result of the outages .. its all going stratospheric...

 

Arvida seduced punters into forking out zillions to acquire Arena by saying eps accretive and implied that FY22 earnings without Arena were going to be 13.4 cents per share

So base eps before acquisition 12.4 cents

FY22 eps turned out to be 12.0 cents ...not accretive

FY23 eps was 12.2 cents ......better than F22 but still less than what they said F22 was going to be pre-acquisition

H1FY24 underlying earnings going be less that last year and on a rolling 12 months basis I reckon eps is going to be about 11 cents

So over 2 years from forecasting 12.4 cents and then acquiring Arena eps has fallen to 11 cents.

And Jeremy seems pretty excited about that.

what thats winner() ?

did you say something about closing down the NZX?

Shareprice down to $1.09 today ...probably Forbar the cause with their downgrade

Jeez, ARV closes at 106 today .......back to prices seen 6 months ago

IMO it surprising as last two announcements from company have not been good ..... wonder how much H1 underlying earnings will be down on last year

ARV always seems to fail to live up to punters expectations

ARV and OCA make a perfect pair with their high level's of care as long as you are investing for altruistic reasons and don't care about a decent return on your capital and not worried about the loss of it 

If you think the next 20+ years tailwind demographics suggest an investment opportunity around about now, then short term thinking might orientate towards when is a good time to load up on the RV's. All the chatter about 'care' profits is imo irrelevant, the listed RV's are all property development companies, care revenue/profit is a loss leader for some, more than others. There's no better time to get a slice of the action, than when the capital sensitive have freaked out and left the room. Now's not the time, imo to delve into the weighing room of the respective RV's, one's better than the other etc, it's time to consider the lifetime DCF and whether now or soon is a good time to get some, or even a lot of some, whichever you choose. The whole sector has been beaten to a pulp by the market, soon enough the opportunity to buy low will be gone. The tide will turn, it always does.

I disagree and think it's helpful to study population demographics to understand one of the reasons why SUM have outperformed.  Its widely acknowledged that the baby boomer population generation kicked off after the second world war ended in 1946.  This huge population wave won't really start hitting the premium care industry with its widely available care suites until approx the start of next decade.  1946 + 85 years = 2031.
This is one of the reasons care suites are presently slow sellers and likely to stay that way for many, many years to come.

On the other hand many of this group are already eligible to move into retirement villages 1946 + 70 years = 2016 and these sorts of retirees are predominantly looking for retirement villages with a comprehensive set of amenities and facilities.

Also worth noting that 1961 was a good year, more people were born in that year than any other in N.Z. and unless people my age have a serious health condition, they're not looking for a care suite for another 2 decades.  There's no money in care and the more you have in your portfolio the lower profits you make, its really that simple and that's the reason ARV and OCA are both trading at multi year low's and huge discounts to their theoretical asset backing.  With 44% of their units being care in nature (ARV) and ~ 60% OCA, they are highly likely to continue to underperform SUM in the years ahead.

Its too early to get back into the sector in my opinion and MUCH too early to buy ARV or OCA.  RYM also set to underperform the market in my opinion.  Sure the tide will turn eventually, maybe we're two thirds of the way towards low tide now, or thereabouts.  Lot of rocks will come to the surface as the tide continues its journey out.  My objective is to stay in safe harbour and safe harbour type stocks and not let my boat get grounded on one or more of those rocks.

Quote from: Basil on Nov 13, 2023, 09:26 PMI disagree and think it's helpful to study population demographics to understand one of the reasons why SUM have outperformed.  Its widely acknowledged that the baby boomer population generation kicked off after the second world war ended in 1946.  This huge population wave won't really start hitting the premium care industry with its widely available care suites until approx the start of next decade.  1946 + 85 years = 2031.
This is one of the reasons care suites are presently slow sellers and likely to stay that way for many, many years to come.

On the other hand many of this group are already eligible to move into retirement villages 1946 + 70 years = 2016 and these sorts of retirees are predominantly looking for retirement villages with a comprehensive set of amenities and facilities.

Also worth noting that 1961 was a good year, more people were born in that year than any other in N.Z. and unless people my age have a serious health condition, they're not looking for a care suite for another 2 decades.  There's no money in care and the more you have in your portfolio the lower profits you make, its really that simple and that's the reason ARV and OCA are both trading at multi year low's and huge discounts to their theoretical asset backing.  With 44% of their units being care in nature (ARV) and ~ 60% OCA, they are highly likely to continue to underperform SUM in the years ahead.

Its too early to get back into the sector in my opinion and MUCH too early to buy ARV or OCA.  RYM also set to underperform the market in my opinion.  Sure the tide will turn eventually, maybe we're two thirds of the way towards low tide now, or thereabouts.  Lot of rocks will come to the surface as the tide continues its journey out.  My objective is to stay in safe harbour and safe harbour type stocks and not let my boat get grounded on one or more of those rocks.

I think you make a good point related to when we should expect the key demand for care suites - and yes, the time the baby boomer peek turns 85 is certainly an interesting milestone in that regard.

Coincidentally - my father was 85 when he needed care (and lived on until 90).

I am however not sure, whether this is the full story. As others correctly said, retirement villages are basically property plays, and I am sure winner could easily draw up a chart showing the correlation of the property market with ANY of the retirement village providers.

In a year things will already look rosier.

I am not sure either, whether e.g. OCA's The Helier or the Sands are targeting clients who already need care for every move. They are targeting clients who want to enjoy the good life as long as they can and want to have the safety to stay in their acommodation if and when they need care.

Going back to my father - something like the Helier would have been ideal for him when he reached age 80 (and my mother died). Actually - a place like the Helier probably would have prevented him from needing care with age 85 (more social interactions and all these things), but unfortunately, there was his stubbornness. We had at that stage a place for him in an upmarket retirement village, he just didn't wanted to move.

BTW - WW 2 ended in 1945. Only two years to go until the people born in that year turn 80. Might be a good time to have enough attractive space for them on offer.

Quote from: Basil on Nov 13, 2023, 09:26 PMI disagree and think it's helpful to study population demographics to understand one of the reasons why SUM have outperformed.  Its widely acknowledged that the baby boomer population generation kicked off after the second world war ended in 1946.  This huge population wave won't really start hitting the premium care industry with its widely available care suites until approx the start of next decade.  1946 + 85 years = 2031.
This is one of the reasons care suites are presently slow sellers and likely to stay that way for many, many years to come.

On the other hand many of this group are already eligible to move into retirement villages 1946 + 70 years = 2016 and these sorts of retirees are predominantly looking for retirement villages with a comprehensive set of amenities and facilities.

Also worth noting that 1961 was a good year, more people were born in that year than any other in N.Z. and unless people my age have a serious health condition, they're not looking for a care suite for another 2 decades.  There's no money in care and the more you have in your portfolio the lower profits you make, its really that simple and that's the reason ARV and OCA are both trading at multi year low's and huge discounts to their theoretical asset backing.  With 44% of their units being care in nature (ARV) and ~ 60% OCA, they are highly likely to continue to underperform SUM in the years ahead.

Its too early to get back into the sector in my opinion and MUCH too early to buy ARV or OCA.  RYM also set to underperform the market in my opinion.  Sure the tide will turn eventually, maybe we're two thirds of the way towards low tide now, or thereabouts.  Lot of rocks will come to the surface as the tide continues its journey out.  My objective is to stay in safe harbour and safe harbour type stocks and not let my boat get grounded on one or more of those rocks.

Some good points there Basil, but I think the demographic situation is a little more complicated that you are portraying. You are only considering one of the factors that contribute to the population age profile - ie Birth Rate.

There are other factors

Immigration, and in the NZ context, particularly the boom in immigration after WWII. Many people from Europe and predominantly born pre 1940s. They will be adding significantly to the over 80s in NZ right now.

Also, life expectancy rose significantly during the 20th century so on a population level we are seeing a larger percentage of children born, surviving to become octogenarians.

Mix of ethnicity in the population will also play a role.

You might find this [albeit 2003] treasury report interesting, particularly figure 12 which shows the largest growth in octogenarians was (at that time) expected to start in around 2016 and to peak by 2031.

https://www.treasury.govt.nz/sites/default/files/2007-09/twp03-27.pdf

Thanks Poet, interesting.  I guess the other thing to think about is there seems to be quite a variation in the penetration rate of retirement villages in terms of their acceptability as a place to retire between the various ethnicities.

Think I might leave the commentary at that for now as we have three of the companies in this sector reporting later this month and there will be plenty more evidence to assimilate in terms of which business model is working the best.

Half year out

Jeez Underlying Profit down 14% to 33.6m is worse than what I thought

Numbers don't seem to reconcile with the bullish commentary around sales etc ...must have lost heaps on day to day operations

Not a good result at all

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/422439/408262.pdf

Quote from: winner (n) on Oct 10, 2023, 03:23 PMMore sales than last year but for a raft of reasons gains less .....lnot good

Underlying profit likely to be down on last year ....not good

Definitely hasn't delivered on the eps accretive 'promise' made at that capital 2 years at $1.85

In my view Arvida continues to disappoint .......always showing promise but not delivering ....things don't seem to be getting better even though Jeremy did a bit of a rave about 'green shoots' ...and this Intergenerational Technology Learning sounds fun.

And so it turned out to be

A mixed bag is how I see it.

Slight beat on underlying profit

$33.6m against FB forecast $29m. Debt up and result includes $8.4m in insurance proceeds.

Financing and staffing costs well up as expected. Surprised at a dividend payment considering at upper end of debt limit.

Sell more make less seems to be the way these days ...wonder how RYM will go with their result

Shows times still tough in sector

Arv NTA now $2.00 ....must be a buy ...but NTA not a four letter word I'm told whatever that means

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/422439/408265.pdf

A few thoughts.  Operating costs up a whopping 14%, more than double the rate of inflation have sucked the wind out of operating profitability.  Cash flow from operations down a lot.   Softer and slower housing market have also made their mark.
Underling eps of only 4.6 cps v 5.4 cps and outlook for ongoing high rates of cost increases makes it a hard stock to like on an earnings basis.
Discount to NTA is fully warranted.  NTA of $2 is a red herring really as much like OCA if you can't generate acceptable returns on care the NTA is meaningless.
Lowest of sector development margin and has been lowest for a long time, indicates systemic weaknesses in their procurement and development strategy.

My financial interest is as a bondholder and the revised banking facility gives them more than sufficient room to execute on their revised development program that's currently focused entirely on villa's.  I also note they are looking at winding back their FY25 development program, presumably to less than 200 units.  ~ 33% debt ratio looks pretty comfortable to me and I note this is well below OCA @ 38%.

I'm content and feel very comfortable to remain a bondholder.  I'd need to see this get right down towards the 12 month low of 91 cents to get me interested in the shares.  Current financial performance and near term outlook of this and OCA fully warrants them trading at a discount to NTA of at least 50%.

Quote from: winner (n) on Nov 28, 2023, 09:26 AMSell more make less seems to be the way these days ...wonder how RYM will go with their result

Shows times still tough in sector

Arv NTA now $2.00 ....must be a buy ...but NTA not a four letter word I'm told whatever that means

Do the RV companies operate in a different universe from the other property related companies?

They are still posting huge increases in property valuations when the likes of KPG actually accept market realities and reduce their property valuations!

No wonder the RVs' NTAs have little credibility with the market.

I hear what you are saying but tarring them all with the same brush is a little harsh.
The problem that I've alluded too for years is the pathetic returns on capital invested in care.
It's an intensive people business and the 4 year CAGR in the cost of providing care is 10% whereas the 4 year CAGR in care revenue is 5%, so it's getting materially worse every year.
I see this is a systemic unresolvable issue.  Others, on the other channel see it differently and good luck to them, they'll need it.
The less care in your business model the better. In my view, SUM is really the only company that's "fit for purpose" in terms of generating acceptable returns to shareholders in the current environment.  I think the market knows this which is why their SP is trading at only a fraction below NTA whereas OCA and ARV trade at about half.  RYM also have a high level of care in their model which is why they also trade at a sizeable discount to NTA.

Quote from: Basil on Nov 28, 2023, 10:17 AMI hear what you are saying but tarring them all with the same brush is a little harsh.
The problem that I've alluded too for years is the pathetic returns on capital invested in care.
It's an intensive people business and the 4 year CAGR in the cost of providing care is 10% whereas the 4 year CAGR in care revenue is 5%, so it's getting materially worse every year.
I see this is a systemic unresolvable issue.  Others, on the other channel see it differently and good luck to them, they'll need it.
The less care in your business model the better. In my view, SUM is really the only company that's "fit for purpose" in terms of generating acceptable returns to shareholders in the current environment.  I think the market knows this which is why their SP is trading at only a fraction below NTA whereas OCA and ARV trade at about half.  RYM also have a high level of care in their model which is why they also trade at a sizeable discount to NTA.

You really saying that a lot of the 'discount to NTA' is the future cost (losses) of caring for people and running villages (and of course HQ)

Quote from: Teitei on Nov 28, 2023, 09:48 AMDo the RV companies operate in a different universe from the other property related companies?

They are still posting huge increases in property valuations when the likes of KPG actually accept market realities and reduce their property valuations!

No wonder the RVs' NTAs have little credibility with the market.

I'd assume that the valuations of retirement villages go closer with the valuations of residential property, rather than with the valuation of office buildings, warehouses and shopping malls.

Property prices developed as well differently in different parts of the country.

Both factors might very well explain the difference to the property trusts.

Quote from: winner (n) on Nov 28, 2023, 08:50 AMHalf year out

Jeez Underlying Profit down 14% to 33.6m is worse than what I thought

Numbers don't seem to reconcile with the bullish commentary around sales etc ...must have lost heaps on day to day operations

Not a good result at all

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/422439/408262.pdf

So bad?

Revenue up, NPAT up and NTA up - I guess things could have been worse for the half year where the property prices reached their low points.

But I guess this is what most investors see at the bottom of the cycle ...

I reccon we must be currently somewhere between capitulation and depression on the financial cycle, and for that - with all due respect - do I think the numbers look pretty good :) ;

Quote from: BlackPeter on Nov 28, 2023, 10:50 AMSo bad?

Revenue up, NPAT up and NTA up - I guess things could have been worse for the half year where the property prices reached their low points.

But I guess this is what most investors see at the bottom of the cycle ...

I reccon we must be currently somewhere between capitulation and depression on the financial cycle, and for that - with all due respect - do I think the numbers look pretty good :) ;

Nice diagram that eh Peter

Hopefully we are past Despondency and heading to Depression .....but some would be at hope eh

Spooky the shape of ARV share chart looks just like that diagram ....though I'd have to change some of the descriptions to reflect reality

ARV exits MSCI small companies index on Thursday.  It'll be fascinating to see the final match price for the day, the level at which institutions are prepared to put their hands up for heaps more with substantial index selling pressure.  Buying opportunity?  (For me, only if it screams "CHEEP' louder than a budgie lol).
Substantial ongoing cost increases in the care sector will never end.  https://www.1news.co.nz/2023/11/27/nurses-begin-fresh-round-of-campaigning-over-pay-and-conditions/?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Tuesday+28+November+2023

Quote from: winner (n) on Nov 28, 2023, 10:32 AMYou really saying that a lot of the 'discount to NTA' is the future cost (losses) of caring for people and running villages (and of course HQ)

Makes sense - as our Beagle usually does.

Time for some positive spin

ARV's Board remains confident enough to pay a dividend

ARV still well clear of its ICR covenants and gearing still within its target range.

ARV has noted several trends pointing to an improved 2H24 including: Applications up 24% compared to last year, with more higher margin Arena stock available to sell in 2H24.

October new sales have inflected higher. Aged care occupancy has ticked up to c.94%, from 93% across 1H24. 2H24 care earnings will also benefit for a full period from the c.10% increase in care worker funding providing from July 1.

Huge immigration and house prices on the up.  Talk of interest rate cuts....

Don't see much downside from here with the share price

If you want some as a play on the deep discount to NTA thing, I see this as a somewhat better opportunity, (opps sorry, that should be less worse, opportunity than OCA) as OCA's very high level of care acts as a massively powerful handbrake on future eps growth.  That said, in my view it's a close call as the ARV development team are the least skilled in this sector by quite a long way.   Pick the dog with the least fleas and mange...unfortunately they are both pretty badly infected.

Watch for that closing match price on Thursday this week as it exits the MSCI small company's index.  Massive selling pressure is coming shortly. 

Quote from: Basil on Nov 28, 2023, 12:07 PMIf you want some as a play on the deep discount to NTA thing, I see this as a somewhat better opportunity, (opps sorry, that should be less worse, opportunity than OCA) as OCA's very high level of care acts as a massively powerful handbrake on future eps growth.  That said, in my view it's a close call as the ARV development team are the least skilled in this sector by quite a long way.   Pick the dog with the least fleas and mange...unfortunately they are both pretty badly infected.

Watch for that closing match price on Thursday this week as it exits the MSCI small company's index.  Massive selling pressure is coming shortly. 

Good points Basil. Watching...

Good volume today at $1.03 but the big test is coming.
Looks set to join the 50% off NTA club with OCA.
I see it like a Briscoes 50% off sale...best to get an even bigger discount or go to K Mart instead ;) 

Two years ago Arvida held out the begging bowl to raise $330m to buy Arena

At the time they said F22 Underlying profit was going to be $67m and a pro-forma basis Arena would add $32m to $34m .....so F22 full year on proforma basis Underlying Profit was going to be $100m ....with bright prospects for future growth (of course) and even hinted F23 could be $110m plus

Currently last 12 months Underlying Profit is $83m

Obviously things have not gone to plan .....another failure to deliver as indicated ....no wonder the share price is where it is today

Hope anybody on here who forked out the $1.80 two years ago sold before too much damage was done.

Quote from: winner (n) on Nov 28, 2023, 01:21 PMTwo years ago Arvida held out the begging bowl to raise $330m to buy Arena

At the time they said F22 Underlying profit was going to be $67m and a pro-forma basis Arena would add $32m to $34m .....so F22 full year on proforma basis Underlying Profit was going to be $100m ....with bright prospects for future growth (of course) and even hinted F23 could be $110m plus

Currently last 12 months Underlying Profit is $83m

Obviously things have not gone to plan .....another failure to deliver as indicated ....no wonder the share price is where it is today

Hope anybody on here who forked out the $1.80 two years ago sold before too much damage was done.

Just from memory - 2 years ago was the peak of the property boom, and currently we are at the bottom. Bit harsh to bash ARV management for the cyclical nature of the industry they are depending on - I can not see how they are supposed to control the property market - do you?

Quote from: BlackPeter on Nov 28, 2023, 02:11 PMJust from memory - 2 years ago was the peak of the property boom, and currently we are at the bottom. Bit harsh to bash ARV management for the cyclical nature of the industry they are depending on - I can not see how they are supposed to control the property market - do you?

1- Some in sector have increased Underlying Profit since 2021

2- So Arvida were unlucky to buy Arena at the top of the market?

Quote from: winner (n) on Nov 28, 2023, 02:26 PM1- Some in sector have increased Underlying Profit since 2021

2- So Arvida were unlucky to buy Arena at the top of the market?

Not wanting to break here a lance for Arvida, however - underlying profit is the most meaningless number one can use to measure success. It is neither standardized nor comparable, so - who cares?

And yes, assuming it was not just idiots who bought property in 2021 - I suppose you could say they have been unlucky.

Quote from: winner (n) on Nov 28, 2023, 01:21 PMTwo years ago Arvida held out the begging bowl to raise $330m to buy Arena

At the time they said F22 Underlying profit was going to be $67m and a pro-forma basis Arena would add $32m to $34m .....so F22 full year on proforma basis Underlying Profit was going to be $100m ....with bright prospects for future growth (of course) and even hinted F23 could be $110m plus

Currently last 12 months Underlying Profit is $83m

Obviously things have not gone to plan .....another failure to deliver as indicated ....no wonder the share price is where it is today

Hope anybody on here who forked out the $1.80 two years ago sold before too much damage was done.

I dumped mine at just over $1.60 and took the loss on the chin but then thought they must be cheap at $1.20 and then again sold at took another loss on the chin at $1.15.  You've got to be a special kind of stupid or very brave, or both, lol, to have a third crack at something that's already bitten you on the backside, twice.

Quote from: Basil on Nov 28, 2023, 04:13 PMI dumped mine at just over $1.60 and took the loss on the chin but then thought they must be cheap at $1.20 and then again sold at took another loss on the chin at $1.15.  You've got to be a special kind of stupid or very brave, or both, lol, to have a third crack at something that's already bitten you on the backside, twice.

That depends on your investing Philosophy doesn't it Basil? If your long term you ride the rollercoatser and potentially buy in trying to pick the lows (Good Luck), or your buying in fr a trade thinking you have picked the bottom and see on the bounce at its high (good luck)

I am long term. My average buy on ARV is in the $0.80's, so I just watch and let the rollercoaster do its thing.

Quote from: Greekwatchdog on Nov 28, 2023, 04:33 PMThat depends on your investing Philosophy doesn't it Basil? If your long term you ride the rollercoatser and potentially buy in trying to pick the lows (Good Luck), or your buying in fr a trade thinking you have picked the bottom and see on the bounce at its high (good luck)

I am long term. My average buy on ARV is in the $0.80's, so I just watch and let the rollercoaster do its thing.

How's that strategy worked compared to the NZX50 ?

Quote from: Basil on Nov 28, 2023, 05:22 PMHow's that strategy worked compared to the NZX50 ?

Honestly I don't think of it like that.

I have invested in a 6 companies at various stages of their life for long term to fund a comfortable retirement. I don't follow the rest of the market to closely to be that heavily involved with it.

As I said, comes down to each persons investing Philosophy.

Each to their own strategy I suppose but, in my book, if you're not aiming to beat the NZX50 then you might as well put your money in an index tracking fund and go fishing.

Quote from: Basil on Nov 28, 2023, 05:45 PMEach to their own strategy I suppose but, in my book, if you're not aiming to beat the NZX50 then you might as well put your money in an index tracking fund and go fishing.

That's why we spend our own money and do our own research. I have enough cash put away earning a healthy income currently, however will deploy some of thus around 2nd half next year.

I have enough OCA and ARV. I have bought into SUM over last 12 months at average of $8.37. RYM happy to watch for another 12 months, still not totally comfortable where their debt levels are. So sector covered.

Good luck with your investing strategy.

For Bars take on result

NEUTRAL

Arvida Group (ARV) reported a weak and somewhat messy 1H24 result, but with sprinkles of hope for the future mixed in. Excluding an insurance accrual and development gains from non-cash transfers of residents treated as sales, we estimate underlying earnings were down ~-45% versus 1H23. A poor start to ARV's first period for some time, without any prior period acquired growth. That said, the results did have some positives. ARV's care revenues grew strongly, up +15% per bed as both occupancy and government funding improved meaningfully — a welcome change from recent history. ARV also disclosed a good start to 2H24. We estimate ~25 new sales in October versus the run-rate of ~13 per month in the 1H24, excluding non-cash transfer sales. We retain NEUTRAL with a reduced target price of NZ$1.18.

What's changed?
Earnings: Annuity EBITDA down -11%/-13%/-9% with higher care fees offset by higher costs and lower resale gains.
Target price: Reduced to NZ$1.18 from NZ$1.30 on reduced dividends, increased net debt, and lowered annuity EBITDA.
Net debt likely to continue up for the foreseeable future — but leverage should stabilise
In-line with its pre-announcement, ARV reported net debt up ~+NZ$200m (+37%) YoY, with gearing +600bps to 34%, near the upper end of its 25% to 35% target range. On our forecasts ARV is likely to remain at or slightly above the upper end of its target range. We were encouraged by ARV's clear message that future development would be path dependent. The level of future developments will be dependent on demand and ARV guided to lower deliveries in FY25. We see a tougher path for ARV to meaningfully reduce debt versus Oceania Healthcare (OCA). ARV has ~NZ$100m of available unsold new stock, ~13% of its debt, compared to ~60% for OCA.


Care revenues and profitability are recovering
On a positive note, care revenues grew ~+20% driven by a combination of: (1) improved occupancy rate, (2) three months of increased funding, and (3) better staff availability. We estimate that care EBITDA margins for ARV will improve by ~+800bps in FY24 versus FY23, taking it to near breakeven. This is a sharp reversal of the dramatic deterioration in profitability over the last three years.


Transfer sales and insurance recoveries, but what is underlying earnings?
ARV included NZ$8.4m of insurance recoveries and, we estimate, ~NZ$4.5m of development gains from the non-cash sale of 21 apartments at Aria Bay to residents transferring there (from an apartment block that is being de-commissioned). We have some sympathy for the inclusion of insurance recoveries as they relate to estimated lost earnings, but to date only a small portion has been settled for cash. We have also left our estimate of non-cash transfer development gains in underlying earnings to make our estimates comparable to that of consensus and company communication.

Forecast changes
We downgrade our underlying earnings and annuity EBITDA estimates over the forecast horizon due to: (1) lower resale gains driven by lower number of resales, (2) higher total costs, led by increased employee and property expenses given the growth seen in 1H24 and indication by management these levels are likely to be the new base, (3) higher interest costs. Offsetting these are increased care fees, given the higher care fees earned per bed, on sustained elevated care occupancy on 1H24. We decrease our dividend forecasts to assume a pay out at the bottom end of its 30% to 50% range over our forecast horizon. Our net debt estimates increase on higher capex and lower ongoing operations cash flow.

Thanks gwd

Love how they summarise, esp the sprinkles of hope bit — Arvida Group (ARV) reported a weak and somewhat messy 1H24 result, but with sprinkles of hope for the future mixed in.

Quote from: BlackPeter on Nov 28, 2023, 04:05 PMNot wanting to break here a lance for Arvida, however - underlying profit is the most meaningless number one can use to measure success. It is neither standardized nor comparable, so - who cares?

And yes, assuming it was not just idiots who bought property in 2021 - I suppose you could say they have been unlucky.

So when Arvida say 'underlying profit is a financial measure to monitor financial performance and reference dividend distribution' they are talking meaningless shit.

I take it you 'methodology' is along the lines of 'value is in the story being told'

Interesting report from Forbar, thanks gwd for sharing.  Seems like a reasonable amount of creativity went into generating a very poor underlying result.  Sobering stuff.

 

Quote from: winner (n) on Nov 29, 2023, 08:27 AMSo when Arvida say 'underlying profit is a financial measure to monitor financial performance and reference dividend distribution' they are talking meaningless shit.

I take it you 'methodology' is along the lines of 'value is in the story being told'

Look - I notice that you changed the context for the post you are referring to. I was responding to your comment "Some in sector have increased Underlying Profit since 2021", which clearly uses a not standardized measurement to compare different companies. Now you put excrements into my language to describe what Arvida might do as internal measure to better understand their own operation. Different things.

Underlying profit is not standardized - i.e. every CFO can make a judgement call whatever they wish to put in and what they wish to leave out. For that reason is a quite meaningless to compare underlying profits across different organisations as well as underlying profits in the same organisation whenever the criteria (which may or may not be documented) changed. This is what I meant.

But I am sure, you know all that - probably much better than I do, and I am sure you can describe all this as well without referrring to excrements. Sorry, though if I pressed a button .... no harm intended :) ;

ARV rightful place in the pecking order / order of merit

NZX losers ar moment ....seems to say it all re ARV

Sorry for pointing out the illustrious company they keep ...but it seemed appropriate

IMG_5562.jpeg

ARV trying hard to be top of losers board ......in good company

IMG_5563.jpeg

RYM recognised markets concern about cash burn and to their credit said something about it

RYM: Negative free cash flow of $158.4 million, an improvement of $138.5 million on the same period last year

If OCA said the same it would be ... Negative free cash flow of $55 million, an improvement of $52 million on the same period last year

And ARV would have said ... Negative free cash flow of $121 million, $40m  worse than the same period last year

So 2 of the 3 who've reported burnt less cash than pcp but 1 seem to burn heaps more

No mention of underlying profit but just plain old cash flow statements to do a bit of comparing sector performance.

Big test coming tomorrow with MSCI small companies exit.  Now reached 50% off the NTA and some might see this as a can't lose situation.  I still see it as a Briscoes 50% off sale, i.e. there's better value and prospects elsewhere.

oh like shopping at BRIS... nicer than warehouse ...

dont want to buy any retirement except if a chance to get some SUM...

local gardening expert has just sold her house and is moving into a local SUM village.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/423195/409229.pdf

My money is on him being pushed to resign.  As mentioned before, over the years ARV have consistently had the lowest development margins in the sector and it's a real weakness in their business model.  My opinion is they need to have a very hard look at their procurement costs, appoint a specialist procurement manager and drive bulk efficiencies with their buying power, not that they will have as much going forward as they wind back their development program a bit.

Frankly on the procurement efficiencies side of things, this is where RYM and SUM have an advantage with their buying power with building 600+ units a year, (not sure if that will apply as much to RYM going forward as they also wind back their build rate).

Quote from: Basil on Dec 08, 2023, 11:52 AMhttp://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/423195/409229.pdf

My money is on him being pushed to resign.  As mentioned before, over the years ARV have consistently had the lowest development margins in the sector and it's a real weakness in their business model.  My opinion is they need to have a very hard look at their procurement costs, appoint a specialist procurement manager and drive bulk efficiencies with their buying power, not that they will have as much going forward as they wind back their development program a bit.

Frankly on the procurement efficiencies side of things, this is where RYM and SUM have an advantage with their buying power with building 600+ units a year, (not sure if that will apply as much to RYM going forward as they also wind back their build rate).

The Oceania Development guy got the boot 2 years ago .......the ex KPG guy who took over doesn't seem to made any difference

Endangered species these guys

Quote from: Basil on Dec 08, 2023, 11:52 AMhttp://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/423195/409229.pdf

My money is on him being pushed to resign.  As mentioned before, over the years ARV have consistently had the lowest development margins in the sector and it's a real weakness in their business model.  My opinion is they need to have a very hard look at their procurement costs, appoint a specialist procurement manager and drive bulk efficiencies with their buying power, not that they will have as much going forward as they wind back their development program a bit.

Frankly on the procurement efficiencies side of things, this is where RYM and SUM have an advantage with their buying power with building 600+ units a year, (not sure if that will apply as much to RYM going forward as they also wind back their build rate).

Possible - and you have a good point on volumes (assuming all units are equal, what they probably aren't).

When I still was in the industry (no, not that industry, but I think the ratios are similar everywhere) they said if you produce one order of magnitude higher volume (i.e. 10 times more), you have only half the cost (per piece).

Which means, if you produce 600 units a year, you could produce one unit at half the price of somebody producing only 60 units a year (note - this is obviously only looking at scalable cost, i. e. excluding the price of the land). Somebody producing 120 units a year must be cost wise somewhere in between (say squareroot of 2 - i.e. 1.4 times more expensive than the organisation producing 600 units).

So, yes - all things being equal, smaller companies naturally produce dearer units. On the other hand, they can be more flexible and responsive and might find it easier to produce whatever the customer really wants.

DRP at .9277

That'll please you guys ...more shares than you thought

Trading at less than half NTA, deepest value in the sector if you think NTA is relevant.

Do you think replacement value would be higher or lower than current NTA.?
And by what %.

Share prices follow earnings which is why many in the sector are in the dog box.   

Quote from: Basil on Dec 13, 2023, 12:19 PMShare prices follow earnings which is why many in the sector are in the dog box.   

True, but earnings follow demand - and unless you tell us that people won't need in the future places in retirement villages anymore, because they prefer to sleep rough under the next bridge, they will in the end need to pay for companies building the facilities they need. This is the reason why replacement value matters.

The issue is not that share prices follow earnings, but that investors mood follows earnings and too many investors only think linear (instead of cyclical), which, for a cyclical business, always makes people to sell and buy in the wrong time.

Arvida and any other REIT are currently in a cyclical low, so just lets all keep whinging and wait for the prices to go up again. As soon as investors mood recovers and SP's are up we will all be happy to buy the than much more expensive shares we could have got now at a bargain price.

That's the typical investment cycle: Sell cheap and buy high for whomever this strategy works. I prefer to be a contrarian investor.

BP ...how does this replacement cost affect the share price / valuation?

Is it just that if somebody wanted a lot of retirement villages instead of building from scratch they'd just buy an outfit like Arvida ...and maybe pay a premium for them ....which underpins ARV guess at NTA .....which makes ARV cheap as today
Replacement cost seems to be a bit of a buzz word these days

Replacement cost being the cost position of new industry capacity is very relevant if demand is growing.

A friend bought a unit at a retirement village about 7 years ago for $600,000.
She would like to move to an apartment at the same village.
Apartment cost is about $850,000 to $900,000.
The village would pay out for her unit $600,000 less 30% say $420,000.
So would cost her between $430,000and $480,000 to change.[She can not afford that].
Sold the village cost of old unit is now $420,000.Spend $30,000 to $40,000.Cost is now $480,000.Sale price $1mil means the village pockets $520,000..Remember they have already pocketed a development margin when they first sold the unit to my friend.

Interesting is that her old unit will sell for over $1mil.

So it would appear to me replacement value/cost would be far in excess than NTA.

Good example of the value creation power of the model if done well. However NTA is based on current valuation not historical cost.

Therefore current NTA is meaningful.
And would follow the village does not need to build any more units to be very profitable.
If fact I think they stopped building a few years ago.

Hi Lorraina,

Another thought on your post. My relative is in a Ryman village and I thought for a transfer at Ryman you would only pay the difference between the $600,000 and the $850,000 to $900,000 in your example (so additional payment of $250,000 to $300,000). They also don't double dip on DMF as far as I understand it so the total DMF across both units would be 30% (or 20% in Ryman's case) of the higher value unit. I could be wrong on this but that was the impression I got from their documents. This may vary I guess at another RV operator.

Quote from: lorraina on Dec 13, 2023, 05:04 PMTherefore current NTA is meaningful.
And would follow the village does not need to build any more units to be very profitable.
If fact I think they stopped building a few years ago.

Agree current NTA is meaningful given it reflects current valuation of assets less debt. So I think buying Arvida shares at less than half of NTA offers reasonable prospects of good returns with limited downside. 

Expanding on potential returns from Arvida. I see the DMF and other fees as almost covering the cost of running the village, care and head office. Based on this thinking, actual value creation comes from two value drivers. Firstly, growth in the value of assets per share less cost of debt per share. Secondly new sales margin per share.

On the first value creation driver, Arvida have $5.48 of tangible assets per share. If they can generate an average long term increase in value of these property dominant assets of 3% per annum, that equates to 16.44 cents per share. Arvida have debt of $1.03 per share, lets say the cost of debt is 6%, then 6.18 cents needs to be deducted from 16.44 cents resulting in value creation of 10.26 cents per share which is an 11.2% return on the current share price of $0.92.   

On the second value creation driver, last financial year Arvida achieved new sales margin of $27.8 m which equates to 3.8 cents per share (based on shares currently on issue - I know they would have had a few less shares last year but I am too lazy to adjust for this). 3.8 cents is a 4.2% return on the current share price of $0.92.

Adding these two sources of value creation together generates an estimated forward looking long run annual return of 15.4% based on the current share price. I would then deduct 1 to 2% from this to allow for a small operating loss, assuming that the operational costs (of running the villages, care and head office) are a little higher than DMF and other fees. This would bring the return down to 13.4% to 14.4% based on the assumptions outlined.

I am not saying this will be the return as the long run 3% annual increase in the value of assets per share is an assumption, albeit one I am pretty comfortable with personally, recognising there will be plenty of volatility along the way.

It is worth noting that if the share price was $2.00 per the NTA the estimated return from these two value drivers would be the same in terms of cents per share but equate to only 5.1% + 1.9% = 7.0%. This would come down to 5.0% to 6.0% assuming the negative returns from operations mentioned above.

I welcome any thoughts on this and appreciate that others may have a more negative view on long term real estate appreciation, which as we know, is the main driver of whether it is possible to generate economic returns from the RV model using a lot of zero cost debt via the ORA's along with equity and some interest bearing debt to fund new developments.

Halted

Quote from: Poet on Dec 14, 2023, 03:08 PMHalted

Without an announcement? Am I missing something? Nope don't see anything.

CR or Takeover..

Quote from: Greekwatchdog on Dec 14, 2023, 03:25 PMWithout an announcement? Am I missing something? Nope don't see anything.

CR or Takeover..

Capital raise would be bizarre after reassuring on balance sheet stability just three weeks ago and declaring a dividend.
Leaves takeover a possibility I guess
Nothing on nzx website

Quote from: Poet on Dec 14, 2023, 03:08 PMHalted

Share price been pretty weak this week

Rumours about a transaction eh ...... opportunistic offer no doubt on way .....market mood might accept $1.30

Quote from: winner (n) on Dec 14, 2023, 03:34 PMRumours about a transaction eh ...... opportunistic offer no doubt on way .....market mood might accept $1.30

I wouldn't think $1.30 would do it, but if that offer does come, even if unsuccessful it should light a fire under the listed RVs.

So there ..offer made a few months

$1.70 and to bugger off

At least Board thinks ARV worth over 2 bucks

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/423543/409608.pdf

Quote from: Poet on Dec 14, 2023, 03:40 PMI wouldn't think $1.30 would do it, but if that offer does come, even if unsuccessful it should light a fire under the listed RVs.

ARV still in halt but OCA now up 4.2% on speculation that there is a buyer out there looking for an RV to buy

And ARV share price big move up

Maybe made the story up to stop farfalle of share price.

Weird share price in 120s about the time of previous appoach

Or am I a cynic

Quote from: Poet on Dec 14, 2023, 03:53 PMARV still in halt but OCA now up 4.2% on speculation that there is a buyer out there looking for an RV to buy

$1.70 would of been attractive I imagine for a lot of us. Interesting. 

Just like Steel and Tube was worth more than $1.90 is the derisory way I view directors dismissing this offer out of hand.

https://www.marketscreener.com/quote/stock/ARVIDA-GROUP-LIMITED-20708484/consensus/
Professional analysts have a 12 month price target of $1.44 average, and yet the directors think they know best despite the share price being in the toilet.

Delusional is the right word for it, just like the board of Steel and Tube were delusional.  Who are these Muppets acting for, themselves or shareholders?   Crickey, they might even have got $1.90 if they had of haggled with them and everyone would have got a get out of jail free card from this very average company.

Quote from: Basil on Dec 14, 2023, 04:15 PMJust like Steel and Tube was worth more than $1.90 is the derisory way I view directors dismissing this offer out of hand.

https://www.marketscreener.com/quote/stock/ARVIDA-GROUP-LIMITED-20708484/consensus/
Professional analysts have a 12 month price target of $1.44 average, and yet the directors think they know best despite the share price being in the toilet.

Delusional is the right word for it, just like the board of Steel and Tube were delusional.  Who are these Muppets acting for, themselves or shareholders?   Crickey, they might even have got $1.90 if they had of haggled with them and everyone would have got a get out of jail free card from this very average company.

Takeover offers all ready to be rejected seem to follow that Susan Paterson around

STU ERD ......."..

Next AGM should be eventful.
Current seller wants $1.04.

An offshore infrastructure fund eh. ...probably that outfit who took over MET and wanting to them really big

Quote from: Shareguy on Dec 14, 2023, 04:03 PM$1.70 would of been attractive I imagine for a lot of us. Interesting.

Agree. Happy to sell into takeover at $1.70 now or wait for long term expected returns. If the would be acquirer can make it unconditional and put it to shareholders, I think they would have a decent chance of succeeding.

Quote from: Basil on Dec 14, 2023, 04:15 PMJust like Steel and Tube was worth more than $1.90 is the derisory way I view directors dismissing this offer out of hand.

https://www.marketscreener.com/quote/stock/ARVIDA-GROUP-LIMITED-20708484/consensus/
Professional analysts have a 12 month price target of $1.44 average, and yet the directors think they know best despite the share price being in the toilet.

Delusional is the right word for it, just like the board of Steel and Tube were delusional.  Who are these Muppets acting for, themselves or shareholders?  Crickey, they might even have got $1.90 if they had of haggled with them and everyone would have got a get out of jail free card from this very average company.

Yep, same with SKY who the Directors saw fit to reject a rumoured bid of $3.70 (something like a 50% premium on the sp at that time). Not only that but the SKY Board didn't even extend the courtesy to shareholders and tell them what the value of the bid was. And, post rejection of the bid, the Chairman and other members bought more shares, with the knowledge of the bid price that they refuse to share with shareholders. Some Boards - STU, ARV, SKT - clearly do NOT see shareholders as being their primary responsibly and deserve all the criticism they get.

Quote from: LoungeLizard on Dec 14, 2023, 05:50 PMYep, same with SKY who the Directors saw fit to reject a rumoured bid of $3.70 (something like a 50% premium on the sp at that time). Not only that but the SKY Board didn't even extend the courtesy to shareholders and tell them what the value of the bid was. And, post rejection of the bid, the Chairman and other members bought more shares, with the knowledge of the bid price that they refuse to share with shareholders. Some Boards - STU, ARV, SKT - clearly do NOT see shareholders as being their primary responsibly and deserve all the criticism they get.

Directors fee preservation? The old turkeys don't vote for Christmas truism?

Quote from: LoungeLizard on Dec 14, 2023, 05:50 PMYep, same with SKY who the Directors saw fit to reject a rumoured bid of $3.70 (something like a 50% premium on the sp at that time). Not only that but the SKY Board didn't even extend the courtesy to shareholders and tell them what the value of the bid was. And, post rejection of the bid, the Chairman and other members bought more shares, with the knowledge of the bid price that they refuse to share with shareholders. Some Boards - STU, ARV, SKT - clearly do NOT see shareholders as being their primary responsibly and deserve all the criticism they get.

I'd be furious if I was a shareholder.   

Some good questions for shareholders at the next annual meeting.

1. Who are you acting for, yourselves or shareholders ?
2. How do you explain not even putting a $1.70 offer to the vote when that's a vast premium to the market price ?
3. Did you commission a professional valuation of the company from a leading investment bank in coming to a decision to reject the offer and if so who and why haven;t you released that report to shareholders for them to decide?
4. Do you think you know better than N.Z. best analysts who have a consensus view of a target price of $1.44 and if so, what are your professional qualifications valuing companies compared to theirs?

I think if this was the US these Muppets who are clearly acting in their own best interests not shareholders' interests, might find themselves in very hot legal water.  Class action?  I find it staggering this offer wasn't at least put to shareholders for them to decide.

Quote from: Basil on Dec 14, 2023, 06:08 PMI'd be furious if I was a shareholder.   

Some good questions for shareholders at the next annual meeting.

1. Who are you acting for, yourselves or shareholders ?
2. How do you explain not even putting a $1.70 offer to the vote when that's a vast premium to the market price ?
3. Did you commission a professional valuation of the company from a leading investment bank in coming to a decision to reject the offer and if so who and why haven;t you released that report to shareholders for them to decide?
4. Do you think you know better than N.Z. best analysts who have a consensus view of a target price of $1.44 and if so, what are your professional qualifications valuing companies compared to theirs?

I think if this was the US these Muppets who are clearly acting in their own best interests not shareholders' interests, might find themselves in very hot legal water.  Class action?  I find it staggering this offer wasn't at least put to shareholders for them to decide.

Agree, but reading between the lines, maybe too conditional? If it was unconditional they could put the offer straight to shareholders and take their chances with independent valuers report.

Quote from: Mos on Dec 14, 2023, 06:13 PMAgree, but reading between the lines, maybe too conditional? If it was unconditional they could put the offer straight to shareholders and take their chances with independent valuers report.

I tend to think you're probably right, but the MET takeover had a vast number of conditions too and still eventually transacted, albeit at a lower price than was originally proposed.

For Bars take on it.

Arvida Group (ARV) turned down a highly conditional non-binding NZ$1.70 per share takeover bid from an offshore infrastructure fund in September. The bid represented a ~+36% premium to its September price of ~NZ$1.25 (~+89% premium to its last undisturbed price of NZ$0.90). ARV said it has no reason to believe anything further will proceed from this bid; there is a big step between a firm offer and a highly conditional unsolicited non-binding bid. Asset multiples across the sector, and for ARV specifically, remain compressed creating an attractive backdrop for takeovers. We note that since the offer ARV has reported a ~+NZ$130m increase in net debt over the last six months, ahead of expectations and a subdued 1H24 result. Apart from a deep discount to book value, ARV's high level of (admittedly long dated) embedded value may have attracted a patient buyer.





Why ARV?
We believe the infrastructure bidder could have been attracted to ARV's ~-20% discount to its potential long-term cash release from its currently built up embedded value and development work in progress. ARV is the only stock in the sector trading at a material discount on this measure. While the bid was at a ~+10% premium to this value, a patient investor could extract this cash while still being left with the underlying business. ARV is also trading at ~0.5x its book value, a sector and historic low.

Quote from: Greekwatchdog on Dec 15, 2023, 08:09 AMFor Bars take on it.

Arvida Group (ARV) turned down a highly conditional non-binding NZ$1.70 per share takeover bid from an offshore infrastructure fund in September. The bid represented a ~+36% premium to its September price of ~NZ$1.25 (~+89% premium to its last undisturbed price of NZ$0.90). ARV said it has no reason to believe anything further will proceed from this bid; there is a big step between a firm offer and a highly conditional unsolicited non-binding bid. Asset multiples across the sector, and for ARV specifically, remain compressed creating an attractive backdrop for takeovers. We note that since the offer ARV has reported a ~+NZ$130m increase in net debt over the last six months, ahead of expectations and a subdued 1H24 result. Apart from a deep discount to book value, ARV's high level of (admittedly long dated) embedded value may have attracted a patient buyer.





Why ARV?
We believe the infrastructure bidder could have been attracted to ARV's ~-20% discount to its potential long-term cash release from its currently built up embedded value and development work in progress. ARV is the only stock in the sector trading at a material discount on this measure. While the bid was at a ~+10% premium to this value, a patient investor could extract this cash while still being left with the underlying business. ARV is also trading at ~0.5x its book value, a sector and historic low.

Thanks for posting. Interest rates look to be coming down as is inflation. The Dows up and even my broker has been busy buying for himself. Some say NZ and Australia have small caps on sale.

Rakon now Arvida who's next.....

Quotethere is a big step between a firm offer and a highly conditional unsolicited non-binding bid.

No kidding, Sherlock.  All bids start as non-binding and highly conditional.

My take on this. ARV directors just handed potential shareholders another reason not to own this stock because of their intransigent promotion of self-interest.  No fund in their right mind is going to offer more than that now with the dirty dishwater weak economy we have so ARV shareholders are stuck in an asset with meagre earnings and almost no chance of a takeover eventuating which renderings their highest of sector discount to NTA as virtually worthless.  It's disgraceful this offer wasn't fully explored to see if it could be developed into a firm offer whereupon the owners of this business voted on it, not the Muppets who think they know best.  The whole board should resign.

Quote from: winner (n) on Dec 14, 2023, 04:22 PMTakeover offers all ready to be rejected seem to follow that Susan Paterson around

STU ERD ......."..

SKT

Piece on NBR about how market telling RV players to focus on cash flows rather than growth per se

Mad3 comment that ARV didn't get the memo ...and also said it's not a good sign when debt > market cap

This chart said it all ...one really cool chart

Article here ....maybe paywalled
https://www.nbr.co.nz/margin-call/show-me-the-money/

IMG_5584.jpeg

Looks like a double bottom in the low 90íes to me ... which would be a bullish signal.

Arvida chart.JPG

All up from here?

Thought ARV share price was heading to $1

No on it's way up again

Looks pretty bad across the RV sector.
Perhaps Arvida should have taken up on the takeover offer.

I suspect it was the European fund that owns Metlifecare that submitted the offer. Pure speculation and based on a couple of interesting reddit posts prior to the takeover offer.

Quote from: Cookie on Feb 19, 2024, 02:32 PMLooks pretty bad across the RV sector.
Perhaps Arvida should have taken up on the takeover offer.

I suspect it was the European fund that owns Metlifecare that submitted the offer. Pure speculation and based on a couple of interesting reddit posts prior to the takeover offer.

Looks pretty bad across the RV sector.
Perhaps Arvida should have taken up on the takeover offer.

Hmm - sounds like proposing a permanent "solution" (i.e. sell out) to a temporary problem (market jitter due to some temporary uncertainty about interest rates and inflation), but I guess that's what they say about suicide as well.

Sure retirement sector currently scratching along the bottom, but this is typically not the time one should sell ones investment (by accepting a takeover), isn't it? , unless your assumption is it will never ever get better again.

Here are some hints:

As soon as interest rates go down, retirement sector will go up. And they will go down, maybe not this year (though they might), but then the next.

As soon as housing sector jitters finish (and they will, they always do), retirement sector will go up.

As soon as wealthy baby boomers start in earnest to look for a nice place to spend lifes autumn, retirement sector will go up. Hint: The first boomer year (born 1946) turn this year 78. Do you sense the demand rising?

Quote from: BlackPeter on Feb 19, 2024, 03:00 PMLooks pretty bad across the RV sector.
Perhaps Arvida should have taken up on the takeover offer.

Hmm - sounds like proposing a permanent "solution" (i.e. sell out) to a temporary problem (market jitter due to some temporary uncertainty about interest rates and inflation), but I guess that's what they say about suicide as well.

Sure retirement sector currently scratching along the bottom, but this is typically not the time one should sell ones investment (by accepting a takeover), isn't it? , unless your assumption is it will never ever get better again.

Here are some hints:

As soon as interest rates go down, retirement sector will go up. And they will go down, maybe not this year (though they might), but then the next.

As soon as housing sector jitters finish (and they will, they always do), retirement sector will go up.

As soon as wealthy baby boomers start in earnest to look for a nice place to spend lifes autumn, retirement sector will go up. Hint: The first boomer year (born 1946) turn this year 78. Do you sense the demand rising?

I have been looking at demographics for the past couple of months.
Bare in mind I am thinking out loud here. Is it possible that in the last few years all or most RV providers have been focusing developing standard beds/units and less on the specialised options i.e currently do we have excess supply of standard beds/units and conversely do we have enough special care beds given the less return on them.

Granted this is from 2017/2018, but I imagine the percentages are still relevant.

the percentage of the population living in a care home (interRAI New Zealand 2017/18):

between the ages of 65-74 = approximately 1%
between the ages of 75-84 = approximately 6%
and from the age of 85+ = approximately 27%.

I don't dispute that interest rates have an effect. But what is the greater factor at this moment in time. If I recall correctly the RV industry have been building at a compound rate of 7% for a while now. . Will supply meet demand in the next couple months, next year, or year after?. Like I said, just thinking out loud.

Quote from: Cookie on Feb 19, 2024, 03:20 PMI have been looking at demographics for the past couple of months.
Bare in mind I am thinking out loud here. Is it possible that in the last few years all or most RV providers have been focusing developing standard beds/units and less on the specialised options i.e currently do we have excess supply of standard beds/units and conversely do we have enough special care beds given the less return on them.

Granted this is from 2017/2018, but I imagine the percentages are still relevant.

the percentage of the population living in a care home (interRAI New Zealand 2017/18):

between the ages of 65-74 = approximately 1%
between the ages of 75-84 = approximately 6%
and from the age of 85+ = approximately 27%.

I don't dispute that interest rates have an effect. But what is the greater factor at this moment in time. If I recall correctly the RV industry have been building at a compound rate of 7% for a while now. . Will supply meet demand in the next couple months, next year, or year after?. Like I said, just thinking out loud.

Good on you for doing some research, even when the number of care home places needed is not the same as the number of places for retirements homes taken up.

Now the answer for the question "are there enough care home places for elderlies in New Zealand" (i.e. is there enough supply to satisfy the demand for care home places) is easy:

https://www.rnz.co.nz/news/business/496390/demand-for-retirement-villages-outstripping-supply#:~:text=Real%20estate%20firm%20JLL's%20new,satisfy%20New%20Zealand's%20ageing%20population..

Answer: There are not, and given inceased life expectancy and less and less fitness of many in higher age is there no doubt that the demand for care home places will further rise.

More complicated is it to answer the question "are there enough (or already too many) places in upmarket retirement villages in NZ"?

While this question is clearly to a degree correlated with your research above, it is not the whole story. Into a retirement village get mainly people who can afford to pay (there are some state funded exceptions) - and - some (many) of the retirement villages offer near cruiseship experience - i.e. there are as well people moving in who would otherwise not need to go into a care home. They just like the gym around the corner, the swimming pool, the bowling green in front of their villa and the entertainment program.

So - the question is, how many people who would benefit from (or enjoy) living in an upmarket retirement village can afford to live there? I don't think that your research will give us this answer, but if you find it, I would be interested.

Looking at the tendency - the number of candidates in the relevant age group (75+) is clearly rising - and this group brings as well increasing wealth. For the next 3 decades (give or take some years) will generations with high homeownership rates move into the relevant bracket - in 2022 was the average age for a first home buyer 36, which would be still four decades away from the ideal retirement home age.

But sure - while everybody might like to drive a Rolls Royce (well, I don't, but lets say it for arguments sake), many will only be able to afford a Toyota, and some will need to be happy with a 2nd hand Fiat 500. If you are saying the industry did build too many Rolls Royce and now we have not enough Fiats - you might be right. But honestly - I don't know the answer to that and I am sure, this is something which will regulate itself over some years (vs. decades) to come.
 
Just stop building Rolls Royce - and remember - a used Rolls Royce increases in value, so not a lot of damage done :) ;

Quote from: BlackPeter on Feb 19, 2024, 05:39 PMGood on you for doing some research, even when the number of care home places needed is not the same as the number of places for retirements homes taken up.

Now the answer for the question "are there enough care home places for elderlies in New Zealand" (i.e. is there enough supply to satisfy the demand for care home places) is easy:

https://www.rnz.co.nz/news/business/496390/demand-for-retirement-villages-outstripping-supply#:~:text=Real%20estate%20firm%20JLL's%20new,satisfy%20New%20Zealand's%20ageing%20population..

Answer: There are not, and given inceased life expectancy and less and less fitness of many in higher age is there no doubt that the demand for care home places will further rise.

More complicated is it to answer the question "are there enough (or already too many) places in upmarket retirement villages in NZ"?

While this question is clearly to a degree correlated with your research above, it is not the whole story. Into a retirement village get mainly people who can afford to pay (there are some state funded exceptions) - and - some (many) of the retirement villages offer near cruiseship experience - i.e. there are as well people moving in who would otherwise not need to go into a care home. They just like the gym around the corner, the swimming pool, the bowling green in front of their villa and the entertainment program.

So - the question is, how many people who would benefit from (or enjoy) living in an upmarket retirement village can afford to live there? I don't think that your research will give us this answer, but if you find it, I would be interested.

Looking at the tendency - the number of candidates in the relevant age group (75+) is clearly rising - and this group brings as well increasing wealth. For the next 3 decades (give or take some years) will generations with high homeownership rates move into the relevant bracket - in 2022 was the average age for a first home buyer 36, which would be still four decades away from the ideal retirement home age.

But sure - while everybody might like to drive a Rolls Royce (well, I don't, but lets say it for arguments sake), many will only be able to afford a Toyota, and some will need to be happy with a 2nd hand Fiat 500. If you are saying the industry did build too many Rolls Royce and now we have not enough Fiats - you might be right. But honestly - I don't know the answer to that and I am sure, this is something which will regulate itself over some years (vs. decades) to come.
 
Just stop building Rolls Royce - and remember - a used Rolls Royce increases in value, so not a lot of damage done :) ;

I accept demographic trends is one of many cogs in the overall scheme of things. I have no doubt supply will equate to and potentially be overwhelmed by demand over time. When? I don't know. That is the tricky bit for the investor. We are trying to make the money grow and not lose out on the opportunity cost. Not an issue if one is prepared to dca over time.

In terms of whether current product offering meets demand/needs. I can't say.
One would think that they had "focus groups" in front of them before committing to the build. Capital allocation is the defining measure of any management.


Anyway it's always good to have a discussion. Whether right or wrong.
 

ACC like Arvida ...another 1%

Quote from: winner (n) on Feb 28, 2024, 03:49 PMACC like Arvida ...another 1%

And lets face it - sometimes hey get it right, and sometimes the get it wrong - just like any of us :) ;

I do think however in this case they have a point.

I will be very interested to see who the buyer is. Anyone have any inside info or thoughts on who it might be?

https://www.nzx.com/announcements/428152

Looks to be one of their older villages.  3% discount to valuation is a very good result in this market with the shares trading at a ~ 50% discount to NTA.  https://www.arvida.co.nz/living-with-arvida/communities/strathallan  I have no idea who the buyer is but doubt it's any of the listed companies in this sector.

The directors and management have a heck of a lot to prove to investors to show they were looking after their interests in turning down a $1.70 takeover offer.  I am deeply skeptical the share price will be above $1.70 any year soon.  In the meantime, the unimputed dividend yield is best described as pathetic.

You are correct.

Not sure if the information I have learned today, is public knowledge yet, so will err on the side of caution and not share anything more, but suffice to say, it is literally the last buyer I would have ever expected it to be.

Quote from: Basil on Mar 19, 2024, 10:16 AMI have no idea who the buyer is but doubt it's any of the listed companies in this sector.

Fair enough.  One thing ARV directors need to wake up too is this, they have "enjoyed" lowest of sector development margins for many, many years now which is very clear evidence of very deep systemic weaknesses in their development model.  What is the point of developing new units at a pretty pathetic 15% margin, (which really is a loss in cash flow and profit when you factor in the full extensive infrastructure and common area buildings costs at new villages and this is also cash flow negative), when you can buy your own shares back and make 100% return compared to NTA ? 

Might attend this year's annual meeting and do some serious barking. 

I can now share as it is now public knowledge. This is the organisation I work for. I have mixed feelings to be honest.

QuotePresbyterian Support South Canterbury are delighted to announce the purchase of Strathallan Lifecare in Konini Street Timaru offering Rest Home and Hospital-Level Care, Specialised Dementia Care, and also independent Living Villas and Serviced Apartments.

The purchase represents a significant step forward for our organisation with the merger formally taking effect in May 2024.

With our long history or providing care for the elderly for 106 years and a continuing growing elderly population it is a wonderful opportunity for Presbyterian Support South Canterbury to keep services owned locally.

I think several of Oceania's villages were originally owned by Presbyterian Charitable interests.

Quote from: Basil on Mar 20, 2024, 07:44 AMI think several of Oceania's villages were originally owned by Presbyterian Charitable interests.

Would be interesting to find out who made money from this property merry-go-round?

     Here it is. http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/429131/416258.pdf

ARV latest update reads well and it seems as if things are heading in right direction.

But they seem to gettin into the habit of selling heaps more (full year v pcp 21 more new sales / 33 more resales) but only making a little more

It seems the increase in resales generated about $5m more in way realised gains but 21 more new sales only generated about the same in realised gains as last year.

From what they've disclosed today my estimate for FY23 Underlying Profit is $91m .....last year was $88m .......not much if an increase is it .......and doesn't seem to reflect Jeremy's really enthusiastic rave.

Whatever it's better than going backwards and things will get much better from here.

Market will like what he said about cash flows.

Forgot to add if Underlying Profit is $91m they remain miles behind where they would be if they had kept to the 'promises' they made in that capital raise a while ago

Just as well that acquisition was eps accretive eh Winner...just like OCA's one  ;)
Interesting how far they're dialing back their build rate going forward.

Quote from: Basil on Apr 05, 2024, 11:06 AMJust as well that acquisition was eps accretive eh Winner...just like OCA's one  ;)
Interesting how far they're dialing back their build rate going forward.

Wouldn't you want them to react that way when things aren't all that favorable. Dammed if they do dammed if they don't. They can always increase build rate early next year when the interest start to moderate downwards.

As a shareholder I am happy with this

Annual meeting will be fun given they have a lot ot explain why they didn't give shareholders the $1.70 takeover offer to look at.

I wasn't damming them for dialing back the build rate, I just said it was, and I quote, "interesting".
What is damming is they didn't engage properly on that takeover and put it before shareholders and simply trotted out the same B.S. Steel and Tube directors did with Fletchers takeover at $1.90..."its below intrinsic value".  How's that worked out for STU shareholders...same thing here ?

Quote from: Basil on Apr 05, 2024, 11:25 AMI wasn't damming them for dialing back the build rate, I just said it was, and I quote, "interesting".
What is damming is they didn't engage properly on that takeover and put it before shareholders and simply trotted out the same B.S. Steel and Tube directors did with Fletchers takeover at $1.90..."its below intrinsic value".  How's that worked out for STU shareholders...same thing here ?


Well as I said the shareholders will get there say come annual meeting. Who knows where the share price will be then.

As for STU they have underperformed for years. Maybe next year will be there year with all the infrastructure the country requires...

For Bars Review.

Arvida Group's (ARV) semi-annual investor update was on the whole, positive. It delivered: (1) strong resale gains, driven by both solid unit sales and margins, and (2) illustrated net debt was tracking better than our expectations. We were also encouraged by the reduced FY25 build guidance, suggesting a focus on reducing debt and realising the potential of its Arena acquisition. A sensible prioritisation given how the stock is currently valued. On the negative side was slightly weak new unit sales. But alongside this ARV provided some positive outlook comments that it has 'started to see an up tick in settlement activity' and applications are up >+20% year-on-year. We increase our target price to NZ$1.30, NEUTRAL.
link
NZX Code   ARV
Share price   NZ$1.18
Target price   NZ$1.30 (from 1.21)
Risk rating   Medium
C&ESG rating   B
Market cap   NZ$854m
Avg daily turnover   431.2k (NZ$481k)




link
Financials: Mar/   23A   24E   25E   26E
Rev (NZ$m)   318.9   352.5   355.4   381.9
NPAT* (NZ$m)   88.0   88.0   71.1   77.0
EPS* (NZc)   12.2   12.2   9.8   10.6
DPS (NZc)   4.9   3.0   3.1   3.3
Imputation (%)   0   0   0   0
*Based on normalised profits





link
Valuation (x)   23A   24E   25E   26E
PE   9.7   9.7   12.0   11.1
EV/EBIT   13.9   14.4   16.9   15.4
EV/EBITDA   12.8   13.3   15.3   14.0
Price / NTA   0.6   0.6   0.6   0.5
Cash div yld (%)   4.1   2.5   2.6   2.8
Gross div yld (%)   4.1   2.5   2.6   2.8









What's changed?



Earnings: Annuity EBITDA increased +18%/+4%/+1% over FY24/FY25/FY26 given higher resale gains while underlying earnings are +21%/-6%/-2% over the same forecast horizon given lower new sale units in FY25/FY26, in-line with the lower build rate
Target price: Increased to NZ$1.30 (from NZ$1.21) given increased Annuity EBITDA and lowered net debt.


Strong resales a positive sign


The key positive from ARV's update was the strength of its resale gains achieved. Both (1) strong unit sales, up +12% year-on-year for 2H24, and (2) improved resale margins, 31.5% in 2H24 versus 27.1% in 1H24, drove the result. The strength in margins comes despite our MI index suggesting aged care operators have held unit prices broadly flat for the last 18 months. We believe this suggests ARV has sold units with longer occupant times over 2H24, similar to Summerset's recent result. With some of these sales likely from its acquired Arena villages, we view this as a positive that its sizeable embedded value in its portfolio is starting to translate to cash gains.

Net debt controlled well


ARV's indication that drawn debt increased +NZ$27m over 2H24 was ~NZ$30m better than we expected and marks an impressive turn around from 1H24. It appears this result was driven by improved cash collection of sales and the higher resale gains, with deliveries in-line with expectations. We reduce our estimate of net debt growth over the medium term due to its lowered build rate and also aided by the NZ$30m sale of its Timaru village.

Build rate tempered — living within its means, a sensible choice


ARV has indicated a lowered build rate target for FY25. At ~150 units it is comfortably below our prior estimate and the ~200 delivered in FY24, but we believe this a logical move for ARV and illustrates its more conservative approach to capital management rather than a considerable drop in expected demand for its product. Of this 150 units for FY25, ~60% will likely come from its Queenstown Country Club development (care suites and apartments) with the remainder villas.

So Forbar impressed that Arvida are working on realising the potential of its Arena acquisition.

Good grief that was a couple of years ago ...what have been doing since ...bugger all as profit remains lot less than they 'promised' in the eps accretive raise.

And one can't be too impressed with the profit trend Forbar come up with for F23 through F26 -
NPAT* (NZ$m)   88.0   88.0   71.1   77.0

For me Arvida always seems to disappoint and never seem to deliver on what they say (or sort of indicate)

No wonder share price starting to drift again

EPS* (NZc)   12.2   12.2   9.8   10.6

Agree Winner, its hard to be impressed by those projected eps numbers and also its not like you are being paid well with dividend income to hold either, all future years <3%, when you can get as much as 6.5% on term deposit at the bank.  As you say, its a bitter pill to swallow when they raised funds at $1.80 for a so called eps accretive acquisition.  Turning down a takeover offer at a massive premium to the prevailing share price is just rubbing salt into the wound.  There's no growth here and hasn't been since they listed 10 years ago so just take a no growth PE of 8 and apply it to average expected earnings for the next 3 years (10.87 cps) and the real fair value is only 87 cents....but wait...the directors think $1.70 is not good enough... ::)

Forbar have/looking after  10 million less shares than a few months ago

https://www.nzx.com/announcements/431824

• IFRS net profit after tax of $139m, up 69%
• Underlying profit[1] of $85 million, down 3%
• Gross value sales of $427 million, up 13%
• 201 new units delivered, including 144 villas
• Total assets of $4.2 billion, up 12%
• Gearing at 33.9%
• NTA at $2.05 per share

Dividends suspended....... say no more.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/431824/419581.pdf

Presentation and their strategy makes good common sense to me. 
I think this is far more attractive than RYM and for people going bottom fishing in the 50% off NTA zone, this looks far more attractive to me than OCA.

I actually got the impression reading the presentation they know what they are doing and have a real strategy to turn around the business.  That's refreshing after reading RYM and especially OCA's presentations.

Disc: Signififcant holding in ARV bonds.

Arvida said ' With the assistance of advisors, Arvida is also considering a range of alternative options to accelerate value recognition that includes engaging with other market participants on various capital partnerships, restructuring options and strategic alternatives for the Company.

Is this code for Oceania to merge with Arvida ...that'll be fun

Quote from: winner (n) on May 28, 2024, 12:03 PMArvida said ' With the assistance of advisors, Arvida is also considering a range of alternative options to accelerate value recognition that includes engaging with other market participants on various capital partnerships, restructuring options and strategic alternatives for the Company.
Is this code for Oceania to merge with Arvida ...that'll be fun

IMO this industry is crying out for 'rationalisation'..... trading at hefty discounts to NTA etc..... interesting times.

Quote from: winner (n) on May 28, 2024, 12:03 PMArvida said ' With the assistance of advisors, Arvida is also considering a range of alternative options to accelerate value recognition that includes engaging with other market participants on various capital partnerships, restructuring options and strategic alternatives for the Company.

Is this code for Oceania to merge with Arvida ...that'll be fun

Oh the irony of that statement after they turned their noses @ $1.70 offer and didn't table it to shareholders...
They will be easy target at ASM

Quote from: Greekwatchdog on May 28, 2024, 12:27 PMOh the irony of that statement after they turned their noses @ $1.70 offer and didn't table it to shareholders...
They will be easy target at ASM

ASM will be a lot of fun this year, that's for sure   BYO popcorn.

Quote from: winner (n) on May 28, 2024, 12:03 PMArvida said ' With the assistance of advisors, Arvida is also considering a range of alternative options to accelerate value recognition that includes engaging with other market participants on various capital partnerships, restructuring options and strategic alternatives for the Company.

Is this code for Oceania to merge with Arvida ...that'll be fun

This morning we also had the results and webcast from CDI, one of the questions was about the direction and possible diversification of revenue for CDI. Answer was something along the line, we are exploring different projects, one with the retirement industry however nothing as far as CDI is concerned has been cemented in.
This together with CDI stressing that the profit margins are in land development and not the buildings makes me think that CDI and ARV have been talking to each other.
CDI is a successful land developer and could finance and develop (roading, footpaths, water, electricity, storm water etc.) the land up to a stage ready for building. Only after the infrastructure has been put in place ARV could purchase the site from CDI.
This would greatly reduce the time frame ARV would have to finance their greenfield developments or in ARV words would accelerate value recognition.
 

Quote from: Stockgathering on May 28, 2024, 03:30 PMThis morning we also had the results and webcast from CDI, one of the questions was about the direction and possible diversification of revenue for CDI. Answer was something along the line, we are exploring different projects, one with the retirement industry however nothing as far as CDI is concerned has been cemented in.
This together with CDI stressing that the profit margins are in land development and not the buildings makes me think that CDI and ARV have been talking to each other.
CDI is a successful land developer and could finance and develop (roading, footpaths, water, electricity, storm water etc.) the land up to a stage ready for building. Only after the infrastructure has been put in place ARV could purchase the site from CDI.
This would greatly reduce the time frame ARV would have to finance their greenfield developments or in ARV words would accelerate value recognition.
 

Could well be the case

Like this from NBR -

Under a capital partnership scenario, Arvida could sell majority positions in "grouped villages" where it pertained to management rights, he said.

That could be a similar deal to that announced this week between Australian listed property group Stockland, which has formed a partnership with US-based funds manager Invesco Real Estate, to develop 1200 homes in the "over-50s" market. 

Interesting. Arvida have excess land at Warkworth which may be of interest to CDI.

For Bars take..

After the kerfuffle of Ryman Healthcare's (RYM) result, Arvida Group's (ARV) result provided only incremental news and mostly good news. ARV set out an ambition to close what it considers a major gap between the market's perception of its value (~0.5x net tangible assets) and its own view. The strategy consists of: (1) leave no stone unturned to reduce core debt, (2) look for potential capital partners and other strategic options, and (3) review pricing and reduce costs. All sensible steps, and we walk away encouraged that ARV is through the worst. The result itself was slightly below our expectations, driven by higher costs and slightly lower care revenues, but announced cost savings and robust resale margins drive minor increases in our estimates over the medium term. Like the rest of the sector, ARV has built substantial debt over the last few years. In a similar vein to Oceania Healthcare (OCA) and RYM, ARV gave a clear signal that the direction of travel for net debt from here is down. ARV has identified initiatives to reduce core debt to the tune of ~NZ$200m, the majority of it to occur in FY25. We reiterate our NEUTRAL rating with an unchanged target price of NZ$1.30.

What's changed?
Earnings: Annuity EBITDA +2% across FY25–27, underlying earnings increased more in FY25/FY26 on higher new sale gains.
Exploring strategic alternatives with a focus to reduce net debt
ARV's management and board has taken the widening discount to NTA (~-50%) as a call to arms and outlined a plethora of options to close it. The common theme was to reduce debt in general and core debt (not directly used for development) in particular. We believe the focus to reduce debt is the right one. In the short term, ARV guided to a combination of collecting deferred settlements, the prior announced sale of a village, insurance proceeds, and land sales, to make a meaningful dent in its debt. ARV also outlined numerous strategic options, the most tangible (and in our view interesting) was to sell a majority stake in a group of villages to a capital partner and continue to manage the villages (for a fee) as a minority share holder. Given ARV's and OCA's experience of selling non-core aged care assets at or around book value in the current environment, we believe this idea has potential.

The aged care sector appears to have turned the corner; less debt, improving care profitability and stable resales margins
For the first time in three years we have upgraded our like-for-like earnings on all three aged care companies (with March year ends). For RYM this was clouded by the multiple accounting changes and revelations, but for OCA, ARV and RYM we have increased our annuity EBITDA estimates on a like-for-like basis. The upgrades primarily relate to resales and care revenues, both of which have come in strong. Slightly offset by higher costs. The debt build up has also slowed materially. That is not good enough, but we now forecast all three of these companies to reduce debt in FY25.

Basil asked for this ...Arvida Underlying Earnings per share over the years

Arena acquisition / cap raise occurred during F22. Going to be EPS accretive they said and based on the forecast they were happy with F22 EPS should have been 13.6 cents ....ended up a bit short eh and flat since



IMG_5812.png

Thanks mate, much appreciated.    Makes an interesting comparison to OCA though.  This has nearly doubled underlying eps over the same timeframe the OCA dog has gone nowhere.  Also interesting that IFRS profit grew strongly.  IFRS profits as we know feed directly into embedded value which gets released over time to underlying profit.

Quote from: Basil on Jun 05, 2024, 09:12 PMThanks mate, much appreciated.    Makes an interesting comparison to OCA though.  This has nearly doubled underlying eps over the same timeframe the OCA dog has gone nowhere.  Also interesting that IFRS profit grew strongly.  IFRS profits as we know feed directly into embedded value which gets released over time to underlying profit.

Raised nearly $600m of new capital over recent years ...seems growth by acquisitions is sort of working

Picket line at Village at the Park

Job cuts coming and people not happy

Shareholders should be pleased


https://wellington.scoop.co.nz/?p=162467

Quote from: winner (n) on Jul 19, 2024, 08:50 AMPicket line at Village at the Park

Job cuts coming and people not happy

Shareholders should be pleased


https://wellington.scoop.co.nz/?p=162467

This makes absolutely no sense, and it makes me wonder what is going on with this company. They sold their Timaru village to Presbyterian Support recently, and now they are cutting hours for on the ground staff.

This resident summed it up, and he is spot on:

""We recognise there are financial challenges. We do not believe the solution to this problem lies in cutting the numbers of staff, who are the lowest paid and most vital to resident well-being."

I don't hold, but I smell a rat.

Quote from: Untamed on Jul 19, 2024, 08:56 AMThis makes absolutely no sense, and it makes me wonder what is going on with this company. They sold their Timaru village to Presbyterian Support recently, and now they are cutting hours for on the ground staff.

This resident summed it up:

""We recognise there are financial challenges. We do not believe the solution to this problem lies in cutting the numbers of staff, who are the lowest paid and most vital to resident well-being."

I don't hold, but I smell a rat.

Yes not good reading.

Quote from: Shareguy on Jul 19, 2024, 09:00 AMYes not good reading.

RV providers have always understood that in order to attract customers, they must provide quality, excellent service, and meet the needs of those customers. Without those customers, they have no business. The moment they lose sight of that fact, they have hammered the first nail into their coffin.

That Village at the Park is a joint venture between Arvida and Wellington Tenths Trust ...and branded as Arvida

The Trust original owners of the land that was once Athletic Park

Quote from: winner (n) on Jul 19, 2024, 09:06 AMThat Village at the Park is a joint venture between Arvida and Wellington Tenths Trust ...and branded as Arvida

The Trust original owners of the land that was once Athletic Park

What exactly does that mean? The Trust is a major shareholder? Either way, it is the Arvida name in the news today, and it will be the Arvida brand in general that reaps what they are sowing here.

The fact that there are residents sitting out on that picket line, speaks volumes. Arvida has, in one fell swoop, seriously damaged their relationship with residents, and if they go ahead with these staff cuts, they will lose their trust. That is something they will never get back. Believe me.

RN, caregiver and activities roles are the resident facing roles, that Arvida sold these residents on when they moved in. They are the backbone of the business. They are a major part of the reason people move into RVs. They are the last place you should be cutting staff.

Arvida is lucky I'm not a shareholder.

All the big providers are cutting staff currently from nurses to maintenance staff and everything in between. One large provider is now using gardening staff to do all the maintenance as an example.

Quote from: Breezy on Jul 19, 2024, 09:18 AMAll the big providers are cutting staff currently from nurses to maintenance staff.

I am sure there will be areas where they could make cuts, but it sure as heck should not be the front facing roles that provide the actual "care and support" and the security and peace of mind residents moved in for. Cut the damned management teams, or centralise the back office staff to cover all facilities from one central location. But if RVs choose to mess with the people who residents see as "family" they do so at their own peril.

As a shareholder and its significant I am bitterly disappointed in this. Why the front line? Its makes no sense considering there is a nurse shortage.

They better not complain again of a nurse shortage after this.

If any area needs to be cut its the clowns making the decisions. After all they are the ones who failed to offer shareholders the $1.70 offer.

Be an interesting ASM. Might have to practice my darts.

Well said GWD. As a shareholder I agree. Not a good look. Can't see this helping Arvida sales effort.

Quote from: Greekwatchdog on Jul 19, 2024, 09:30 AMAs a shareholder and its significant I am bitterly disappointed in this. Why the front line? Its makes sense considering there is a nurse shortage.

They better not complain again of a nurse shortage after this.

If any area needs to be cut its the clowns making the decisions. After all they are the ones who failed to offer shareholders the $1.70 offer.

Be an interesting ASM. Might have to practice my darts.

You own part of this business! So call them, email them, write them an old fashioned "offical" letter. Tell them how you feel! I would encourage all shareholders to do the same. Aside from the ethical, concern for residents perspective, any decision they make that has the potential to negatively impact on their reputation, and potential future sales, impacts on shareholders.

Good to know I'm not the only one having a somewhat emotional reaction to this announcement. If OCA ever do this, I will rip them to shreds! Yes, really  ;)

Quote from: Untamed on Jul 19, 2024, 09:36 AMYou own part of this business! So call them, email them, write them an old fashioned "offical" letter. Tell them how you feel! I would encourage all shareholders to do the same. Aside from the ethical, concern for residents perspective, any decision they make that has the potential to negatively impact on their reputation, and potential future sales, impacts on shareholders.

Good to know I'm not the only one having a somewhat emotional reaction to this announcement. If OCA ever do this, I will rip them to shreds! Yes, really  ;)

I would expect nothing less from you being so passionate about the sector and you have first hand knowledge on the front line so thats great for us on this side.

Quote from: Greekwatchdog on Jul 19, 2024, 09:30 AMAs a shareholder and its significant I am bitterly disappointed in this. Why the front line? Its makes no sense considering there is a nurse shortage.

They better not complain again of a nurse shortage after this.

If any area needs to be cut its the clowns making the decisions. After all they are the ones who failed to offer shareholders the $1.70 offer.

Be an interesting ASM. Might have to practice my darts.

LOL love it.  Due to a very unusual, (for me), mistake I made when selling out some time back I got left with 7 shares, yes, I know, it's a 'huge" holding for me lol
Cheap ticket to corporate entertainment at the ASM.  Even more fun would be transferring 1 of them to Untamed so she can attend as well.

So takeover annouced. Board are a bunch of bananas

Arvida has entered into an agreement with Stonepeak BidCo for the sale of 100% of Arvida shares at a price of NZ$1.70 per share in cash by means of a scheme of arrangement ("Scheme").

• The Arvida Board unanimously recommends that shareholders vote in favour of the Scheme, subject to the Scheme consideration being within or above the independent adviser's valuation range for Arvida shares and in the absence of a superior proposal.

• The Scheme represents a 65% premium to Arvida's share price of NZ$1.03 per share.[1]

• Arvida's Board and executive committee have actively and cooperatively engaged with Stonepeak to facilitate this agreement and are committed to concluding the sale.

• The Scheme is subject to a number of conditions, including New Zealand High Court approval, approval at a special meeting of shareholders of Arvida and consent under the Overseas Investment Act 2005.

Arvida Group Limited ("Arvida") is pleased to announce that it has entered into a Scheme Implementation Agreement ("SIA") with Stonepeak Alps BidCo Limited ("Stonepeak BidCo"), under which Stonepeak BidCo would acquire all of the shares in Arvida at NZ$1.70 per share. Stonepeak BidCo is an indirect subsidiary of funds managed or advised by Stonepeak, a leading alternative investment firm specialising in infrastructure and real assets with approximately US$71.2 billion of assets under management.

Details of Scheme

Under the SIA, on satisfaction of all conditions and completion of the Scheme, Stonepeak BidCo would acquire all shares in Arvida at NZ$1.70 per share.

Stonepeak has carried out a comprehensive due diligence evaluation of Arvida and has committed to proceed with the acquisition subject to receipt of customary regulatory and shareholder approvals, including consent of the statutory supervisor for Arvida's villages, together with other customary conditions. The Scheme is not subject to financing or due diligence conditions.

A special meeting of shareholders to approve the Scheme is expected to be held during the last quarter of this year. Arvida shareholders do not need to take any action at the current time.
The Board has concluded the offer price of NZ$1.70 per share in cash represents compelling value, given the material premium, high certainty to completion, and overall attractiveness to Arvida shareholders.

Key value metrics include:

• a 65% premium to Arvida's share price of NZ$1.03 per share on 19 July 2024;

• a 82% premium to Arvida's volume weighted average share price of NZ$0.94 per share over the 30 trading days prior to this announcement;

• an acquisition multiple of 0.83x based on FY24 Net Tangible Assets of NZ$2.05 per share; and

• an implied equity value of ~NZ$1.2 billion.

A copy of the Scheme Implementation Agreement accompanies this announcement.

Unanimous Directors' recommendation

The Arvida directors unanimously recommend that Arvida shareholders vote in favour of the Scheme and each director has undertaken to vote all Arvida shares held or controlled by them in favour of the Scheme, subject to:

i. no Superior Proposal (as defined in the SIA) being received by Arvida; and

ii. the Independent Adviser's Report concluding that the Scheme consideration is within or above the independent adviser's valuation range for Arvida shares.

Grant Samuel has been engaged to prepare the Independent Adviser's Report to assist Arvida's shareholders in assessing the merits of the Scheme.

Arvida Chair, Anthony Beverley said: "The Board of Arvida initiated a value recognition programme in May in order to maximise value for shareholders. Through that process it became clear that the Stonepeak proposal was superior to the other options the Board considered were realistically available to the Company and enabled shareholders to realise 100% of their investment at a material premium to the current share price. We are pleased to present this offer to shareholders. We believe that the Scheme is the best way to expedite the transaction and value recognition for shareholders. There is both a defined timeframe and an agreed price that all shareholders receive.

"We have confidentially appraised certain of our institutional shareholders, representing in aggregate ~18% of shares in Arvida, and they have advised that they are supportive of the offer.

"The Arvida and Stonepeak teams have worked constructively to reach this agreement and we are committed to concluding the sale. An important consideration for us in engaging with Stonepeak was that Stonepeak supported Arvida's business model and our strong focus on providing New Zealanders with exceptional retirement living and care. We believe Stonepeak has a sound understanding of Arvida and the retirement village market, and Stonepeak's strategy is aligned with Arvida's value and vision. Stonepeak intends to bring significant capital and operational expertise to support Arvida's senior management team and business plan; from a resident and staff point of view it will be very much business as usual."

Indicative timetable and next step

A scheme of arrangement is a court-approved process that requires both:

(i) 75% or more of all votes cast by shareholders must be in favour of the Scheme; and

(ii) more than 50% of the total voting rights attaching to Arvida shares must be voted in favour of the Scheme.

A Scheme Booklet containing information relating to the Scheme, the reasons for the Independent Directors' unanimous recommendation and meeting information, together with a copy of the Independent Adviser's Report, is currently expected to be sent to Arvida shareholders in Q3 2024.

The Board encourages shareholders to carefully consider all the materials that will be provided to them and to seek their own professional advice when it comes to the vote; either in person or by proxy.

"Based on recent feedback the Board has received from institutional and retail investors, including since the announcement of the value recognition programme, we are very confident of shareholder support for the Scheme."

Arvida shareholders will have the opportunity to vote on the Scheme at a meeting in Q4 2024. If all the conditions are satisfied or, where capable of waiver, waived, the Scheme is expected to be implemented in late Q4 2024. Note that these dates are indicative and subject to change.

Arvida is being advised by Cameron Partners Limited, Forsyth Barr Limited and Chapman Tripp.

Good news for patient holders. Well done.

IMO the sector is ripe for consolidation and this should boost interest.

GWD says .... Board are a bunch of bananas

Seems instos are pretty keen to take the cash

Yes thanks W69. A bit of a joke. NTA goes up since late last year when they disclosed they had rejected an offer then accept the same valued offer today. The Board and CEO haven't got a clue. Get out of jail free card.

Quote from: Basil on Jul 19, 2024, 11:27 AMLOL love it.  Due to a very unusual, (for me), mistake I made when selling out some time back I got left with 7 shares, yes, I know, it's a 'huge" holding for me lol
Cheap ticket to corporate entertainment at the ASM.  Even more fun would be transferring 1 of them to Untamed so she can attend as well.

Dammit! You're too late. I could have made $1.70 for nothing  ;)

Quote from: Greekwatchdog on Jul 22, 2024, 09:14 AMYes thanks W69. A bit of a joke. NTA goes up since late last year when they disclosed they had rejected an offer then accept the same valued offer today. The Board and CEO haven't got a clue. Get out of jail free card.

I'm asking myself why the hell they announced staff cuts last week, when they knew this was a done deal? Why would they do that? Part of the negotiated deal? (or am I turning into a conspiracy theorist?)

Fantastic news for holders. Looks like a high chance of being successful. Will be interested to see what happens with others in sector given the multiples.

Another loss for the NZX.

Quote from: Shareguy on Jul 22, 2024, 09:26 AMFantastic news for holders. Looks like a high chance of being successful. Will be interested to see what happens with others in sector given the multiples.

Another loss for the NZX.

OCA next out of the blocks I'd say at $1.10 a share.

Quote from: Breezy on Jul 22, 2024, 09:31 AMOCA next out of the blocks I'd say at $1.10 a share.

F*k! that. I would not accept at that price.

Wonder if the bonds get repaid at face value or carry on for the full term ?  Disc: I have quite a few bonds.
Quick read of the scheme implementation agreement...the answer didn't jump out at me but it's a long and complex legal document.
https://api.nzx.com/public/announcement/434816/attachment/423099/434816-423099.pdf
Just the other day I observed that ARV had $1.72 per share in embedded value.   If the company can be managed by people who actually know what they are doing, I would say Stonepeak are likely to get a good buy.  Makes you wonder if Stonepeak or MET's owners might go "dumpster diving" with OCA ?

Good call on ARV takeover target, Mr Basil.

Well Thankyou Arvida.

Sold out at $1.60. I might miss out on any potential upside from any increase in the independent valuation. There might also be further interest from the original company that was keen (if it's not them) or someone else. And of course there is a chance that this falls over.

At the end of the day I see better value with Ryman long term and invested accordingly weeks ago.

For Arvida funds there are opportunities that I think/hope will reward me further than waiting for $.10 

Good luck for holders.

Dear Share Guy

Is it good time to buy or sell? I sold another global stock whenever it had a bounce. For my surprise it has gone up later. Don't you think sell partly and keep rest as a good staregy?

Quote from: Mr Cashflow on Jul 22, 2024, 12:55 PMDear Share Guy

Is it good time to buy or sell? I sold another global stock whenever it had a bounce. For my surprise it has gone up later. Don't you think sell partly and keep rest as a good staregy?

Take a hike Bot.

Quote from: Shareguy on Jul 22, 2024, 12:11 PMWell Thankyou Arvida.

Sold out at $1.60. I might miss out on any potential upside from any increase in the independent valuation. There might also be further interest from the original company that was keen (if it's not them) or someone else. And of course there is a chance that this falls over.

At the end of the day I see better value with Ryman long term and invested accordingly weeks ago.

For Arvida funds there are opportunities that I think/hope will reward me further than waiting for $.10 

Good luck for holders.

Congrats mate.  Get out of jail free card taken and good for you.
ARV have had a systemic problem with their development model ever since they listed a ~ decade ago.
Development margins have been the lowest of the sector by A LONG way and was indicative of deep systemic issues regarding their land procurement and developments processes.

Good development. Will be nice to realise the value at $1.70 and redeploy funds.

Quote from: Mr Cashflow on Jul 22, 2024, 12:55 PMDear Share Guy

Is it good time to buy or sell? I sold another global stock whenever it had a bounce. For my surprise it has gone up later. Don't you think sell partly and keep rest as a good staregy?

I did think about selling some and keeping the rest, which is mostly what I do. However was lucky enough to own most of them under a $1 so a reasonable profit to be had. Also have been building a larger position in Ryman (My largest in the sector) and also still hold OCA and a smaller holding in Sum.  Sum I recently sold down to invest in Ryman.  Overall I made the decision to sell all in this case just based on my overall holding in the sector, which is over weight.

So yes selling some and keeping some in my opinion makes perfect sense and is generally what I do. There is a good possibility that the offer could get improved or further parties get involved.  Either way I'm happy to take a profit and move onto the next opportunity.

Good luck

Quote from: Shareguy on Jul 22, 2024, 03:03 PMI did think about selling some and keeping the rest, which is mostly what I do. However was lucky enough to own most of them under a $1 so a reasonable profit to be had. Also have been building a larger position in Ryman (My largest in the sector) and also still hold OCA and a smaller holding in Sum.  Sum I recently sold down to invest in Ryman.  Overall I made the decision to sell all in this case just based on my overall holding in the sector, which is over weight.

So yes selling some and keeping some in my opinion makes perfect sense and is generally what I do. There is a good possibility that the offer could get improved or further parties get involved.  Either way I'm happy to take a profit and move onto the next opportunity.

Good luck

Lol your answering a machine, im sure his chip will be happy.

Quote from: Breezy on Jul 22, 2024, 03:06 PMLol your answering a machine, im sure his chip will be happy.

Yup, a few bots posting on both channels now.

Quote from: Shareguy on Jul 22, 2024, 03:03 PMI did think about selling some and keeping the rest, which is mostly what I do. However was lucky enough to own most of them under a $1 so a reasonable profit to be had. Also have been building a larger position in Ryman (My largest in the sector) and also still hold OCA and a smaller holding in Sum.  Sum I recently sold down to invest in Ryman.  Overall I made the decision to sell all in this case just based on my overall holding in the sector, which is over weight.

So yes selling some and keeping some in my opinion makes perfect sense and is generally what I do. There is a good possibility that the offer could get improved or further parties get involved.  Either way I'm happy to take a profit and move onto the next opportunity.

Good luck

Thank you so much Shareguy. I think your decision is right given the uncertainty in global markets. Also, you've done a very intelligent trading.  My congratulations! I was very bad in selling in the past and now I have a selling strategy.  Still made few mistakes and they gave me some good lessons. Unlike those days I keep some cash in my portfolio in additon to one or two never sell stocks.Last 12 months was very profitable year for me. Realized some profits from trading and investment. I have kept few listed companies on my radar for investment purpose and trading purpose in global markets as well as in NZX.

Here I learnt something from you.
"Buy when others sell as there's no tomorrow and sky is going to fall
Sell when others chase stocks"

Anyway, markets are looking choppy. We may get some great opportunities. I'm looking forward to them.

When Arvida Board rejected the first $1.70 offer 10 Year Govt stock was about 5.1%. Today it's 4.4%. With this in mind you'd that the $1.70 which "meaningfully undervalued Arvida's intrinsic value" would be worth quite a bit more today.

But today the Chair said $1.70 was a "compelling price"

BusinessDesk asked what had changed the board's position in the interim, Beverly said the full-year result was "softer than expected".

So a pleasing result was actually in their view  'softer than expected' and is such the'meaningfully undervalued' $1.70 they rejected was just a dream.

You could say with the significant fall in interest rates from when the first offer was made and the 'softer than expected' full year result the Board has overseen a decent chunk of shareholder value in last six months ....maybe up to 50 cents a share.

Not a good look in my opinion. All the more reason shareholders should take the money and run ..... and thank their lucky stars they've done very well.

yes but brain eastern says its unlikely the dream of lower house prices will be achieved (45 percent in real terms in ten years) ....

that means the board no longer sees the sector as profitable from a capital gain perspective or that current model is just not working out they way everyone says it will....

someone say it ant so ... joe...

Grant Samuel has been engaged to prepare the Independent Adviser's Report

I reckon they'll come up with a price range of $1.65 to $1.80 and say the offer is fair

Quote from: winner (n) on Jul 24, 2024, 07:57 AMGrant Samuel has been engaged to prepare the Independent Adviser's Report

I reckon they'll come up with a price range of $1.65 to $1.80 and say the offer is fair

... and no doubt they will be paid millions to come to this verdict :) ;

Quote from: winner (n) on Jul 24, 2024, 07:57 AMGrant Samuel has been engaged to prepare the Independent Adviser's Report

I reckon they'll come up with a price range of $1.65 to $1.80 and say the offer is fair

They will come up with a valuation range that suits whoever is paying their bill.

For Bar Just sold 11m odd shares. I guess those of us that sold @ current levels can be happy with ourselves.

Huge volumes continuing today.  After just 2 hours of trading 16.4m shares have changed hands and 15.2m remain on the bid at $1.61.  Huge arbitrage funds and sellers are doing business at a very brisk rate !

With a global share sell off gaining strength are we going to see this deal re negotiated (like Metlifecare was)or worse.

Quote from: Shareguy on Aug 06, 2024, 07:50 AMWith a global share sell off gaining strength are we going to see this deal re negotiated (like Metlifecare was)or worse.

Probably not. Most people seem to think it's a bit low already and looking at yesterday it held up while most did not.

Quote from: Shareguy on Aug 06, 2024, 07:50 AMWith a global share sell off gaining strength are we going to see this deal re negotiated (like Metlifecare was)or worse.

Funny I was thinking the same yesterday

Nearly pulled up the Agreement to see if any triggers mentioned

Mind Metlife was probably more to do with the profit uncertainties related to Covid more than anything else.

Quote from: Shareguy on Aug 06, 2024, 07:50 AMWith a global share sell off gaining strength are we going to see this deal re negotiated (like Metlifecare was)or worse.

Must admit I was wondering the same thing. Here's the scheme implementation agreement. VERY long and VERY complex.  Maybe something in here that ostensibly acts like a force Majure clause. I'm not inclined to spend the time to go looking for it but if I was a holder of ARV shares I would take the money and run!  https://api.nzx.com/public/announcement/434816/attachment/423099/434816-423099.pdf
Cash is definitely king at this point in time.

Quote from: Basil on Aug 06, 2024, 10:50 AMCash is definitely king at this point in time.

I recall you taking a similar stance during covid just before / as central banks started their rate cuts.

I'd argue holding cash is the last thing I'd want to do right now as we look to enter another aggressive rate cutting cycle.

Buffett holding a record level of cash at present too.

Quote from: Basil on Aug 06, 2024, 02:45 PMBuffett holding a record level of cash at present too.

Didn't he hold as well airlines before they moved into the Covid crash?

Just saying ... he is a smart investor, but he isn't always right.

Discl: currently roughly at 20 % cash which is a lot for my investing style, but still 80% shares and bonds

Adviser's assessed valuation range at NZ$1.63 to NZ$1.94 per share

Directors all say sell...no other offer yet

But now the reports out let's see

Quote from: winner (n) on Jul 24, 2024, 07:57 AMGrant Samuel has been engaged to prepare the Independent Adviser's Report

I reckon they'll come up with a price range of $1.65 to $1.80 and say the offer is fair

Report ended up with an expanded range $1.63 to $1.94

Wasn't to far off ...but so predictable eh

https://api.nzx.com/public/announcement/438860/attachment/428081/438860-428081.pdf

More than 99% of votes cast supported the takeover.  A damming indictment of management who previously turned down the offer saying it was well below ARV's intrinsic value.  That earlier statement would have had some credibility if ARV were not such an abject failure in achieving reasonable development margins, which have been very consistently right throughout ARV's listed history, right at the very bottom of the sector by a VERY long way.  Some aspects to their development model simply didn't work.

Arvida put out a half year report

From what you can make out from brief detail a real disappointing it was

If takeover wasn't on methinks there would have been carnage

Lucky there was a decent get out of jail card


https://api.nzx.com/public/announcement/442194/attachment/432270/442194-432270.pdf

$1.70 tomorrow as compared to updated NTA $2.14
The most disappointing thing about ARV's tenure of a decade on the NZX was they never seemed to be able to generate decent development margins, which were consistently the lowest of the sector by a very long way.  If it weren't for that, this could have been a good company.

Quote from: Basil on Nov 19, 2024, 05:09 PM$1.70 tomorrow as compared to updated NTA $2.14
The most disappointing thing about ARV's tenure of a decade on the NZX was they never seemed to be able to generate decent development margins, which were consistently the lowest of the sector by a very long way.  If it weren't for that, this could have been a good company.

Last year H1 development margin was about 17%

This year it's even lower ....down 14% .....and there were fewer new sales (number of new sales not disclosed except saying lower but $ sales down 18% on last year)

The Interim Report clearly shows that the cost of caring for people and running villages are growing faster than income ......running at quite a 'loss'

Without property related activity the P&L abd Cash Flows are bit sad looking

Quote from: winner (n) on Nov 19, 2024, 07:03 PMWithout property related activity the P&L abd Cash Flows are bit sad looking

That's the dumbest thing I can remember being said about any RV which are at their core, property & development investments!

The only sad thing about the ARV report IMO is that the investors got shafted in the buyout at 0.79x NTA.

Quote from: Buzz on Nov 19, 2024, 07:25 PMThat's the dumbest thing I can remember being said about any RV which are at their core, property & development investments!

The only sad thing about the ARV report IMO is that the investors got shafted in the buyout at 0.79x NTA.

Thanks for the compliments Buzz, appreciate them

But I keep hearing that profits from 'property and development investments' subsidise the cost of looking after people and running villages.

What I was saying was that the 'subsidy' is getting bigger and bigger. In Arvida's case could be as high as $50m this year.

If that keeps up the present value of future subsidies is about $300m .......which happens to be about the difference between NTA and what Arvida sold for ...maybe shareholders did not get 'shafted' after all.

BINGO. Run the same common sense over OCA and their discount to NTA is probably about right.
I think the other point worth noting is that there are many commercial property stocks that do not have the handicap of care centers costing them tens of millions in operational losses per annum, that trade a fairly sizeable discounts to their NTA, e.g. ARG current price $1.09 v NTA of $1.46
ARG only trades at 75 cents on the dollar so those getting 79.4 cps on the dollar cash today considering ARV's massive losses on care are getting a fair deal in my opinion for what is a company that has been managed quite poorly.  Put in a decent development team and the value accrual to private equity should be good and belongs to them as they're the ones introducing quality Intellectual property.   The CEO of Arvida always seemed intensely focused on all things ESG, like the CEOs that come and go for another ugly duckling in this sector.  How's that working out for shareholders so far...

Quote from: Buzz on Nov 19, 2024, 07:25 PMThat's the dumbest thing I can remember being said about any RV which are at their core, property & development investments!

The only sad thing about the ARV report IMO is that the investors got shafted in the buyout at 0.79x NTA.

Worth noting that 99.04% of shareholders voted for the scheme.  I suppose you think those shareholders and institutions managers are all dumb too?
https://api.nzx.com/public/announcement/438860/attachment/428081/438860-428081.pdf
Maybe they understand that assets are only worth what they earn and if a whole bunch of assets are tied up in loss making activities that cost tens of millions per annum that heavily impairs the overall asset value.  Something to keep in mind for the other company in this sector that's losing even more every year on their extensive care operations eh.  Interesting that both MET and now ARV have been taken over and yet nobody is interested in taking over OCA.

I note that the beloved Norah Barlow has joined the Arvida Board

Crickey

Quote from: Basil on Feb 03, 2025, 04:14 PMCrickey

She was CEO of Heriatge Life but is standing down from that role so our Brett Pattison can take over

Crikey

Recycling ♻️

well the land and buildings in this sector have to still be worth something...

maybe a new model will be needed as the retirement models except for SUM are busted...

Quote from: Basil on Feb 03, 2025, 05:47 PMRecycling ♻️

Recycling? Lets hope not. Lets call it Reuse, shall we?