OCA - Oceania Healthcare

[winner (n)]

The vagueness of OCA's recent announcement and Forbars revised financials suggests that a capital raise is likely in near future. The timing of the announcement and it's contents was pretty weird ...like saying look we are still here so don't forget about us,

Forbars numbers (and mine) imply cash inflows not as much as most were expecting and they continuing to spend on developments ...so expect increased levels of debt (in spite of disposing a few things) to be reported next month.

What better time to announce a capital raise than at results time.

[Teitei]

The vagueness of OCA's recent announcement and Forbars revised financials suggests that a capital raise is likely in near future. The timing of the announcement and it's contents was pretty weird ...like saying look we are still here so don't forget about us,

Forbars numbers (and mine) imply cash inflows not as much as most were expecting and they continuing to spend on developments ...so expect increased levels of debt (in spite of disposing a few things) to be reported next month.

What better time to announce a capital raise than at results time.

Cutting the dividend, slowing and stopping new developments and selling 'surplus' assets are all indicative of a company carrying too much debt and facing operating cash flow deficits - which is what OCA has been doing.

Best to do a CR and be done with it so OCA can get on with its 'transformative' stratgy sooner than later?

[BlackPeter]

Cutting the dividend, slowing and stopping new developments and selling 'surplus' assets are all indicative of a company carrying too much debt and facing operating cash flow deficits - which is what OCA has been doing.

Best to do a CR and be done with it so OCA can get on with its 'transformative' stratgy sooner than later?

Well, I guess they just can't win.

Do they pay a dividend then they get blamed for funding the dividend out of debts. However, if they do the right thing and cut the dividend they are blamed for doing exactly that.

If they keep unproductive assets, then they are blamed for doing nothing, and if they sell them - how terrible, how can they?

Ah yes, and the ominous CR some posters keep predicting again and again and again - sort of feels like the so called experts who called twenty of the the last two economic crashes.

By all means - lets look at all risks and opportunities for any investment, but just repeating endlessly the same story ad nauseam - that's not tei tei (high), that's just daft.

[Teitei]

Well, I guess they just can't win.

Do they pay a dividend than they get blamed for funding the dividend out of debts. However, if they do the right thing and cut the dividend they are blamed for doing exactly that.

If they keep unproductive assets, than they are blamed for doing nothing, and if they sell them - how terrible, how can they?

Ah yes, and the ominous CR some posters keep predicting again and again and again - sort of feels like the so called experts who called twenty of the the last two economic crashes.

By all means - lets look at all risks and opportunities for any investment, but just repeating endlessly the same story ad nauseam - that's not tei tei (high), that's just daft.

Not a case of blaming them - but reviewing where they were and where they are now.

You are actually confirming what OCA did wrong - paying dividend using debt until they have to stop. Buying  unproductive & retaining unproductive assets until they have to stop. Paying up for ever more expensive land and costly developments (the sun will never set) until they have to stop.

Making the point that they should do a CR and just be done with it is simply reflecting market sentiment.

[Untamed]

So out of curiosity, and excuse me if it is a stupid question, but hypothetically - if they were to do a CR what would you see them using it for? Just to pay off debt?

Not a case of blaming them - but reviewing where they were and where they are now.

You are actually confirming what OCA did wrong - paying dividend using debt until they have to stop. Buying  unproductive & retaining unproductive assets until they have to stop. Paying up for ever more expensive land and costly developments (the sun will never set) until they have to stop.

Making the point that they should do a CR and just be done with it is simply reflecting market sentiment.

[Teitei]

So out of curiosity, and excuse me if it is a stupid question, but hypothetically - if they were to do a CR what would you see them using it for? Just to pay off debt?

Pay off debt and present a strong balance sheet to ride out the property and economic downturn over the next few years.

[Untamed]

OK, so would you expect them to also halt development at the same time, and focus on selling stock on hand?

And isn't this precisely what people were bitching about when Ryman did it?

Pay off debt and present a strong balance sheet to ride out the property and economic downturn over the next few years.

[Buzz]

The Helier Private Care Residences now open.

[Teitei]

The Helier Private Care Residences now open.

Wonder how many private care residents have moved in.

"CEO Brent Pattison call the "private care model", costing around $3500/week or $182,000/year. The exact weekly fee will depend on the level of care required but the concept is to provide hospital-standard rest home and palliative care for residents at the luxurious end of the market."

Gulp!

[Untamed]

Given that the standard basic rest home level weekly rate is around $1300 on average, this doesn't actually seem too bad.

Wonder how many private care residents have moved in.

"CEO Brent Pattison call the "private care model", costing around $3500/week or $182,000/year. The exact weekly fee will depend on the level of care required but the concept is to provide hospital-standard rest home and palliative care for residents at the luxurious end of the market."

Gulp!

[Buzz]

Given that the standard basic rest home level weekly rate is around $1300 on average, this doesn't actually seem too bad.

And the people that will be attracted to this are most likely to be easily able to afford it.

[Basil]

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?

The slow real estate market has affected all companies in the sector

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).

With OCA you are referring to their occupancy rate of their care units, (ARV are 94% by comparison).
As at 31 December 2023 SUM had 380 uncontracted new sales stock (page 51 of their preso) and they sold 560 new units last year so that represents 8.1 months of new stock. Page 55 they had 3.2 months' worth of uncontracted resale stock.

By comparison as at last report date OCA had unsold new stock in the late 300's from memory and again this year they have built more new units than they've sold so somewhere in the low 400's as at 31 March 2024, although they will be reluctant to disclose that number in their presentation material, you will need to tune into the FY24 call to hear that.  That's about 2.7 years worth of new stock at their most recent sales rate.  Some of that, mainly care suites, will be temporarily occupied at a premium care room, again they are very opaque about the extent to which this happens.  Over the years OCA have done their very best to conceal their unsold stock situation...to the best of my recollection it has only come out last year in analysts Q&A time in the call.

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.

SUM has at times traded on a forward multiple in the high 20's and presently as at close of trade on Friday trades at 13.6 times last years underlying earnings which in my opinion is fully justified based on their average rate of growth over the years.  For example, SUM have grown underlying earnings from $56.6m in FY16 to $190.3m in FY23, more than tripled.  If you use the measurement basis you prefer NPAT, they increased Net profit after tax from $145.5m in FY16 to $436.3m in FY23, (tripled) .  SUM is a growth company, OCA is not, it really is that simple.
At the end of the day share prices follow earnings not NTA and you can't eat NTA. 

OCA is not (yet).

"priced for perfection"  I think the market is well aware of the challenges OCA face to grow earnings and is pricing the shares at about their fair value.
Long term I think SUM have a tremendous advantage with their business model with far less care and huge growth potential in Australia. 

At this stage I think the whole sector is most likely going to track sideways for quite a while until the housing market gains genuine forward momentum.  That could take quite some time. With the very poor dividend yield I don't have any equity exposure in this sector at this point and am not looking to add any in the foreseeable future.    I think the market in Auckland in particular is absolutely saturated with supply which perhaps partly explains OCA's very lackluster recent sales announcement.  I think in eps terms you will be very lucky if OCA can post similar earnings in late May to what it has in recent years, flat result is best case scenario.  7 whole years without any eps growth and I think that trend is likely to continue for the foreseeable future.    Until they can prove to the market they can grow eps the shares are highly likely to stay anchored in the doldrums.  That's how I see it and if others see it differently, that's fine and good luck to you.

[Plata]

If they start making progress on selling that unsold stock this will probably rise quite strongly. A few motivated individuals collaborating could probably prod and probe a few of the key villages to find out if that is occurring. If only you could get satellite data at night to see what % of rooms have lights on and such...

[Waltzing]

just fly some drones over them ....

[Left Field]

OCA care facilities found to be not up to scratch..... " a litany of failures..."

https://www.newshub.co.nz/home/new-zealand/2024/04/oceania-slammed-as-report-exposes-litany-of-failures-in-care-of-man-who-died-after-complaining-of-terrible-pain.html