OCA - Oceania Healthcare

[Basil]

Looks like its another year of no earnings growth as I expected. No sales increase in 2H despite ARV seeing an uptick and those 2H sales are based on a record level of unsold stock. Unsold stock level up yet again in FY24.  I expect much the same in FY25 Not surprised the market is underwhelmed .

[winner (n)]

Property market not too bad last quarter. Number of sales in March 24 Qtr v Dec 23 Qtr were UP (REINZ data)

So comparing March 24 Qtr v Dec 23 for RV outfits

Number of New Sales -
ARV UP
OCA DOWN
SUM UP

Number of Resales -
ARV UP
OCA DOWN
SUM UP

Property showed a bit more life in March quarter. ARV and SUM saw more sales than December but OCA have reported less sales.

Supply not an issue as all say they have plenty of stock on hand

Something not quite right with OCA selling less while others are selling more. I'm trying to make sense of it but struggling.

Wonder why that's why Brent was a bit vague in the announcement ...almost a non announcement ...but it keep me occupied for a while ...and Speedy Az still got his walk.

No RYM numbers yet

[winner (n)]

They said - Oceania has completed a total of 182 development units in the 12 months to 31 March 2024.

Sold 153 units this year

Does this mean number of unsold new units has gone up

With 224 units expected to be completed in F25 let's hope sales boom in next year or so.

[Breezy]

Looks like its another year of no earnings growth as I expected. No sales increase in 2H despite ARV seeing an uptick and those 2H sales are based on a record level of unsold stock. Unsold stock level up yet again in FY24.  I expect much the same in FY25 Not surprised the market is underwhelmed .

The whole NZX is suffering from long Covid so can't really be anything but underwhelmed.

[Teitei]

Agree - quite positive ......

Anyway, but lets not allow some  good news to spoil the bashing party ... I am sure some people around this thread will just keep doing whatever they think they are best at, whether it makes sense or not.

Why the aggro?  Some of us are simply and imo, rightly posting our views as we see the 'update'.

As you know, it's all about market perspective about whether the update is better, worse or line with expectations.

The sp reaction (down) says the market is disappointed. So am I as I expected OCA to update on sales and margins.

Increasing sales is good but if it is at the expense of margins?

Dis. I read between the lines, did not like what I read and decided to let go of the shares I bought during the index selldown.

[Untamed]

Given that almost everything was "down" today, I don't think you can legitimately make that assumption. Wait and see what the next few days bring.

The sp reaction (down) says the market is disappointed.

[Teitei]

Given that almost everything was "down" today, I don't think you can legitimately make that assumption. Wait and see what the next few days bring.

Market recovered towards the close - down only 0.1%.  OCA led the decliners while the other RV stocks held steady.

But fair enough - let's see what the next few days bring.

Guess 30m shares from the index selldown are still sloshing around.

[Ferg]

Looking at the numbers released today, here are the volumes per half year (HY) and the Year on Year % change (Yoy%):

You cannot view this attachment.

H1 was +13% versus last year, H2 was +19% versus last year, overall is +16%.

[Greekwatchdog]

For Bars brief review

Oceania Healthcare's (OCA) FY24 sales update was below our expectations. 2H24 sales softened from a solid 1H24 and is illustrative of the current subdued housing market. While recent commentary on its 'The Helier' development has been constructive, it appears the remainder of its new sales inventory is proving a tougher sell in the current housing market. But OCA continues to hold prices steady, and any uptick in sales activity is likely the positive catalyst the stock needs to sell its inventory and reduce debt. We still remain of the view that net debt should fall in FY25 and see this update more as a delay in its turnaround rather than a cancellation. Encouragingly, further non-core site sales at book value provide further support to its book valuation. OCA trades at ~0.45x book value and we retain our OUTPERFORM rating.

What's changed?



Earnings: FY24/FY25/FY26 underlying earnings down -24%/-9%/-4% on slower new sales
Target price: Decreased to NZ$0.95 (from NZ$1.02) due to lower annuity EBITDA and higher net debt.


New sales — solid sales at The Helier, softer elsewhere


OCA reported 2H24 new sales comfortably below our expectations, this is despite solid sales at its flagship The Helier development. In February OCA stated in news articles it had applications for/had sold 20 apartments and four care suites at The Helier, up from six in November (only one was settled in 1H24). These sales achieved in the six months since opening constitute ~25% of the apartments at The Helier. We believe this is a solid result, however, this implies OCA sold ~50 units from its other new sales inventory of ~330 units in 2H24. We view this as soft despite volatility in new sales period to period and the current subdued housing market backdrop.

Sales of non-core sites at book value encouraging


OCA's sale of three further non-core sites and a land parcel at book value is encouraging. This provides another data point to support the book valuations; with OCA trading at less than half its total book value we see valuation as attractive. It had seven sites held for sale at its 1H24 result and has sold four of these over the period (only one land parcel settled in 2H24). Of the NZ$40m in proceeds achieved, NZ$13m was received in 1H24, we estimate ~NZ$2m will be received in 2H24 and the remainder in 1H25.

Build rate guidance in-line, net debt higher on lower sales proceeds


OCA's FY24 deliveries and FY25 build rate guidance were in-line with our expectations and company commentary at its 1H24 result. As a result of the soft sales our net debt estimate increases and we move our expectation of peak net debt forward six months from 1H24 to FY24. Unsold new stock remains elevated for OCA and any pick up in housing market turnover will likely be the catalyst needed to sell through this and drive: (1) a reduction in net debt, (2) an uplift in earnings, and (3) a likely re-rating of the stock.

[winner (n)]

Thanks GWD

Under what's changed they say FY24/FY25/FY26 underlying earnings down -24%/-9%/-4% on slower new sales

As a matter of interest did they say what the forecasted underlying earnings for F24 in $ terms is?

[Greekwatchdog]

Hopefully this helps W69?
Oceania Healthcare Limited (OCA)
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Priced as at 15 Apr 2024 (NZ$)                   0.61
                    
12-month target price (NZ$)*                   0.95
Expected share price return                   55.7%
Net dividend yield                   5.0%
Estimated 12-month return                   60.7%
                    
Carbon and ESG (C&ESG)**                   
C&ESG rating                   B+
C&ESG score                   65.4%
Sector average C&ESG score                   61.6%
NZ average C&ESG score                   59.7%
                    
Profit and Loss Account (NZ$m)   2022A   2023A   2024E   2025E   2026E
Revenue   288.6   306.8   319.3   346.4   370.6
Normalised EBITDA   76.2   76.0   70.9   91.0   102.6
Depreciation and amortisation   (10.2)   (8.9)   (9.3)   (9.   (11.5)
Normalised EBIT   66.0   71.2   61.6   81.2   91.1
Net interest   (9.3)   (12.6)   (16.0)   (16.   (16.3)
Associate income   0   0   0   0   0
Tax   0   0   0   0   0
Minority interests   0   0   0   0   0
Normalised NPAT   56.7   58.7   45.6   64.4   74.8
Abnormals/other   4.4   (43.1)   6.1   (8.6)   (10.1)
Reported NPAT   61.1   15.6   51.7   55.9   64.7
Normalised EPS (cps)   8.1   8.2   6.3   8.9   10.3
DPS (cps)   4.4   3.2   2.0   3.0   3.5
                    
Growth Rates   2022A   2023A   2024E   2025E   2026E
Revenue (%)   12.0   6.3   4.1   8.5   7.0
EBITDA (%)   16.4   -0.4   -6.7   28.4   12.7
EBIT (%)   14.0   7.9   -13.5   31.8   12.1
Normalised NPAT (%)   11.0   3.4   -22.2   41.2   16.0
Normalised EPS (%)   3.7   1.1   -23.0   40.9   16.0
Ordinary DPS (%)   29.4   -27.3   -37.5   50.0   16.7
                    
Cash Flow (NZ$m)   2022A   2023A   2024E   2025E   2026E
EBITDA   76.2   76.0   70.9   91.0   102.6
Working capital change   (28.5)   0.1   8.4   0.6   18.9
Interest & tax paid   (9.3)   (12.6)   (16.0)   (16.   (16.3)
Other   (47.7)   (61.   (85.6)   (66.9)   (85.3)
Operating cash flow   (9.3)   1.8   (22.3)   8.0   19.8
Capital expenditure   (172.   (173.4)   (215.6)   (171.6)   (177.6)
(Acquisitions)/divestments   114.8   68.4   105.0   185.8   199.8
Other   (50.5)   (51.2)   30.0   40.6   16.6
Funding available/(required)   (117.   (154.4)   (103.0)   62.8   58.6
Dividends paid   (19.4)   (21.   (6.   (29.0)   (25.3)
Equity raised/(returned)   20.0   0   0   0   0
(Increase)/decrease in net debt   (117.2)   (176.2)   (109.7)   33.8   33.3
                    
Balance Sheet (NZ$m)   2022A   2023A   2024E   2025E   2026E
Working capital   28.2   56.6   56.5   48.1   47.4
Fixed assets   2,065.1   2,309.9   2,589.3   2,772.7   2,985.1
Intangibles   8.6   6.7   6.7   6.7   6.7
Right of use asset   0   0   0   0   0
Other assets   3.9   107.7   64.8   64.8   64.8
Total funds employed   2,105.8   2,480.9   2,717.3   2,892.3   3,104.0
Net debt/(cash)   370.4   546.2   655.9   622.1   588.8
Lease liability   9.9   4.8   4.3   3.3   2.3
Other liabilities   817.8   972.0   1,054.2   1,237.1   1,443.7
Shareholder's funds   907.7   958.0   1,002.9   1,029.9   1,069.2
Minority interests   0   0   0   0   0
Total funding sources   2,105.8   2,480.9   2,717.3   2,892.3   3,104.0
* Forsyth Barr target prices reflect valuation rolled forward at cost of equity less the next 12-months dividend** Information on Forsyth Barr's Carbon and ESG (C&ESG) ratings can be found at www.forsythbarr.co.nz/corporate-news-events/c-and-esg-ratings-report
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Spot valuations (NZ$)                   
EV/Annuity EBITDA                   1.00
DDM                   0.92
n/a                   n/a
                    
Key WACC assumptions                   
Risk free rate                   5.00%
Equity beta                   0.88
WACC                   8.7%
Terminal growth                   1.5%
                    
Valuation Ratios   2022A   2023A   2024E   2025E   2026E
EV/Sales (x)   2.6   2.9   3.3   3.2   3.0
EV/EBITDA (x)   9.9   11.8   14.7   12.0   10.7
EV/EBIT (x)   11.4   12.6   16.9   13.5   12.0
PE (x)   7.5   7.4   9.7   6.9   5.9
Price/NTA (x)   0.5   0.5   0.4   0.4   0.4
Free cash flow yield (%)   -16.2   -24.5   -30.8   4.9   9.5
Adj. free cash flow yield (%)   -5.1   -3.6   -8.9   -2.2   0.3
Net dividend yield (%)   7.2   5.2   3.3   4.9   5.7
Gross dividend yield (%)   7.2   5.2   3.3   4.9   5.7
                    
Capital Structure   2022A   2023A   2024E   2025E   2026E
Interest cover EBIT (x)   7.1   5.7   3.9   4.8   5.6
Interest cover EBITDA (x)   8.2   6.0   4.4   5.4   6.3
Net debt/ND+E (%)   29.0   36.3   39.5   37.7   35.5
Net debt/EBITDA (x)   4.9   7.2   9.3   6.8   5.7
                    
Key Ratios   2022A   2023A   2024E   2025E   2026E
Return on assets (%)   3.1   2.8   2.2   2.7   2.8
Return on equity (%)   6.2   6.1   4.5   6.3   7.0
Return on funds employed (%)   4.4   3.9   2.7   3.9   4.4
EBITDA margin (%)   26.4   24.8   22.2   26.3   27.7
EBIT margin (%)   22.9   23.2   19.3   23.4   24.6
Capex to sales (%)   59.9   56.5   67.5   49.5   47.9
Capex to depreciation (%)   1,691   1,943   2,329   1,755   1,539
Imputation (%)   0   0   0   0   0
Pay-out ratio (%)   54   39   32   34   34
                    
Operating Performance   2022A   2023A   2024E   2025E   2026E
Care fees   174.6   180.2   186.3   189.5   200.8
Management fees   47.2   53.9   55.8   63.6   73.7
Other   12.5   17.5   22.6   21.5   22.2
Gain on resales   23.5   27.0   29.4   32.8   36.0
Gain on new sales   32.9   32.4   25.2   39.0   38.0
Total revenue   290.7   311.0   319.3   346.4   370.6
                    
Key Drivers                   
Sales - new units   184   128   154   250   275
Sales - resold units   266   280   321   411   465
Gross development margin   28%   37%   24%   21%   19%
Gross resales margin   21%   22%   20%   18%   17%
Average new sales price (NZ$000)   637   680   682   743   726
Average resales price (NZ$000)   417   449   449   449   460
                    
Portfolio Overview                   
ILU's   1,625   1,820   1,917   2,038   2,200
Care Suites (ORA)   613   687   772   867   972
Care Suites (PAC)   241   301   303   294   282
Care Beds   1,725   1,651   1,351   1,321   1,312
Total   4,204   4,459   4,343   4,520   4,766

[winner (n)]

Thanks again GWD

The line I was keen on seeing was -
Normalised NPAT ...F22  56.7   F23 58.7  F24 45.6  F25 64.4

That $45.6m for F24 is pretty shocking ......way less than F23

Unlike Arvida who sell heaps more things and make about the same Oceania seems to be going down the path of selling heaps more thing and making heaps less.

No worries ...F25 looks good and Forbar still have OUTPERFORM rating ...even though they have 10 million less/looking after shares than a few months ago.

[winner (n)]

As one who can extrapolate from incomplete information my forecast F24 Underlying Profit is $60.1m ...slightly more than F23 ...even though they sold heaps more

Difference between me and Forbars $45.6m extrapolation is my development gains number is a lot higher

Come end of May all will be revealed

[Basil]

Sales - new units  184  128  154  250  275
Normalised EPS (cps)  8.1  8.2  6.3  8.9  10.3

The lines that I think are most interesting.  Shocking eps number for FY24, lowest ever.
Growth in underlying eps in their estimated figures for FY25 and FY26 are predicated on a massive uplift in sales of new units from 154 in FY24 to 250 and 275 in future years.

Those targets look "highly aspirational" to me and are not supported in any way whatsoever by sales performance in the last 2 years.  I guess we will see in due course but even if somehow they do manage to get to 250 in FY25 that only lifts underlying eps to an estimate of 8.9 cents, not far north of the 8 cps they have been averaging since they listed 7 years ago.

Yeah. NAH... a far more plausible forecast is for a slight recovery in sales numbers this year, maybe another 10-15% increase of FY24's number of 154, perhaps 180 if they do well and that maybe gets eps back to 8 cps for FY25.  Still believe there's simply no growth here and goal one is to get this company back to the average it has been earnings.  8 cps x a PE of 8 = 64 cents.

They keep building many more units than they can sell.  This happens year in, year out and has done for many, many years now.  Gearing must be pushing towards a very uncomfortable level, notwithstanding sales and contracts on some basic care villages and some land, which has to a fair extent already been eaten up with land purchases adjacent to the Helier at top market prices.   I suspect, given their truly woeful communication in the past, there's a real chance the directors made this surprise one-off update to soften shareholders up for a forthcoming capital raise when the result is announced.    Time will tell but a 1:4 at about 50 cents wouldn't surprise me.

[Breezy]

Sales - new units  184  128  154  250  275
Normalised EPS (cps)  8.1  8.2  6.3  8.9  10.3

The lines that I think are most interesting.  Shocking eps number for FY24, lowest ever.
Growth in underlying eps in their estimated figures for FY25 and FY26 are predicated on a massive uplift in sales of new units from 154 in FY24 to 250 and 275 in future years.

Those targets look "highly aspirational" to me and are not supported in any way whatsoever by sales performance in the last 2 years.  I guess we will see in due course but even if somehow they do manage to get to 250 in FY25 that only lifts underlying eps to an estimate of 8.9 cents, not far north of the 8 cps they have been averaging since they listed 7 years ago.

Yeah. NAH... a far more plausible forecast is for a slight recovery in sales numbers this year, maybe another 10-15% increase of FY24's number of 154, perhaps 180 if they do well and that maybe gets eps back to 8 cps for FY25.  Still believe there's simply no growth here and goal one is to get this company back to the average it has been earnings.  8 cps x a PE of 8 = 64 cents.

They keep building many more units than they can sell.  This happens year in, year out and has done for many, many years now.  Gearing must be pushing towards a very uncomfortable level, notwithstanding sales and contracts on some basic care villages and some land, which has to a fair extent already been eaten up with land purchases adjacent to the Helier at top market prices.   I suspect, given their truly woeful communication in the past, there's a real chance the directors made this surprise one-off update to soften shareholders up for a forthcoming capital raise when the result is announced.    Time will tell but a 1:4 at about 50 cents wouldn't surprise me.

Balance kept predicting a CR for ages and he has been wrong to date just as I suspect you will be, perhaps just tossing a coin would give a better indication.