OCA - Oceania Healthcare

[Plata]

I see a few key points here from what you guys are discussing.
Gearing at the last reporting date was high, bond yields indicate market is not very comfortable with it.
In the recent past build rate has exceeded sales rate.
While sales rate has picked up recently, build rate target has also been increased.
Plummeting share price must indicate word has leaked a capital raise is incoming.

To me, it seems kind of unlikely that a raise is going to occur imminently. Does an executive staring down the barrel of a *highly dilutive to EPS and especially NTA* debt bailout capital raise, go and guide the market they are going to increase capex/build rate? Doesn't seem logical. OCA still gets sales, you would expect they would delay projects, slow the build rate etc if they were concerned, and start to pay down the debt.

I reckon unless someone/s very high up are very thick in the head, the only explanation for increased build rate guidance is that sales that have not been reported yet were positive. What other explanation could there be that doesn't involve gross stupidity, worse than that seen with the Ryman CR because someone failed to read the fine print on the USPP notes.

EDIT: Also don't forget the $40 million in divestments "in line with book value" with some of the $58 million more at 'various stages of completion'

[Waltzing]

well if over time they manage the stock and the companies comes out in the green... or the industry has a study case for trying to find a model that works...

some saying it already has and it SUM..

Does that mean a socialist model required for some in the industry where the likes of OCA get  Nationalised?

[Teitei]

Any profit is a good one in this market. Well done on making a realized profit from the dead cat index exit bounce.
From Investopedia
What Is a Dead Cat Bounce?
A dead cat bounce is a temporary, short-lived recovery of asset prices from a prolonged decline or a bear market that is followed by the continuation of the downtrend. Frequently, downtrends are interrupted by brief periods of recovery—or small rallies—during which prices temporarily rise.

The name "dead cat bounce" is based on the notion that even a dead cat will bounce if it falls far enough and fast enough. It is an example of a sucker's rally.

KEY TAKEAWAYS
A dead cat bounce is a short-lived and often sharp rally that occurs within a secular downtrend.
It is a rally that is unsupported by fundamentals that is reversed by price movement to the downside.
In technical analysis, a dead cat bounce is considered to be a continuation pattern.
At first, the bounce may appear to be a reversal of the prevailing trend, but it is quickly followed by a continuation of the downward price move.
Dead cat bounce patterns are usually only realized after the fact and are difficult to identify in real-time.
Dead Cat Bounce
Investopedia / Laura Porter

I thought the sp would retrace back to over 70c after the index selldown at 59c and was happy to be a holder.

The sales update was bad however (thanks, W69, for the quick update on the day) and it just looked like the company cannot get its act together. Reinforced why Brent quit in February - that things were not going well imo.

Was Brent's background in investment banking one of the reasons why OCA kept gearing up?

[Untamed]

Does that mean a socialist model required for some in the industry where the likes of OCA get  Nationalised?

Not in a million years. The Government washed their hands of Aged Care (regardless of which party/parties) years ago. They have zero interest in taking that responsibility back and zero ability to run it. They absolutely do not want it back. They will eventually, begrudgingly, have no choice but to fund it appropriately, but God knows when that will happen. And if they don't - well, they will reap what they sow. In more ways than one.

[Teitei]

Not in a million years. The Government washed their hands of Aged Care (regardless of which party/parties) years ago. They have zero interest in taking that responsibility back and zero ability to run it. They absolutely do not want it back. They will eventually, begrudgingly, have no choice but to fund it appropriately, but God knows when that will happen. And if they don't - well, they will reap what they sow. In more ways than one.

Not true that the government has washed their hands of Aged Care at all!

The 82 year old father of a contact went into the Bruce McLaren Retirement Village in Auckland - having lived a great life and had no assets left when he checked in. The Village arranged for everything (applying for the residential care subsidy) and he was staying there free until he passed away 2 years ago. His children initially paid for him to stay there ($1,500 per week) but after the first month, he stayed there courtesy of the taxpayer.

You all now know what to do if you choose to do so.

[Untamed]

You knew exactly what I meant. The government no longer owns or operates any aged care facilities. Everything, including all dementia care at both D3 and D6 levels, is provided by third parties. Sure, the government funds those who are eligible for the Residential Care Subsidy, but that is literally the extent of their involvement now. And they can't even do that properly, as we all well know. The Aged Care Review has 100% confirmed that.

Not true that the government has washed their hands of Aged Care at all!

The 82 year old father of a contact went into the Bruce McLaren Retirement Village in Auckland - having lived a great life and had no assets left when he checked in. The Village arranged for everything (applying for the residential care subsidy) and he was staying there free until he passed away 2 years ago. His children initially paid for him to stay there ($1,500 per week) but after the first month, he stayed there courtesy of the taxpayer.

You all now know what to do if you choose to do so.

[Teitei]

You knew exactly what I meant. The government no longer owns or operates any aged care facilities. Everything, including all dementia care at both D3 and D6 levels, is provided by third parties. Sure, the government funds those who are eligible for the Residential Care Subsidy, but that is literally the extent of their involvement now. And they can't even do that properly, as we all well know. The Aged Care Review has 100% confirmed that.

No, I did not and do not know what you mean. I accept that the system sucks because those who live responsibly and save for their retirement end up having to pay for their own aged care while those who choose to squander all and live the high life get their aged care paid for by the taxpayers! No different from solo mums having 8 kids from 8 fathers livcing off the taxpayers - that's how NZ is now set up.

Do the US, Australia, Canada or UK run aged care homes?

[Breezy]

No, I did not and do not know what you mean. I accept that the system sucks because those who live responsibly and save for their retirement end up having to pay for their own aged care while those who choose to squander all and live the high life get their aged care paid for by the taxpayers! No different from solo mums having 8 kids from 8 fathers livcing off the taxpayers - that's how NZ is now set up.

Do the US, Australia, Canada or UK run aged care homes?

Although it cuts both ways, i have witnessed many incredibly wealthy residents get a full subsidy over the years due to family trust setups.

[Teitei]

Although it cuts both ways, i have witnessed many incredibly wealthy residents get a full subsidy over the years due to family trust setups.

Exactly. That's why I wrote 'You all know what to do if you choose to do so."

[Untamed]

Ah, here we go. Back to your usual bashing of those less fortunate than yourself. You have no idea how the other half live Balance. Those of us who will one day need that subsidy, did not "squander" our money. Nor were we lazy bludgers. We worked our butts off at low paid jobs, and  experienced circumstances in our lives, that made it impossible for us to ever be wealthy. But as far as you're concerned, we should just go live under a bridge when we are old.

No, I did not and do not know what you mean. I accept that the system sucks because those who live responsibly and save for their retirement end up having to pay for their own aged care while those who choose to squander all and live the high life get their aged care paid for by the taxpayers! No different from solo mums having 8 kids from 8 fathers livcing off the taxpayers - that's how NZ is now set up.

Do the US, Australia, Canada or UK run aged care homes?

[BlackPeter]

SUM solved the problem because people seem to want SUM units, Oceania just keep making it worse year after year after year, that's the difference....but you know that already.  They now appear to have approx. 3 years worth of unsold stock sitting on their balance sheet and headed even higher.    No worries, either the bank will fund that at current high interest rates or shareholders will have to put their hand in their pocket for a cash issue...either way, eps will be affected.

3 years worth of unsold stock? Really?

Just wondering based on which data you came to this conclusion for a company with an occupancy rate above 90%?

If what you say would be true, i.e. less than 10% of their stock are worth 3 years of selling, than this would mean that their average occupation time per unit would be 30 years. Quite unusual for a retirement home, isn't it?

Not sure, on which data (if any) your claim is based on, but you seem as well not to understand what difference the different average occupation times have on the occupancy rates.

A cruise ship experience provider for rich and healthy people like SUM has an average occupation time of 8 years.

A needs based care suite provider like OCA has an average occupation time of three years.

Given that the time to refurbish and market an apartment after the departure of the previous resident is the same, whether the resident occupied it for 3 years or 8 years, this obviously means that care providers with a higher change frequency have a lower occupancy rate - this is simple maths. More constant delay events over a given time reduce the occupancy rate

So - where are your three years of unsold stock coming from, and how does the unsold stock compare to e.g. SUM if you take the different occupation periods into account?

[Basil]

3 years worth of unsold stock? Really?

I am time poor today so you'll need to do some legwork yourself. I suggest you read the most recent half year presentation, its all in there.  I posted a link to it a while back.

You are getting totally confused between the care unit's occupancy and the overall stock situation.  Try harder, it's all in there, 409 unsold units as at half year and then extrapolate by adding new builds in the 2H, less sales.  Page 12 and 13 will get you started.  Then look at their overall annual new build sales annual run rate and compare that to the number of estimated unsold new build stock units as at 31 March 2024.  Its worrying me as a bondholder.  I get approx 3 years of stock.

8 months uncontracted stock for SUM at their most recent sales run-rate.
 

[BlackPeter]

I am time poor today so you'll need to do some legwork yourself. I suggest you read the most recent half year presentation, its all in there.  I posted a link to it a while back.

You are getting totally confused between the care unit's occupancy and the overall stock situation.  Try harder, it's all in there, 409 unsold units as at half year and then extrapolate by adding new builds in the 2H, less sales.  Page 12 and 13 will get you started.  Then look at their overall annual new build sales and compare than to the number of estimated unsold new build stock units as at 31 March 2024.  Its worrying me as a bondholder.  I get approx 3 years of stock.
 

See, this is the problem - you only look at the trees and you are so overwhelmed that you don't see the forest.

Maybe they did build in the past couple of years some larger apartment buildings (Oops, yes they did), which take longer to sell down? Quite normal for any RV provider.

So yes, lifestyle villages sell down faster, but they have as well higher maintenance and operational costs - SUM just will pay the bill a bit later.

Maybe you are taking the sales numbers of a (for all providers) weak sales period and assume that this will be the average sales number for the future? How sensible is this approach? It happens that companies sell more if they have more on offer ... and they certainly sell more when the real estate sector recovers (which it does).

Maybe you ignore the resales numbers that you forget that they are part of the mix? Money is not only coming from selling units the first time.

Look, I don't know what drives your confirmation bias this time, but normally it pays to take a step back and look at the bigger picture. OCA's occupation rate (~91%) is hardly worse than SUM's (~94% from memory). Not really a case to push doomsday rhetoric, isn't it?

[Basil]

See, this is the problem - you only look at the trees and you are so overwhelmed that you don't see the forest.

Maybe they did build in the past couple of years some larger apartment buildings (Oops, yes they did), which take longer to sell down? Quite normal for any RV provider.

I'm seeing the trees, the wood and the forest as well as the pine needles on the forest floor.  I didn't invest a significant sum in the bonds without both my eyes wide open and keeping them open.  Look, it's perfectly clear you haven't done the legwork I suggested.  Analysts have said before they have an ocean of unsold stock, (they are not saying that about other R.V. companies), and the stock situation has got worse in FY24 and likely to get even worse in FY25.  I've been warning about this for a long time now and with the share price where it has tracked over that time, it should be crystal clear the market has concerns too.

I think the bonds are fine from a risk reward perspective, possibly even good buying at an 8% yield to maturity.  If the company has to do a cash issue or slow their FY25 build rate as I suspect, that's not going to materially affect their debt repayment capabilities either way.  I think OCA are going to be very close to the upper limit of their bank loan facilities as at 31 March 2024.  Maybe with incoming cash from basic care village sales they can achieve their FY25 indicated build rate or maybe that gets throttled back or perhaps there's a cash issue...either way the banks' lending cap will probably play a major role in dictating the future build rate.   Others are throttling back their future build rate (apart from SUM) so its no big deal to stakeholders in the bonds is how I see it.

[Breezy]

I run into a colleague today at a care facility and we got talking, she only provides services to residential care facilities including SUM, she said she enjoys the OCA homes the most due to the atmosphere/interactions with staff and level of care provided to the residents.