OCA - Oceania Healthcare

[Basil]

I enjoyed reading ARV's report this morning and quite frankly it was a breath of fresh air compared to OCA.

Hey Ferg how are you getting on with untangling OCA's financials' and translating them into some more readable?

[winner (n)]

One thing that's weird about Oceania is that since the initial IPO the subsequent capital raised has been returned to shareholders as dividends

New capital about $130m dividends about $130m

Weird eh  .... but of course I just don't get this form of 'capital management'

Only winner has been taxman whose taken his share of the $130m (say $42m)

[Shareguy]

There has been a lot of good questions regarding the level of unsold units and if demand is tapering off. 

Contacted Oceania with this question

"Now that the results are released can you tell me how many  care suites at the close of the period 30 September 2022 are  not considered contracted under a ORA agreement?"

Answer as follows

Firstly thanks for your enquiry.


As a brownfield developer of care suites, we will typically construct a new care site and then transfer residents across from the previous care centre on site, without those residents entering an ORA. There will still be other care suites available which we will sell under ORA from opening, and as the transferred residents depart we will then sell the care suite they were occupying under an ORA for the first time.



This complexity means that to date we have not disclosed the number of care suites not under ORA as it does not accurately reflect availability of stock. As we work through our pipeline of brownfield developments this will become less prevalent, however.



Feel free to contact Oceania's Investor Email address (investor@oceaniahealthcare.co.nz) for future investment related enquiries and we'll be able to get back to you.



Regards



Heath


HEATH MILNE M&A, Strategic Projects Manager
MOB +64 27 406 1798

[lorraina]

Just watched Brent Pattison on NZX Virtual investor Event.
Loan term debt including bonds at very low interest rates. [5 to 7 years].
Current [next two years] build at fixed prices.
No need to adjust current unit prices.Compare well with others. [and still a lot lower than surrounding property prices].
Interesting their very upmarket care  will attract people who can afford to pay without any Govt help.
Very excited about St Heliers build.
And did mention sale of sites which no longer suited OCA's requirements.
Most impressed with Brent and OCA's prospects.

[winner (n)]

Good job there shareguy ...... answer really was 'trust us we know what we are doing' or was it a Sargeant Schultz type of answer

[lorraina]

Perhaps W69 you should have posted this here as well as ARV.?
A guy from Oceania said in an investor webinvar today that the 'market went to sleep' in the later bit of half one - hence the shortfall in new sales. But its all back to normal now so big catch up in second half

Went to sleep for all in the sector I reckon, so Arvida will be busy selling new ORAs as well this summer

[Basil]

Maybe the market went to sleep, (or that's their latest excuse), on what OCA had to offer but I definitely didn't get that sense listening in to the ARV call.
Of course, they will talk up their Helier success story, one village, compared to ten villages that are performing so poorly they want to try and quit them is this market.  Good luck with that.

[BlackPeter]

Maybe the market went to sleep, (or that's their latest excuse), on what OCA had to offer but I definitely didn't get that sense listening in to the ARV call.
Of course, they will talk up their Helier success story, one village, compared to ten villages that are performing so poorly they want to try and quit them is this market.  Good luck with that.

You clearly must love to resemble a broken record ... and you like to tease, don't you?

But I think you are clever enough to realize that maybe these 10 sites don't fit into the new OCA story of luxury accommodation, but hey - just keep trashing them, cheaper shares for everybody else to buy.

Are you sure that stocks always go the way you are trying to push them? If yes, then you might have a somewhat selective memory. The beagle is sometimes right and sometimes wrong - as all of us.

From memory - both TRA as well as HLG have been on loftier heights when you started to support them, but who knows - it might get right eventually. But as anybody else, you might still need to work on your timing with them. Just would be nice you could do this a bit quieter ....

Talking about timing ... I think the time to support OCA is now ...

[Basil]

Arvida Group Limited   ARV NZ   NZ$1.25   NZ$904        10.7x   
Ryman Healthcare    RYM NZ   NZ$6.90   NZ$3,450         11.2x
Summerset Group Limited SUM NZNZ$9.30   NZ$2,159  11.9x
Oceania Healthcare    OCA NZ   NZ$0.83   NZ$594          10.1x

Extract from a brokers recent analysis on the sector, forward PE is the last figure and as you can see you can throw a blanket over the range of forward PE's, they're all very similar.  All companies will be subject to similar headwinds and challenges in the year ahead.
Three of these companies have proven business models with which they have proved they can grow earnings...and one just talks about growth.

[lorraina]

today's presentation
https://www.youtube.com/watch?v=v50PygLI_kI

[winner (n)]

Arvida Group Limited   ARV NZ   NZ$1.25   NZ$904        10.7x   
Ryman Healthcare    RYM NZ   NZ$6.90   NZ$3,450         11.2x
Summerset Group Limited SUM NZNZ$9.30   NZ$2,159  11.9x
Oceania Healthcare    OCA NZ   NZ$0.83   NZ$594          10.1x

Extract from a brokers recent analysis on the sector, forward PE is the last figure and as you can see you can throw a blanket over the range of forward PE's, they're all very similar.  All companies will be subject to similar headwinds and challenges in the year ahead.
Three of these companies have proven business models with which they have proved they can grow earnings...and one just talks about growth.

So currently with similar PEs the 'best play' in the sector from now is the one that can grow the fastest ...yes?

[Basil]

So currently with similar PEs the 'best play' in the sector from now is the one that can grow the fastest ...yes?

Exactly. Look at the various business models across the sector and ask yourself, who has the most proven track record of growing earnings in the last decade, (SUM), and which company has the most obvious headwinds going forward with care costs, (OCA).  I also think it's well worth focusing on the very latest data coming back from the market and its readily apparent that since the Reserve Bank's extremely hawkish statement in late November the real estate market has taken another significant leg down in terms of sales level's.   Banks are stress testing new applicants at close to 10% now and hardly anyone is going to qualify.

I am forecasting that 2023 is going to be a very grim year for house prices and sales volumes.  Consider who has the lowest gearing in the sector ARV (28%) and SUM at a similar level, compared to OCA at 38% and RYM even worse, and who's sales have proven so far in 2022 to be holding up the best (ARV), and who's reported sales have been the worst (OCA).  Strap yourselves in for 2023 folks, it's going to be a very challenging year for this sector.

[BlackPeter]

Arvida Group Limited   ARV NZ   NZ$1.25   NZ$904        10.7x   
Ryman Healthcare    RYM NZ   NZ$6.90   NZ$3,450         11.2x
Summerset Group Limited SUM NZNZ$9.30   NZ$2,159  11.9x
Oceania Healthcare    OCA NZ   NZ$0.83   NZ$594          10.1x

Extract from a brokers recent analysis on the sector, forward PE is the last figure and as you can see you can throw a blanket over the range of forward PE's, they're all very similar.  All companies will be subject to similar headwinds and challenges in the year ahead.
Three of these companies have proven business models with which they have proved they can grow earnings...and one just talks about growth.

One of the criteria we applied when employing new designers and analysts was to check whether they are able to from their opinions based on a diverse variety of inputs - or whether they used to jump to conclusions based on preconceived views.

You are listing PE (and actually OCA looks best) and you hold this against them due to a preconceived view.

Why not telling us a bit more about the whole story?

Who is doing best in earnings CAGR? Which company has the best discount to assets? Did you compare the past growth rates and made a judgement, which of them are already past their best (growth rates peaked and declining) and which of them have still the best to come?

Are you comparing the stories and aligning them with the public health forecasts?

Just picking one parameter and trashing a company for actually doing best in this category is not good enough.

[Basil]

I have already posted extensively about the challenges OCA faces.
Underlying earnings, (realised earnings) is the benchmark for this sector that RYM set.  I beleive you use other criteria so we are never going to align our views based on earninbgs metrics.
OCA's underlying earnings per share have gone backwards since they listed.
SUM have grown underlying earnings per share at a rate of 31% CAGR since they listed and are confident of growing earnings this year despite the headwinds for the sector.  They do what they say they are going to do unlike your beloved OCA.
ARV grew underlying eps last half by 10% in a very tough market and have grown underlying earnings per share reasonably well since they listed whereas OCA have not.  Blind Freddy can see RYM have too much debt for this market.
Care suites are vastly oversupplied in the market which is why they are not selling well.
I think a decade from now as the baby boomer population come of that age care suites will do okay-ish.
RYM with their fully refundable deposit scheme for premium rooms which is finding wide acceptance in the market, (100% of the deposit back within 30 days of passing), are in my opinion sucking the wind out of care suite sales.  That's how I see it but I have such a small stake in this sector I find it easy to be completely objective.  I invest on the numbers and numbers only and leave the relative feel good ESG merits of each company to others to consider.
If that makes me a bad dog then I'm guilty as changed but I can't help noting that all sector participants are trying to curate wonderful living environments for their residents, some with far more facilities than others though and in my experience it's those on-site facilities that get old folks out of their units mixing with and enjoying each other's company. 
 

 

[Basil]

today's presentation
https://www.youtube.com/watch?v=v50PygLI_kI

I reckon there's every chance he'd make a great Dad reading his kids fairy tales at bedtime.  Fabulous storyteller with lots of really impressive feel good stuff.  Shame about the numbers which do not line up with the story.