OCA - Oceania Healthcare

[lorraina]

Funny as..lol.
No surprises there.!

[Whacc]

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.

Found that upmarket care statement very interesting.
Every New Zealander is currently entitled to, at least in part, subsidised hospital-level care regardless of their means.

So at higher socio-economic sites they're not going to apply for funding that the resident (and by extension OCA) are entitled to?
I just don't understand the point of this and why it would be a value-add strategy?

Will they provide a different standard of care at these sites (it's always been care is care - it's high regardless)?
Is it something to do with strengthening the social license so you can demand Government increase funding for standard beds?
I presume it's so you have a counter argument to Government claims of "LOOK AT YOUR PROFIT THOUGH!"

Honestly a big shoulder shrug on why this is something shareholders should be excited about.

[BlackPeter]

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.
 

 

Fair enough.

I do use earnings according to the internationally agreed standard, while you use non standardized parameters every CFO can make up (and they do) as they see fit.

Clearly my fault - guilty as charged.

But look, it is good to have a variety of views in these discussions, and sure - sometimes the use of non standard measures helps to see some things better. Sometimes recasting can add value, but sometimes it just adds another level of smoke screen - and I suppose this is what some CFO intend to do.

Not wanting to start here a discussion about our different methods to value companies - it clearly is interesting to get various different views, and lets face it - markets don't follow any particular method to value stocks over time, so the more different views we hear and see, the more likely it is we understand what the market is going to do.

It is just sometimes a bit arduous to endure the same argument from the same poster several times per week - again and again and again. We get it that you don't like OCA (well, at current, its not unheard of you changing your views).

I don't like everything they do either, but I still see them at current on the balance of arguments as a deep value game.

[winner (n)]

There's an old saying 'Earnings don't repay loans, Cash flow does'

Probably these days applies more so to companies in the retirement sector

That 'hand brake' scenario on another thread was interesting

[winner (n)]

There's an old saying 'Earnings don't repay loans, Cash flow does'

Prompted me to update this - another measure I have a morbid fascination with

Its a chart of Oceania's cash burn since they floated (including dividends)

Suppose spending more and more is what happens in this sector so no worries ..... but whatever a fascinating chart showing half a billion of spend funded by the begging bowl to shareholders and borrowing more.

At least that forbar 'hand brake' scenario said that if they stopped developing (borrowing) they would be debt free in 2027 ... that's good

You cannot view this attachment.

[winner (n)]

Top chart below is from half year preso a few weeks ago

The EBITDA MARGIN line doesn't look too bad hanging around 12%

The bottom is from Full Year preso from six months ago and had things going back to 2017 ..like ebitda margin was 21% in F17, 18% in F18 and 15% in F19

And six months ago I think they said that ebitda margin would start improving because covid was over and more premium stuff etc etc ..just have to wait eh

Making things look better (less bad) pretty sneaky eh

They have changed a few other charts as well ...hmmm

Red flags to me

You cannot view this attachment.

You cannot view this attachment.

But 

[Basil]

Excellent work Winner, thank you.  Gosh the slope of that red line, cash burn looks like its steepening   
"Care Suite premiumisation delivers results" the recent result headline read.  Interesting how they changed the timeframe of the latest chart to try and show the margin in a better light.   Hmmm

[Gerald]

What are the odds 1 RV player has to do a cap raise before old mate Haast Eagle Orr finishes his hiking?

Hope not 

[Ferg]

Interesting 'cash burn' chart winner which had me scratching my head.  It's not wrong per se - but I think it is only telling half the picture

'Cash outflows' per your graph of ~$504m is made up of:

• operating cash flows +$582m
• less capex -$985m
• less dividends -$102m
• gives circa -$504m

Meanwhile assets grew by $1.5b since FY16, and on the other side of the Balance Sheet ORA's grew by $600m, loans $240m, capital $330m and reserves + retained earnings grew $430m.

So very roughly it appears growth in the investment / income earning asset base of $1.5b was funded ~40% by residents, 16% by loans, 22% by equity and the balance from retained earnings etc.  In other words this 'cash burn' of ~$500m represents around 33% of the build in asset base.  Half of that was borrowings locked in at rates of 2.3% and 3.3% for 7 year terms. The remaining portion was mostly funded interest free by residents.

Looking at these numbers I would happily borrow $1 if I could get another $1-$2 free of charge to add to an asset base that makes money.....where do I sign up?

[lorraina]

Interesting 'cash burn' chart winner which had me scratching my head.  It's not wrong per se - but I think it is only telling half the picture

'Cash outflows' per your graph of ~$504m is made up of:

• operating cash flows +$582m
• less capex -$985m
• less dividends -$102m
• gives circa -$504m

Meanwhile assets grew by $1.5b since FY16, and on the other side of the Balance Sheet ORA's grew by $600m, loans $240m, capital $330m and reserves + retained earnings grew $430m.

So very roughly it appears growth in the investment / income earning asset base of $1.5b was funded ~40% by residents, 16% by loans, 22% by equity and the balance from retained earnings etc.  In other words this 'cash burn' of ~$500m represents around 33% of the build in asset base.  Half of that was borrowings locked in at rates of 2.3% and 3.3% for 7 year terms. The remaining portion was mostly funded interest free by residents.

Looking at these numbers I would happily borrow $1 if I could get another $1-$2 free of charge to add to an asset base that makes money.....where do I sign up?

We do not have to sign up anywhere.
Just join the OCA share register,and let them continue doing what they know best.
And the Christmas Bonus is we can  currently buy  $1 of OCA [NTA] for  62.68 cents....!!!!!
Good people doing great things...

[Whacc]

What are the odds 1 RV player has to do a cap raise before old mate Haast Eagle Orr finishes his hiking?

Hope not 

RYM should have done a cap raise in the good times (as an aside the exact same thing could be said for central bank hiking!!)

Cap raises are not a bad thing for growth companies, framing them as such has been RYM's biggest issue.
Dividends are the real stupidity for these businesses.  They have no free cash flow.

[BlackPeter]

There's an old saying 'Earnings don't repay loans, Cash flow does'

Prompted me to update this - another measure I have a morbid fascination with

Its a chart of Oceania's cash burn since they floated (including dividends)

Suppose spending more and more is what happens in this sector so no worries ..... but whatever a fascinating chart showing half a billion of spend funded by the begging bowl to shareholders and borrowing more.

At least that forbar 'hand brake' scenario said that if they stopped developing (borrowing) they would be debt free in 2027 ... that's good

You cannot view this attachment.

Pretty picture. Accelerating trends towards the bottom right make most investor nervous. However - doesn't this chart just show that they invest money into new buildings - and their build rate has increased? Good on them, as long as they can repay their bonds / loans / occupier deposits, and so far I don't see any issues, their leverage ratio is in the mid 50'ies (which is quiet normal). Do you?

Makes sense that it takes a bit of time for an investment into a building you own to repay, doesn't it?

What exactly is the big deal?

[winner (n)]

Pretty picture. Accelerating trends towards the bottom right make most investor nervous. However - doesn't this chart just show that they invest money into new buildings - and their build rate has increased? Good on them, as long as they can repay their bonds / loans / occupier deposits, and so far I don't see any issues, their leverage ratio is in the mid 50'ies (which is quiet normal). Do you?

Makes sense that it takes a bit of time for an investment into a building you own to repay, doesn't it?

What exactly is the big deal?

Yes, no big deal

I did Suppose spending more and more is what happens in this sector so no worries .

Just see it as fascinating - suppose all in sector have similar charts - and was in context of 'Earnings don't repay loans, Cash flow does'

[winner (n)]

Fair enough.

I do use earnings according to the internationally agreed standard, while you use non standardized parameters every CFO can make up (and they do) as they see fit.

Clearly my fault - guilty as charged.

..............

Things like Underlying Earnings do use real numbers and even thought those distardly CFOs might manage what's reported they do represent a pretty good feel for how current activities (looking after and caring for people and selling properties) are doing

Insofar as your using these internationally agrred standards have you ever considered that as the resulting NPAT is essentially change in fair valuations how guesses, estimates, assumptions etc etc are behind those numbers - many guesses,estimates, assumptions I reckon

[Basil]

Interesting they cut their dividend and are still running their dividend reinvestment program issuing shares at a deep discount to NTA, (when most other companies stop their DRIP in similar circumstances).