OCA - Oceania Healthcare

[Basil]

Yeah for sure. I imagine the trope of the silver tide makes it hard for them to take the loss, I know it was when I sold out although time has shown just how much worse it could have been  . I keep eyeing this one and ARV up time to time but struggle to get past the non-development business being so marginally profitable. I'm sure part of it is DMF maturity of the villages but it is hard to overlook the rapid growth in OPEX as well. As these businesses have grown their operations I would have expected OPEX growth to taper to be more in line with inflation, since adding a few hundred units when you only have a few hundred is a huge change vs adding a few hundred more units when you have thousands is a small change. IE % growth in units a year is not as high as it once was to my knowledge yet OPEX is still roaring away. Can DMF and other village revenue outpace OPEX going forward or will they always rely on rising house prices and development margin. These are the things I ponder.

All perfectly valid things to ponder in my opinion.  Maybe that's all been factored into in the price now ?

[Azz]

No clue why this particular stock on the NZX has such a following. Can anyone explain it? Because it's a dog stock for price. The share price journey is shocking. I'm not trying to upset longs, in fact I'm trying to help: if I had been holding myself, I would have sold up ages ago. It's a total waste of time and capital. And the CEO departs to spend more time with his family, and the market moves the stock an almighty 5c higher. What's that all about? It's good he's going but it really doesn't matter? Or maybe it was just natural price drift and some punters didn't even know who he was?

I actually want to make two points here. (Disclosure: I looked into this outfit ages ago, along with all the other suspects in the NZ retirement home industry, because "the one who shall not be named" mentioned it to me in an unrelated thread in a galaxy far away; I came back from my research absolutely shocked at this industry, and obviously I never bought shares in any of them and I never will.)

Point 1: "The Elephant in the Room"... I won't dwell on this as I've read the "Strict" guidelines and my intention is not to upset those who hold the stock, and too many details would certainly be upsetting. But these sales of "property" to people are a total rip-off. There must be many and significant estate fights over aged people destroying their wealth when they already owned a house. Would anyone here on this site, today, sell a fully paid-up house and go and live in an OCA establishment (which not only destroys the family property but essentially charges rent as well)? That's it from me on this. Pick it apart as you like, but I can tell you now I would never do anything as financially illiterate as signing up for one of these, no matter my age.

Point 2: "Liquidity"... The NZX is never going to be the same again. A.I. changes everything. And all that money is on the Nasdaq. Why would anyone buy the stock the longs hold, when they wish to cash out for huge riches in x amount of years? It's not going to happen. That money is going overseas. This affects all stocks held on the exchange but it affects some more than others. The most likely buyer of OCA stock is an offer with a low-ball bid maybe 30c higher than it is now.

[Untamed]

If you are the same Azz from ST, I should probably just scroll on by, but I have zero willpower, so .....  you are still young, so I understand why you might feel this way now, but there is a lot of water to flow under the bridge between now and your retirement. You may very well feel very differently when you get there. There is more to life than accumulation of wealth. I would lay a bet that if you took a wander through an OCA,SUM or RYM facility, you would be hard pressed to fine even one resident who regrets their decision.

but I can tell you now I would never do anything as financially illiterate as signing up for one of these, no matter my age.

[Azz]

If you are the same Azz from ST, I should probably just scroll on by, but I have zero willpower, so .....  you are still young, so I understand why you might feel this way now, but there is a lot of water to flow under the bridge between now and your retirement. You may very well feel very differently when you get there. There is more to life than accumulation of wealth. I would lay a bet that if you took a wander through an OCA,SUM or RYM facility, you would be hard pressed to fine even one resident who regrets their decision.

"If you are the same Azz from ST, I should probably just scroll on by"

That's not a very nice thing to say. I thought this was the friendly chat site.

Re the OCA/etc retirement home ripoff: the amount of money lost on the deal, plus all the rent having to be paid, could be used for paid care with a nurse or family member in the owned home, if that's the issue (health). But if these people are healthy and active well that makes the ripoff even worse. And if someone doesn't truly care about wealth transfer upon death, an annuity could be done.

[Basil]

If you are the same Azz from ST, I should probably just scroll on by, but I have zero willpower, so .....  you are still young, so I understand why you might feel this way now, but there is a lot of water to flow under the bridge between now and your retirement. You may very well feel very differently when you get there. There is more to life than accumulation of wealth. I would lay a bet that if you took a wander through an OCA,SUM or RYM facility, you would be hard pressed to fine even one resident who regrets their decision.

When my Mum was in the Peninsula Club retirement village, (now owned by Arvida), she told me everyone she knew there felt the same way.  They all wished they had moved it sooner.  Apart from the early years of her marriage she told me just before she died that the 11 years she enjoyed at the village I helped choose for her and Dad, were the happiest years of her life.  We all knew when she moved in Dad wasn't long of this world with his advanced dementia, but she was never lonely despite living 9 years there without him.  I think close camaraderie, minimizing loneliness through companionship and a genuine sense of community are huge factors. All the common area's and activities are just facilities to help achieve what I've just mentioned which is what's really important. 

[Breezy]

"If you are the same Azz from ST, I should probably just scroll on by"

That's not a very nice thing to say. I thought this was the friendly chat site.

Re the OCA/etc retirement home ripoff: the amount of money lost on the deal, plus all the rent having to be paid, could be used for paid care with a nurse or family member in the owned home, if that's the issue (health). But if these people are healthy and active well that makes the ripoff even worse. And if someone doesn't truly care about wealth transfer upon death, an annuity could be done.

No clue why this particular stock on the NZX has such a following. Can anyone explain it? Because it's a dog stock for price. The share price journey is shocking. I'm not trying to upset longs, in fact I'm trying to help: if I had been holding myself, I would have sold up ages ago. It's a total waste of time and capital. And the CEO departs to spend more time with his family, and the market moves the stock an almighty 5c higher. What's that all about? It's good he's going but it really doesn't matter? Or maybe it was just natural price drift and some punters didn't even know who he was?

I actually want to make two points here. (Disclosure: I looked into this outfit ages ago, along with all the other suspects in the NZ retirement home industry, because "the one who shall not be named" mentioned it to me in an unrelated thread in a galaxy far away; I came back from my research absolutely shocked at this industry, and obviously I never bought shares in any of them and I never will.)

Point 1: "The Elephant in the Room"... I won't dwell on this as I've read the "Strict" guidelines and my intention is not to upset those who hold the stock, and too many details would certainly be upsetting. But these sales of "property" to people are a total rip-off. There must be many and significant estate fights over aged people destroying their wealth when they already owned a house. Would anyone here on this site, today, sell a fully paid-up house and go and live in an OCA establishment (which not only destroys the family property but essentially charges rent as well)? That's it from me on this. Pick it apart as you like, but I can tell you now I would never do anything as financially illiterate as signing up for one of these, no matter my age.

Point 2: "Liquidity"... The NZX is never going to be the same again. A.I. changes everything. And all that money is on the Nasdaq. Why would anyone buy the stock the longs hold, when they wish to cash out for huge riches in x amount of years? It's not going to happen. That money is going overseas. This affects all stocks held on the exchange but it affects some more than others. The most likely buyer of OCA stock is an offer with a low-ball bid maybe 30c higher than it is now.

You have much to learn about the ins and outs of this sector young grasshopper and I'm getting too old and weary to write a book for you.

[Untamed]

Clearly, you do not understand the reasons for people choosing to move into a retirement village. Those who move into a villa or apartment, generally do so for three reasons. One, they no longer want the stress or expense of having to maintain a home and garden/section. Two, they want extra support such as security, on call RN in the event of an emergency, gardener service (for villas), on site options for meals, entertainment, sports/activities etc. And finally, companionship and community connections. They are able, and happy, to pay for all of that.

Those needing a higher level of care, are usually even more isolated than the above group of people, if they are living at home. Your assumption that they could save their money and pay for a full time RN or caregiver, is misguided. For one thing, if they are still living in their home, they don't have that "bucket of money" you are talking about, at their disposal. It is tied up in the equity in their house. How do you propose they can pay for full time, in home care? 24 hour care would require a minimum of three caregivers working 8 hour shifts. Even at $27/hour, that is going to cost them over $4000 a week. Drop it back to 12 hours a day and you're still looking at over $2000 a week. Now add on equipment such as shower chairs, hoists, toilet raisers, incontinence products, food, and other basic items needed for someone needing higher level care. Plus, if your rostered caregivers are required to transport the person to appointments or activities etc - they need reimbursing for fuel and wear and tear on their car. They are also entitled to holiday pay and sick leave. There is NO away you could pay them under the table for this kind of role, so you are most probably going to have to employ them via an agency, at an extra cost OR do all the pay roll stuff yourself.

It is absolutely not as easy or "cheap" as you assume.

People make huge assumptions about elderly folk. The vast majority are absolutely still capable of making their own decisions and understanding exactly what they are signing up to when they choose an RV. We have to get away from this idea that they must leave an inheritance and be frugal to protect that inheritance. As far as I am concerned, as someone who is passionate about aged care, they should use their money for themselves. They worked for it, and they are absolutely entitled to choose to spend it on the last years of their life, if that is what they wish to do. At the end of the day it is money. A man made construct which can bring us some pleasure but also create a level of stress while we are alive, but it is of zero consequence once we are dead.

Re the OCA/etc retirement home ripoff: the amount of money lost on the deal, plus all the rent having to be paid, could be used for paid care with a nurse or family member in the owned home, if that's the issue (health). But if these people are healthy and active well that makes the ripoff even worse. And if someone doesn't truly care about wealth transfer upon death, an annuity could be done.

[Left Field]

Catching up with my weekend reading I liked this recent post by Maverick on the other channel.

"OCA have always said they would produce 250 to 330 units over the years. ( oooh, remember those days.... when any RV just had to buy a paddock, say they are increasing build rate and the share price would jump.)

OCA have never said they are throttling build rates but IMO they most certainly are...
They usually had a little over 500 units on the go at any time. Now they still have that number but in a VERY short time when some deliveries complete over the next few months they will have half that on the go. There is no mention of what will replace those completions, which they normally would have. Even Frankton`s earthworks seem to have fallen off the "under construction " schedule.

They are cutting back and seem to have significantly reduced their current build ambitions, although have not said so. They have some excellent sites ready to pull the trigger on when ready such as Milford, Frankton and numerous others but looking 6 months out they have not committed to bugger all of that new development.

This is all good news for the immediate and medium term stakeholders as this will do wonders to their balance sheet. They are a unique position of having 2 years of stock using appropriate sales rates for this market , currently ready for sale.

OCA historically spent capex of c. $80m HY ( and a higher number lately as they finished the Helier and CHCH) so it would seem fair this would reduce to say c. $50m . The net effect on the cash flow henceforth should be very healthy. (IMO There should be plenty of cash floating around to resume the dividend.)

Yes, I have some healthy numbers but given OCA are in the middle of this change and will be temporary, they are pretty meaningless to state here. These can only be rough figures as they are entirely dependent on what the directors set as build targets. At any moment they could easily resume construction at pace should they choose but until they ramp up again the money will be rolling in nicely.

I would hope some corporate expenses reduce too as they back off the build rate. Perhaps they will want to retain their staffing as they will want to resume building at some point. We will have to wait and see about that.

We know that should they stop spending on new stuff and just finish their work in progress, sell what they have over the next 2 years, then they could all but pay off all debt. It does seem for this moment in time that is their direction.

As a long term shareholder but also who wants the dividend to resume. To me and Daytr, this is an obvious path they have chosen for now.

Naturally , development will resume at some point, they are poised ready to go. In the interim for up to the next 2 years OCA are in a sweet position of turning their surfboard around and ride the wave (cash in) that they have created underneath them."

I've never held OCA ( despite previous exhortations by some noted posters to "back up the truck" and "you can't have enough (OCA)". I'm v glad I ignored these posters. However, I like a beaten down stock with a turn around story...... the question is whether "turn around" yet applies to OCA.

From a TA perspective OCA is still very much in downtrend mode..... but well worth watching from the sidelines (particularly if Maverick is proven right.) 

[Basil]

One or two of those posters were subsequently, quite clearly bearish for years after selling near the top.
Makes good common sense for them to dramatically dial back their build rate with the truly astonishing amount of completed stock they already have on hand. 

[winner (n)]

Oceania's stock turn would make Kathmandu's stock turn of 1.32 times look tremendous

And KMD didn't seem too perturbed with such a low number

Then again a huge stock pile of unsold units is akin to Comvita's mountain of honey ....doesn't do them any harm

[Basil]

Comvita has had a lot of problems with debt levels resulting from unsold stock.  They keep saying it improves with age. Suppose you could try and make the same case with OCA as the cost of construction never goes down then theoretically their unsold stock is worth more over time....but you have to sell it at some point and I worry some of the stock maybe isn't really wanted by the market.

Wonder what Todd Hunter does with really old vehicle stock that doesn't sell for years ?  You reckon he puts the price up or down ?  Is there a lesson there for Comvita and OCA ?

[Ricky Bobby]

Cashflow is so important, especially in these economic times. They like so many others will have to crack at some point, sell their high cost product for less/loss to get some cash in... then things balance out and we will be off again! This could take a while tho...

[TGB]

Wonder what Todd Hunter does with really old vehicle stock that doesn't sell for years ?  You reckon he puts the price up or down ?  Is there a lesson there for Comvita and OCA ?

I'd imagine they wholesale lots of unwanted stock to wreckers or potentially throw them in containers themselves and send them to markets that aren't too worried about modern safety standards.

[Basil]

Yes, repurposing stock for other uses is always a good strategy for stock you can't sell.  I do genuinely wonder with more than 4 years of unsold care suites whether some of those should be repurposed as cheap independent living units ?  I also wonder if the old care villages that are ostensibly breaking even and giving no return on capital, or even making a small loss, if they can't sell them maybe they could be repurposed as emergency housing or tarted up and sold as really cheap ILU units ?  Plenty of strategic thinking for the new CEO to focus on and really hope he does rather than encouraging furtherance of the ESG focus that seems to be becoming quite pervasive at OCA.

[winner (n)]

Yes, repurposing stock for other uses is always a good strategy for stock you can't sell.  I do genuinely wonder with more than 4 years of unsold care suites whether some of those should be repurposed as cheap independent living units ?  I also wonder if the old care villages that are ostensibly breaking even and giving no return on capital, or even making a small loss, if they can't sell them maybe they could be repurposed as emergency housing or tarted up and sold as really cheap ILU units ?  Plenty of strategic thinking for the new CEO to focus on and really hope he does rather than encouraging furtherance of the ESG focus that seems to be becoming quite pervasive at OCA.

Emergency housing would fit well with their BELIEVE IN BETTER culture