OCA - Oceania Healthcare

[Greekwatchdog]

Why they don't repurchase the shares, maybe it's a lack of understanding of how a share buyback works? Or they don't want to rock the boat and do something outside of the industry norm.

That was answered today

"And as a management team, we haven't recommended a share buyback at this time. We currently -- we lack the free cash flow at the moment. A buyback would require additional borrowing.


And -- but importantly, we do believe that as we have capital free up, so over and all the things we talked about today through divestments, improvement, sell-down of development stock, we are freeing up capital.


Our current view, though, is that there are better growth opportunities such as value-adding developments that would deliver greater long-term value than returning the funds to shareholders at this point in time.


We'll obviously keep revisiting that as a Board, and we'll come back to you again in March, and I expect the same question, and we'll be able to answer it again then. But at this point, we're not recommending a share buyback"

[ValueNZ]

That was answered today

"And as a management team, we haven't recommended a share buyback at this time. We currently -- we lack the free cash flow at the moment. A buyback would require additional borrowing.


And -- but importantly, we do believe that as we have capital free up, so over and all the things we talked about today through divestments, improvement, sell-down of development stock, we are freeing up capital.


Our current view, though, is that there are better growth opportunities such as value-adding developments that would deliver greater long-term value than returning the funds to shareholders at this point in time.


We'll obviously keep revisiting that as a Board, and we'll come back to you again in March, and I expect the same question, and we'll be able to answer it again then. But at this point, we're not recommending a share buyback"

Yeah, I asked one of the Forbar analysts this morning to ask about repurchases and am glad they did.

I am extremely unsatisfied with that answer and will come back to it with my thoughts at some point.

[Basil]

Govt introduces mandatory 12 month buyback for units.  I can think of one company this is really going to hurt.  Will also hurt Ryman and to a lesser extent SUM.  Paywalled https://www.nbr.co.nz/politics/govts-retirement-village-reforms-introduce-12-month-buyback/

[Poet]

Govt introduces mandatory 12 month buyback for units.  I can think of one company this is really going to hurt.  Will also hurt Ryman and to a lesser extent SUM.  Paywalled https://www.nbr.co.nz/politics/govts-retirement-village-reforms-introduce-12-month-buyback/

Yes, not the greatest news for RVs, however on the plus side (and as per the parliamentary bill as proposed), the law won't be in force until 2027 at the earliest and more importantly for the RVs, the repayment requirements will only apply to new contracts.

[Basil]

Its a real shame the 50,000 + existing residents will still get a raw deal. This will allow unscrupulous operators to continue to hang them out to dry with the resale of their unit while the village heavily promotes its own brand new stock. I believe that disgraceful practice is more widespread than investors would care to know about. It commonly takes the form of significant sales incentives for new units that are not applicable to resale units
Additionally the village sets the price difference between new and resale units, if any and they are simply not motivated to resell former residents old units when they have lots of new stock they're struggling to sell.

[Poet]

Its a real shame the 50,000 + existing residents will still get a raw deal. This will allow unscrupulous operators to continue to hang them out to dry with the resale of their unit while the village heavily promotes its own brand new stock. I believe that disgraceful practice is more widespread than investors would care to know about. It commonly takes the form of significant sales incentives for new units that are not applicable to resale units
Additionally the village sets the price difference between new and resale units, if any and they are simply not motivated to resell former residents old units when they have lots of new stock they're struggling to sell.

I guess with the huge contraction in new builds that we will see over the next few years, this issue will resolve itself to a large extent

[winner (n)]

They'll just increase DMF and weekly costs to 'recover' this added burden

[Shareguy]

12 month limit I think is fair and was expected. Has just been introduced in NSW and Victoria.

[Greekwatchdog]

OCAS just released this.

4 December 2025

Proposed changes to Retirement Villages Act 2003

Oceania acknowledges the importance of the proposed changes to the Retirement Villages
Act.

They provide clarity and certainty to residents, their families and the Operators of
Retirement Villages.

Oceania already operates within the parameters proposed by the Government.

We buy back villas, apartments and care suites within a 12-month period and pay interest to residents
from the 6-month mark and do not charge fees or accrue any deferred management fee
from the time of vacant possession.

Our focus remains on supporting our residents to live well, with confidence and peace of
mind.

This announcement has been authorised for release by the Chair of the Oceania Board

[Greekwatchdog]

Govt introduces mandatory 12 month buyback for units.  I can think of one company this is really going to hurt.  Will also hurt Ryman and to a lesser extent SUM.  Paywalled https://www.nbr.co.nz/politics/govts-retirement-village-reforms-introduce-12-month-buyback/

You may want to do more research before having a crack

[Buzz]

You may want to do more research before having a crack

That's a bit inconvenient for the recidivous naysayers who didn't know that OCA had already implemented exactly the policy proposed by government. Like, it has no, zero effect on OCA.

The government bill is more likely to severely affect the smaller to medium non-listed RV / rest home entities, than the listed ones who are more involved and proactively anticipating sector reform changes.

[Left Field]

Govt introduces mandatory 12 month buyback for units.   I can think of one company this is really going to hurt.  Will also hurt Ryman and to a lesser extent SUM.

You may want to do more research before having a crack

Indeed..... RNZ reporting SUM is most affected by these changes.... SUM still using the 12 month buyback requirement while other operators were using 6 months buyback long ago.

Here's OCA's statement

Oceania acknowledges the importance of the proposed changes to the Retirement
Villages Act. They provide clarity and certainty to residents, their
families and the Operators of Retirement Villages. Oceania already
operates within the parameters proposed by the Government. We buy back
villas, apartments and care suites within a 12-month period and pay interest
to residents from the 6-month mark and do not charge fees or accrue any
deferred management fee from the time of vacant possession

Disc - Don't hold OCA or any other retirement sector.

[Basil]

The gold rush is over for this sector as per my post in the RYM thread. reproduced below.
Interesting coincidence that OCA made that statement right after the Govt announcement.  I don't believe in coincidences especially from companies that have been proven to be masters of information obfuscation over many years but regardless of whether you accept their announcement at face value or not the gold rush is over and I believe this sector will deliver well below acceptable returns on capital employed for the foreseeable future.  You see that in the fact that RYM and OCA have had to suspend dividends for years and recently radically dialing their build rate back in a desperate attempt to be cash flow positive.

The poor sods that took up shares at the IPO eight and a half years ago are more than 30% underwater in inflation adjusted terms, (share price has to get to $1.27 just to match inflation over that period let alone get any return at all on their capital, (source RBNZ inflation calculator), much worse for those poor unfortunates that subscribed to the capital raise at $1.30 several years ago. 

Lets face it, IPO subscribers were sold "a pup" with this company.  A significant majority of the villages this floated with have either been sold or are on the market.  This was and remains a lame dog because its saddled with a business model with far too much care which will give very weak returns on capital employed forever and a day.  This is without doubt the worst business model of any of the listed companies in this sector for those actually interested in shareholder returns.  RYM probably gets the prize for the worst management in the recent past.  Whether the current lot are any good or not is anyone's guess.

Disc: No stake in any company in this sector.

The Gold Rush is Over
Ryman listed in June 1999 and for more than a decade enjoyed unprecedented demand as the leading listed company in its field.  Not only did it enjoy first mover listed advantage there was virtually no competition from unlisted players and we were enjoying an unprecedented sustained period of house price inflation.

Between mid 1999 and the peak of the housing market in late 2021 housing went up 456% whereas general inflation went up only 65% (source RBNZ inflation calculator and their real estate index calculator) so for more than 20 years housing inflation outstripped general inflation by more than seven to one !  Putting some numbers on this, a mid priced house worth $200K in mid 1999 went up to $1,112K whereas if it has just matched inflation it would be worth $330K.  This enabled RYM an opportunity to resell  licenses to occupy units for two to three times the original development cost and then do it again 10 years thereafter.  The sector looked to be invincible and indeed RYM took on market darling status.

Housing became so unaffordable over that timeframe we've seen a sustained drop of 16% since then, despite inflation of 17.5% so housing is less outrageously overpriced in real inflation adjusted terms by a factor of one third than it was at the peak, but still vastly more expensive in real terms that when RYM listed.  This sustained correction may have more road to travel due to a much lower pattern of immigration, lack of affordability and sustained efforts by central government to free up more land resources for development.

RYM's model was built upon selling mainly first class units at high prices and charging fixed fees for life and then reselling those licenses to occupy about ten years later for several times the original price.  This was always where the real gold was made and is analogous to walking around and picking up huge nuggets of gold just lying on the ground.

It was so lucrative that just like any other gold rush there were soon other players itching to get into the action.  Summerset listed in November 2011 at $1.40 and has carved out a niche in the middle segment of the market and done extremely well.  In fact it's listing can be traced to when RYM's golden period of first mover advantage ended.   

These days there are so many companies trying to extract an advantage from this sector its easy to make the case the market is vastly over supplied and only the very best operator SUM can make any money along with those supplying the picks and shovels to this sector.

My contention is quite simple.  In most investors lifetimes, its exceptionally unlikely you'll ever see another sustained period of 20 years where housing outperforms the rate of inflation by 7:1 or even anything remotely similar but that is exactly the sort of sustained extreme bullish real estate environment that's needed for retirement companies to make serious coin again.  Its simply not going to happen as housing even after the recent correction is still at unaffordable level's.

SUM have some really significant competitive advantages over RYM now which include:-
They still have a fully integrated internal development model with huge economies of scale.
They are still building new units at scale ~ 700 per annum, (the only one doing so of the listed players as others desperately try and repair stretched balance sheets and rectify slow moving stock issues) which confers huge market share gains to SUM in future years and better economies of scale with their head office costs.
SUM are not saddled with legions of residents stuck on ultra low fixed fees for life that's literally draining the lifeblood out of business operations at a village level. i.e. people still paying for example $99 per week fixed fees for life at RYM's villages are literally laughing all the way to the bank as its probably costing RYM near twice that now to service their needs.  This will cause a huge drain on cash flow that will only gradually abate over the next decade or so.

There is only one company on the NZX in this sector worth investing in in my opinion.  Only one that has come through the baptism of fire this sector has experienced with their reputation intact.   Even SUM will only perform in a mediocre way in a new environment of heightened competition, losses in care and where all you are likely to ever make on a unit is in the initial development margin, (often sunk back into the village with common area facilities) and then the ongoing DMF going forward.

RYM performed well when it had all the sector tailwinds behind it, enjoyed first mover advantage and enjoyed the legendary services of the CEO Simon Challis.  None of these factors apply any more.  Worse, management that have followed on from Simon have all been underwhelming to say the very least.

There's vast amounts of listed and unlisted competition now for RYM and all now seem to be struggling to eek out even a very modest return on assets, a situation I expect will continue indefinitely.  RYM have done themselves no favors with the myriad of accounting standard changes and highly questionable and quite frankly misleading original accounting practices.  Two 1 billion dollar capital raises has avoided the ship sinking but I see systemic weaknesses now in their business model and while the good ship Titanic is now very unlikely to sink, it lacks some of the key drivers it once had and the analogy I see is it will limp along with bent propellors at a very mediocre cruising speed.

My 2 cents worth.  Others will see it differently and think this sector will return to its glory days at some stage soon.  Good luck with that.

Average of 4 professional analysts sees this getting to $3.20 one year hence and its rated an average hold.

Assets that cannot grow in real inflation adjusted terms and cannot give you a half decent dividend yield, investing money there is a dead end in my book. If all you can ever make with villages is the DMF maybe that's an acronym for Dead Money Forever in this sector ?

[Greekwatchdog]

The gold rush is over for this sector as per my post in the RYM thread. reproduced below.
Interesting coincidence that OCA made that statement right after the Govt announcement.  I don't believe in coincidences especially from companies that have been proven to be masters of information obfuscation over many years but regardless of whether you accept their announcement at face value or not the gold rush is over and I believe this sector will deliver well below acceptable returns on capital employed for the foreseeable future.  You see that in the fact that RYM and OCA have had to suspend dividends for years and recently radically dialing their build rate back in a desperate attempt to be cash flow positive.
Disc: No stake in any company in this sector.
The poor sods that took up shares at the IPO eight and a half years ago are more than 30% underwater in inflation adjusted terms, (share price has to get to $1.27 just to match inflation over that period let alone get any return at all on their capital, (source RBNZ inflation calculator), much worse for those poor unfortunates that subscribed to the capital raise at $1.30 several years ago.

You must have sold your stake in SUM that you bought into a little bit back.

You can paint it anyway you like but you quoted it wrong again.

When the IPO came out, I recall you as saying this is a home run, put it in the draw for 10 years.

As always everyone should do their own respective research.

All OCA did was confirm what some already new to market. Absolute nothing wrong with that. Also I note at the time of Govt annoucement that SUM;s shareprice sank whilst OCA's when up again.

[BlackPeter]

You must have sold your stake in SUM that you bought into a little bit back.

You can paint it anyway you like but you quoted it wrong again.

When the IPO came out, I recall you as saying this is a home run, put it in the draw for 10 years.

As always everyone should do their own respective research.

All OCA did was confirm what some already new to market. Absolute nothing wrong with that. Also I note at the time of Govt annoucement that SUM;s shareprice sank whilst OCA's when up again.

Looks like Basil is a bit caught in his views ... but hey, most of us are in some areas, and this is ok, isn't it?

Just looking into the market trends - it looks like OCA, RYM and yes, SUM are in an uptrend (above MA200 and MA50) - and while the market is not more often right about the future than all these analysts - at the moment the consensus seems to be that things go up for the sector. Not bad to hold stocks going up.

Was it yesterday that RNZ had this discussion about a serious shortage of retirement homes and care homes and things sigificantly worsening within the next decade or so? Can't be that bad that some companies are still providing some of the units.

Personally I am rather optimistic with this sector - and holding OCA, RYM and SUM. Not all of them worked ideally in the past - but all of them offer something people will need. Maybe even more than 13 year olds need stuff from HLG, but this is a different discussion.