OCA - Oceania Healthcare

[Breezy]

I think that's the key takeaway from this update.  All the more surprising because new stock is at an all time high.  Its crystal clear to me that people are voting with their feet and most prefer what ARV and SUM are bringing to the market. 

Umm no, people prefer all kinds of options, when it comes to care SUM are at the back of the pack and don't be fooled by selective customer satisfaction surveys. SUM are a great real estate company but thats where their advantage ends.

[Basil]

I assume as accountant you happened to come across distortions due to timing before?

Look, this is not a timing distortion.  I have written extensively about how OCA are so slow to sell the 'literally" hundreds of care suites they have had in stock for years.  OCA has a systemic multiyear stock problem and has built substantially more care suites than the market wants, year in, year out, for many, many years.  It's not just a care suite problem, they keep building more units than they sell.

Now they have a massive stockpile and despite this they're underperforming the current sales numbers of others who have far less stock.  Worse, their gearing level keeps going up and have plans for building even more units in FY25 at a rate significantly higher than the current sales rate. 

You don't have to be an accountant to wonder why despite them having the highest gearing and biggest stock problem in the sector they are the only ones not tailoring their future build rate to market demand.    They're "in denial" about their stock problems and just keep on building more stock than they can sell and burning through cash... one wonders what could possibly go wrong ?  You simply can't keep doing that in the years ahead, its unsustainable.
No worries though BP...just expect them to hand around the begging bowl at some stage and sheet the problem back to shareholders.    I rate the chances of that happening sometime between now and when they report the FY25 year in May 2025 as probably a bit higher than 50/50.

[Basil]

Umm no, people prefer all kinds of options, when it comes to care SUM are at the back of the pack and don't be fooled by selective customer satisfaction surveys. SUM are a great real estate company but thats where their advantage ends.

That's all the advantage they need and what has made them such a great investment since they listed.

[Breezy]

That's all the advantage they need and what has made them such a great investment since they listed.

It depends on your values and morals, we have been on the inside of the sector for for over 30 yrs now. My wife resigned from her job with another formerly listed company because of its change of direction as it prepares for its sale in 2-3 yrs, their new cost cutting and removing services from residents didn't align with her value system so she couldn't keep working there even though she had the village operating like a well oiled Swiss watch, the residents and staff were gutted.

[Basil]

I think you're drawing a very long bow to imply investing in SUM is immoral.    That's simply where the best money has been made in the sector in the last 13 years since they listed.  Lots of happy customers can't be wrong and that's why they have no problems selling their units.

If OCA was such a "Nirvana" as you suggest, why the heck can't they sell their units ?  No matter what moral high ground you might like to try and take, the fact is the market is telling you loud and clear that what OCA's competitors offer is more compelling.
Put it in motoring terms, there's some very good reasons Toyota outsell Citroen.

[Breezy]

I think you're drawing a very long bow to imply investing in SUM is immoral.    That's simply where the best money has been made in the sector in the last 13 years since they listed.  Lots of happy customers can't be wrong and that's why they have no problems selling their units.

If OCA was such a "Nirvana" as you suggest, why the heck can't they sell their units ?

Where did I say that investing in SUM is immoral? I'm talking about individual values and morals and how that affects what is acceptable to you as an individual in a workplace setting.

[Untamed]

I agree. I never ever thought I would invest in the RV sector as I (like many uninformed members of the public) believed, at the time, that RVs were greedy, money hungry, exploitative providers, out to rip off old people. Looking back now, I am ashamed that I ever thought that. It is untrue and is an unfair assessment of the sector. I could have gone with any one of the RV companies, but chose OCA because they aligned with my personal values and my passion for care. Yes, the "care" component is changing from what it was when I first invested, which in some respects disappoints me, BUT I understand why, and I accept that the model had to change. As I have said often, the Care Suite model is the closest care option to "perfect" in my humble opinion. Sadly, I am not part of the Care Suite demographic so will never get to experience it, but as a caregiver (and friend to many elderly folk) this model really impresses me.

I am disappointed with OCA's progress to date, including the share price. I will admit that. I still believe this is a successful business with good prospects for the future, so I am hanging in there for now. Time will tell what the next 12 months bring. Hopefully Brent's replacement will be someone who can drive growth, and someone who values and respects shareholders, more than Brent clearly does. We will see.

It depends on your values and morals, we have been on the inside of the sector for for over 30 yrs now. My wife resigned from her job with another formerly listed company because of its change of direction as it prepares for its sale in 2-3 yrs, their new cost cutting and removing services from residents didn't align with her value system so she couldn't keep working there even though she had the village operating like a well oiled Swiss watch, the residents and staff were gutted.

[Basil]

Where did I say that investing in SUM is immoral?

That's all the advantage they need and what has made them such a great investment since they listed. Basil on Summerset.

It depends on your values and morals, Breezy response

You did infer or imply that investing outside of SUM was more moral and by extension investing in SUM was somehow less moral....at least that's how I interpreted it...maybe I got the wrong end of the stick.

I'll try and make this my final comment on OCA for a while.  Looking back on my journey with OCA what I find the most ironic is that before it listed the previous owner was able to get a 19% EBITDA margin on care.  We were all "sold" on the dream that the care suite model would lift that return substantially.  Earl was a nice guy, a good speaker but also a convincing salesman in terms of selling the transformation model.  We all believed the dream and some thought you can't have too many.  Thankfully the most I ever had was 300K and I was one of the first to work out the dream we were sold was turning into a nightmare in terms of return on investment as the EBITDA return nearly halved and the point of so-called inflection never arrived.  I am sure in due course the next CEO will have his theories on how to turn this around and generate decent returns for shareholders, just as the last two CEO's have tried.

I think from a care perspective the care suite model is fabulous and has all the feel good stuff that Untamed, Breezy and others have talked about but from a getting a decent return on capital invested perspective, which is why I invest, the model simply doesn't work.  That's not to say i think the business will fail, it's just that I think forever and a day the returns from their ILU units will heavily subsidize the large care part of their business they operate. The best analogy I can give you guys is that it's like driving around in a car with the handbrake on.  I think it's always going to be that way with OCA, albeit to a slightly reducing extent in the years ahead as they try and extricate themselves from no return basic care villages.

I am sure OCA will track along for many years to come generating a similar level of earnings as it does now and to some people who like investing for the "feel good" factor that's okay for them and I understand that and if that's what floats their boat all good for them.  For me, I'm not investing in something that I think has serious systemic "handicapping" issues that are incapable of being resolved in terms of generating decent shareholder returns.  I believe in a nutshell the care suite model is deeply flawed from an investors point of view and the so-called transformation program OCA embarked upon when they listed, simply hasn't worked and isn't going too in the future.  For those that look properly under the hood, the evidence is plain to see, an ever-increasing stockpile of care suites they can't sell that grows bigger every year.

[Breezy]

Yes you got the wrong end of the stick and as you can see the village i was talking about above is not a SUM one but yes there are some things about SUM we don't like but won't be discussing it on here in any depth.

[Greekwatchdog]

That's all the advantage they need and what has made them such a great investment since they listed.

So if they are so great why did you see again and rubbish Julian like you have done to so many CEOs? Thats right 600 units to sell.

[Basil]

I refute rubbishing Julian. I challenged him on a number of issues from time to time at the annual meetings but overall, I think he did a superb job as the CEO while he was there and Scott has been performing exceptionally well as his replacement.  They're trading at about 8 times the level they did when they listed 13 years ago which speaks for itself in terms of the caliber of their leadership and the commercial success of their business model.  By comparison, OCA has been an absolute disaster for shareholders with the shares languishing well under the float price despite 7 years of trying to "transform" their business model.  79 cents at float down to 60 cents now might not seem that bad but its horrific in contrast to what could have been earned elsewhere in this sector like in SUM.
Remembering this is an investment in property-based assets and adjusted for inflation since it listed OCA shares should be $1.01 just to have maintained their real inflation adjusted value, (no return on that), just maintaining it so they have lost 40% of their value in 7 years in inflation adjusted terms.

Maybe in another 7 years things will be different...I guess that's the hope for shareholders.

[Breezy]

SUM head office was very ivory tower like under Julian, hopefully its better under Scott.

[BlackPeter]

Look, this is not a timing distortion.  I have written extensively about how OCA are so slow to sell the 'literally" hundreds of care suites they have had in stock for years.  OCA has a systemic multiyear stock problem and has built substantially more care suites than the market wants, year in, year out, for many, many years.  It's not just a care suite problem, they keep building more units than they sell.

Now they have a massive stockpile and despite this they're underperforming the current sales numbers of others who have far less stock.  Worse, their gearing level keeps going up and have plans for building even more units in FY25 at a rate significantly higher than the current sales rate. 

You don't have to be an accountant to wonder why despite them having the highest gearing and biggest stock problem in the sector they are the only ones not tailoring their future build rate to market demand.    They're "in denial" about their stock problems and just keep on building more stock than they can sell and burning through cash... one wonders what could possibly go wrong ?  You simply can't keep doing that in the years ahead, its unsustainable.
No worries though BP...just expect them to hand around the begging bowl at some stage and sheet the problem back to shareholders.    I rate the chances of that happening sometime between now and when they report the FY25 year in May 2025 as probably a bit higher than 50/50.

OK - Lets try to understand your language.

SUM told us in their FY23 presentation, that up to 31. Dec 2023 their unsold new stock did increase. Terrible, I thought these shocking things happen only to losers like OCA?

Anyway, they say that the amount of uncontracted units (I suppose this means not sold) is now up to 6% of total stock, and the number of unsold resales did grow to 2.3% of portfolio (I assume this means as well total stock). This allows the conclusion that their occupancy rate is 91.7% (100 minus (6 + 2.3) ...). I am sure that there are millions other ways to calculate the occupancy rate, but hey, lets take that, shall we?

So - yes, SUM is doing an amazing job, and they have currently only 8.3% vacant units. Pretty flash, isn't it? This must be the Gold standard!

Now, lets look at OCA. Actually, I found it much easier to find their occupancy rate in their recent HY presentation then it took me to find SUM's, but anyway ... maybe SUM's reputation as great reporter is somewhat overstated. But anyway - OCA reported in their recent HY report an occupancy rate of 90.3% (of total stock).

And yes, 90.3% is below 91.7%. But still - somehow wondering how SUM's occupancy rate of 91.7% can be top notch, while OCA's 90.3% (i.e. only 1.4% less) seem to mean endless unoccupied corridors where only the dust is piling up.

Don't misunderstand me - SUM (which actually went up to roughly 8 years ago through a similar phase of market perception like OCA now) is a well run company, but priced to perfection.

OCA is not (yet).

Your pick which of the companies to buy.

[Buzz]

Thanks, a very helpful perspective comparing the 'gold standard' SUM with the 'laggard dog' OCA.

Oh wait, there isn't much difference! In total numbers of unsold/vacant units based on those percentages, given SUM have a lot more property in total, means SUM have a lot more units unsold!

They're all doomed! The RV sector is doomed!

And, if anyone wants a part of the doomed RV sector, then clearly getting some OCA at about 55% discount to NTA, is a lot better than SUM which is fully priced and flatlining.

All of them will be very good long term investments imo, but as they say good investments are about when you buy and at what price, not chasing the money.

 

OK - Lets try to understand your language.

SUM told us in their FY23 presentation, that up to 31. Dec 2023 their unsold new stock did increase. Terrible, I thought these shocking things happen only to losers like OCA?

Anyway, they say that the amount of uncontracted units (I suppose this means not sold) is now up to 6% of total stock, and the number of unsold resales did grow to 2.3% of portfolio (I assume this means as well total stock). This allows the conclusion that their occupancy rate is 91.7% (100 minus (6 + 2.3) ...). I am sure that there are millions other ways to calculate the occupancy rate, but hey, lets take that, shall we?

So - yes, SUM is doing an amazing job, and they have currently only 8.3% vacant units. Pretty flash, isn't it? This must be the Gold standard!

Now, lets look at OCA. Actually, I found it much easier to find their occupancy rate in their recent HY presentation then it took me to find SUM's, but anyway ... maybe SUM's reputation as great reporter is somewhat overstated. But anyway - OCA reported in their recent HY report an occupancy rate of 90.3% (of total stock).

And yes, 90.3% is below 91.7%. But still - somehow wondering how SUM's occupancy rate of 91.7% can be top notch, while OCA's 90.3% (i.e. only 1.4% less) seem to mean endless unoccupied corridors where only the dust is piling up.

Don't misunderstand me - SUM (which actually went up to roughly 8 years ago through a similar phase of market perception like OCA now) is a well run company, but priced to perfection.

OCA is not (yet).

Your pick which of the companies to buy.

[Waltzing]

"Your pick which of the companies to buy."

neither at the moment as OCA has a bit of work to do and SUM is according to the maths people here fully priced.

Interesting article from HCP (HealthCarePro) that according to a NZ health department (lets hope they are good at maths)  12000 units requried soon for care suites...

Could the sector just stay as it is... a sector facing issues.