OCA - Oceania Healthcare

[Basil]

Yeah, hard to believe I joined that other horrible place in 2010 and it took me 12 years to escape that asylum, almost like Hotel California, "you can check out any time you like but you can never leave" LOL....now I'm free at last to enjoy new adventures...just need a new first mate to enjoy it with like some of these lucky owners https://www.rivieraaustralia.com/enews-articles/owners-photo-comp-pets/  Which one is the cutest ?

[Auto Rower]

living the dream now basil, condolences for your beagle

[winner (n)]

Another month passes by and this long term trend continues ..... never before has the OCA share price as the %age of the SUM share price been so low.

Sorry but I have a morbid fascination with long term trends that seem to defy hype etc .... but as they say in trend theory to break such long term trends a real shock to the norm has to occur .... and I have difficulty in seeing any shocks (either with OCA or SUM) coming in the near to medium term.

One thing logic says it can't continue to zero ..... but if say if OCA got taken over soon we'll never find out what the bottom is

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[Basil]

Looks like in due course it will be down to 5%, 20 OCA = 1 SUM.

What's the bet that SUM does a share split at some stage in the next few years.

[SuperMario]

Paywalled  https://www.nzherald.co.nz/business/why-would-kiwi-property-sell-northlands-at-papanui-for-87m-less-than-2019-valuation/E6OAYBDRJP3MH6OX6HVYITLT2A/  I think its crystal clear who got the better end of the deal.

My view on the discount to NTA is that its really an illusion and the discount is "apparent" in nature only and realistically not realizable in the current market.
If KPG was to try and liquidate other assets they'd probably get a similar outcome.
Anyone who thinks they can sell their office assets into a new J.V. fund at book value or very close to that in the current market is probably kidding themselves.

Same applies to OCA with many of their assets compromised by lack of adequate return on many of their older care focused facilities giving a woefully inadequate ROI.

At least with KPG you get a decent quarterly return.

Probably the wrong thread but since it come up here. Thoughts on when OCAs new deliveries come through later this year and next? Already priced in or could make the gap between price and NTA closer?

[Basil]

My thoughts on OCA have been very clearly and thoroughly articulated already in the OCA thread, in the retirement village thread and on the other forum but in summary there are deep systemic issues in that company and with its core care suite product delivering woefully inadequate returns.  Human resource cost escalation is rampant, has been for years and is getting worse.  Government underfunding is getting worse by the year.
113 care suite deliveries this half will do nothing to alleviate these issues.
Sell down of the Helier may give some temporary relief in the year in which the bulk of the selldown of the ILU occurs but its not a permanent fix per se.
Others seem to think the selldown of the Helier is the panacea to all their problems.
In the overall scheme of things I think it won't move the needle much.

The root of the issue as I see it is about 68% off all their units are care beds giving a pathetic return on capital employed no matter whether they're basic care beds of care suites.  There's no obvious permanent cure to the issues confronting OCA so I see the deep discount to "theoretical" NTA as enduring.  I say theoretical NTA because if they tried to sell some of their older basic care villages, I believe its highly unlikely a transaction could be effected other than at an extremely distressed price level. I think a lot of naive investors get tripped up by theoretical paper valuations and believe that if something is trading at a decent discount to NTA it must be a bargain.
=

[winner (n)]

REINZ August data out

HPI down 1.3% from July - last 3 months down 4.7% and 5.8% from a year ago

Sharon from ANZ commented The August data are consistent with our (very uncertain) forecast that house prices will fall 15% peak to trough – they are down 9.5% already.

Just as well Oceania has to this buffer - so no worries

Report https://www.reinz.co.nz/Media/Default/Monthly%20Press%20Release%20Assets/Residential/08%20-%20August/REINZ%20Monthly%20HPI%20Report%20-%20August%202022.pdf

[Basil]

I think there's no argument there is a substantial buffer between house prices and care suites and that people will move into care when they need to.

Whether the care suite product itself is the most attractive option per se, is quite another question.

I think its likely elderly folks are finding it harder and its taking longer to sell with 108% more properties on the market and I think that translates into more people choosing normal premium care accommodation or some other solution like Ryman's fully refundable deposit scheme.

At the end of the day OCA's care suite product is just one of many care options available and the available evidence to date suggests this type of retirement village license to occupy with its own unique terms, (15% first year or part year DMF fee whether you live one day or the whole 365) has found very limited market acceptance, in part perhaps because of the terms which appear egregiously unreasonable at first glance and perhaps in part because it's becoming known these care suites are slow sellers and it may take quite a considerable period of time, (perhaps years), for the Estate to get repaid what's left over after the expensive DMF fees.   

On the other hand the Government funding of OCA's villages means you virtually get a quasi Government backed guarantee on OCA's corporate debt so buying a quasi Govt bond with OCA 010 or OCA 020 corporate debt at about 6% makes sense to me whereas clearly from previous posts I see the theoretical discount to NTA as an illusion and returns of capital employed as being woefully inadequate.   In summary I see OCA's corporate debt as an ideal risk reward investment whereas the shares themselves...frankly you are highly likely to enjoy considerably better growth SUMwhere else.

Just as well the Helier is going to completely transform the entire company and be the panacea for everything for OCA...or so some would have you believe...

Disc; Significant stakes in OCA010 and OCA020 corporate bonds, SUM shares and SUM030 corporate bonds.

[Basil]

Down to 92 cents as we draw towards a close on their half year., down more than 6% since my post a week ago.  Need "M" to do another big ramp in the other place to try and stave off a retest of the 12 month low of 88 cents.

I can't see any relief coming for shareholders with the half year reporting in late November.  Only 113 care suites being "delivered" this half at Lady Allum in Milford that I can recall.  Add them to the hundreds of care suites they already have in stock and can't sell.  Hmmm  Someone in OCA needs to make a very brave call that this whole care suite thing is giving unacceptably low returns and turn at least half the current unsold stock into small independent apartments which I reckon would sell okay to people who can't afford a proper sized independent living unit.  Doubt they'll do a Mea Culpa any year soon so shareholders are likely to keep getting about what they've always got, about 8 cps underlying profit which is worth less each year that inflation runs hot.  No doubt they will wax lyrical about all their fabulous ESG achievements, how staff and residents are doing super well and poor old earnings per share won't even be a figure referred to in the investor presentation, just like last time.

[winner (n)]

Another month passes and again the OCA share price under performs v SUM share price ... a new low as they say

OK historical and all it shows is that since listing OCA generally umder performs SUM - both performance wise and attracting market sentiment

But as BlackPeter keeps reminding nobody can predict the future .... in other words this long entrenched trend could turn before Christmas....one good thing is that its very very unlikely 9not impossible) for the line to keep going down to zero

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[Basil]

The trend continues...that's a "surprise" lol

[winner (n)]

The trend continues...that's a "surprise" lol

Definitely a pecking order in this sector and it shows in this chart

Like SUM growth highest ... then RYM/ARV and at the bottom OCA

Like SUM ROA (Return on Assets) is 12% ... then ARV / RYM at the bottom OCA at 5%

Like how the market 'rates' SUM with a P/B value of 1.26 followed closely by RYM and a distance back to ARV and OCA at the bottom at 0.69

'Pecking orders' don't change overnight ..... and possibly it will be the same in a few years time

[Basil]

Pecking order is no surprise and mirrors the growth rate of each of the stocks in this sector in the last 5 years.

The trend exists for a significant number of profoundly good reasons, all of which I have alluded too at great length already and for those reasons I am very confident the trend will remain intact going forward.

Mark my words, just like I said one day SUM would exceed the share price of RYM, one day some years down the track 1 SUM will equal 20 OCA.

Its such a one sided contest which company will grow its earnings faster it's not even a contest.  Might as well ask which will grow faster, Glassons Australia or the Warehouse lol

[BlackPeter]

Definitely a pecking order in this sector and it shows in this chart

Like SUM growth highest ... then RYM/ARV and at the bottom OCA

Like SUM ROA (Return on Assets) is 12% ... then ARV / RYM at the bottom OCA at 5%

Like how the market 'rates' SUM with a P/B value of 1.26 followed closely by RYM and a distance back to ARV and OCA at the bottom at 0.69

'Pecking orders' don't change overnight ..... and possibly it will be the same in a few years time

Pecking orders don't change over night? OK, maybe not over night, but over a couple of years - absolutely.

Just look what happened to all the amazing companies who couldn't make any wrong move: FPH, XRO, RYM, ATM (to name just a few): always too dear but always a good buy until the trend changed.

At some stage the market will realize that SUM is already fully priced and OCA is full of opportunities, and then will happen to OCA what happened to SUM some years ago (when somebody who changed his avatar used to claim that 1 RYM will always be worth 2 SUM (give or take some percent). It didn't took long for SUM to outgrow RYM, didn't it?

I recon this can happen to OCA as well ...

[winner (n)]

Pecking orders don't change over night? OK, maybe not over night, but over a couple of years - absolutely.

Just look what happened to all the amazing companies who couldn't make any wrong move: FPH, XRO, RYM, ATM (to name just a few): always too dear but always a good buy until the trend changed.

At some stage the market will realize that SUM is already fully priced and OCA is full of opportunities, and then will happen to OCA what happened to SUM some years ago (when somebody who changed his avatar used to claim that 1 RYM will always be worth 2 SUM (give or take some percent). It didn't took long for SUM to outgrow RYM, didn't it?

The change is underway ---- SUM down 4% today and did way worse than OCA