OCA - Oceania Healthcare

[BlackPeter]

If a company is doing well fundamentally but has a falling share price there should be no cause for concern, right? Unless you need to liquidate in a short timeframe that is.

I am wondering whether we have on this thread a problem with some wires being crossed - and that's not just in the latest posts between these two posters (so, I apologise for jumping in quite here)?

One of the camps I hear saying that it is good (for a buyer and long term investor) if the price for an by the market undervalued company keeps dropping. And yes, as I see it - as long as the market is wrong (i.e. the markets rational or irrational fears are unjustified) this camp is right. Nothing better than buying a great product on special sales prices!

The other camp I hear saying that maybe the company is not that undervalued as the other camp thinks it is. Sure, it is great if they heap up lots of a desirable product - and no doubt, if they manage to sell it, they will make a fortune. What however, if they have all this desirable product on their balance sheet, but can't sell it due to market constraints? For sure - it is not clever to have lots of unsold product in your stores - this just costs money to maintain and lost opportunity costs. I think this camp has a point as well, if this is what happens.

So - no need to bother good old Warren, and in my view neither to bother all the stats about the grey tsunami coming in. I think we all see the real estate OCA accumulated, we all see the grey tsunami (and with it the need for more safe living and care places). The only real question I see is - has OCA invested into too much up market product which, while certainly desirable to have, the market can't afford?

If that's the case, than all the talk about NTA is pointless.

So - the real test is - are they able to fill luxury accommodation like the Helier (https://oceaniahealthcare.co.nz/location/the-helier) in real time?

Now - what does that mean? Care suites have an average occupancy of three years and living suites something like 7 years. Lets take the average - i.e. if the Helier is fully booked out after 5 to 6 years ramp up time, they didn't build too many units.

If it s booked out significantly earlier, they need to build another Helier, and if its after seven years still semi vacant, they clearly made a mistake.

So far the numbers we heard: A total of 111 units (not all complete yet) and of them after less than a year already 26 sold (yes, this number is already some months old) indicate that the Helier might fill up within something like 2 to 3 years. That's not bad, isn't it?

From memory - it took something like 3 years to fully sell the Sands, and I hear that the presales for Bellevue in Christchurch (https://oceaniahealthcare.co.nz/location/the-bellevue)  are going quite well (something like 1/3rd presold).

So, may be we need more local intelligence counting the curtains and occupied balconies at the Heliers - and we certainly would need better reporting from OCA itself (yes, OCA, your reporting sucks), but at this stage I think its much more likely that OCA's new luxury living counts as a success rather than a failure. They say patience is a virtue, don't they?

And, if this is the case, than certainly camp 1 will have the last laugh ...

[Basil]

OCA could very easily grow its EPS from here very rapidly. All they would need to do is wrap up developments and invest all ORA's into bonds. But of course, this would be at the expense of being able to grow their asset base as rapidly as they have done in the past... IMO as long as they can grow the ORA account at a 15% CAGR they should do that as long as possible.

I've seen your view repeatedly espoused on the other channel and there are a number of deep systemic flaws inherent in your thesis.  My view remains as expressed in paragraph #2 of post #923 above, they have to grow earnings to break out of the malaise they're in.  I've written extensively about the challenges OCA face before, and I know the P.C. hyena pack will jump down my throat if I summarize them again.  Suggest you read my earlier posts on this channel and Beagle on the other channel, it's all been covered before. 

Where we agree is that OCA needs to sell down its existing units rather than continually building an ever-growing ocean of unsold stock.  How well or poorly they can do that in the years ahead will play a major part in dictating the future direction of the share price.  The other thing that will shape the future share price is whether in gradually selling down 4 years' worth of unsold care suites it actually increases earnings per share.  I think the jury is out on that.  Will more than 90% of the increase in DMF revenue be eaten by a commensurate increase in operating expenses as it has before, or can they convert a slightly better percentage of increased DMF revenue into bottom line profit?  Time will tell. 

I am surprised the dead cat bounce after index exclusion hasn't added a bit more to the share price.  It seems the market is deeply skeptical of claims of a rosy full year report coming in late May.  I think those hoping for $1 are going to be deeply disappointed.  Hopefully it can get back up into its recent trading range of 68-74 cents.

[winner (n)]

Another month passes by so just had to update this chart of OCA share price as %age of SUMs

Both had up months and OCA was up a fraction more than SUMs

The long term trend is still in place but maybe, just maybe, we are at a turning point and the OCA share price might do better than SUMs in future

SUM due to release quarterly sales numbers in next week or two. That might boost both ...pity we need to wait until May until we hear anything from Oceania about their progress.

You cannot view this attachment.

[Basil]

Wont this sector be ok in the long run as house prices are surely fairly valued in NZ... right?

This comment really belongs in the general retirement village thread but the problem is we're amongst the top few most expensive countries in the world on a per capita basis for housing.

Winner, that's a very well entrenched trendline.

[Teitei]

This comment really belongs in the general retirement village thread but the problem is we're amongst the top few most expensive countries in the world on a per capita basis for housing.

Winner, that's a very well entrenched trendline.

Australia is worse but it has the benefit of an economy with real depth and wealth supplemented by flows of rich migrants.

Something has to give in NZ and I for one do not see property prices continuing to increase like in the past, especially with tens of thousands of our bright and skilled youngsters leaving for Australia - to be replaced by low grade & relatively poor migrants.

https://www.canstar.com.au/home-loans/expensive-cities-buy-property/

[Untamed]

Did you really to add the "low grade" comment? You were doing OK up to that point.

to be replaced by low grade & relatively poor migrants.

[Teitei]

Did you really to add the "low grade" comment? You were doing OK up to that point.

Relative to who we are losing (the young, skilled, professionals and wealthy), how else would you describe the tens of thousands of semi-skilled workers NZ is importing from India, Philippines, South America and Fiji? Bus drivers, tire changers, painters, laborers, beauticians, and scammed workers.

https://www.rnz.co.nz/news/national/509925/vietnamese-migrants-sold-everything-to-pay-for-work-visas-claim-promised-jobs-non-existent

"A group of 16 Vietnamese allegedly paid $203,000 after being promised work and new lives, but arrived to find no jobs and were left with a mountain of debt that they say will be impossible for them to pay off. A spokeswoman for the group, Sky Duong, said the group were recruited through Facebook to work for New Zealand company Do Painters Limited and had been promised a wage of $50 an hour. She said they each paid $35,000 and an additional $15,000 for those with spouses and children for the job offer and an agent referred to them by the company to support their application for the work visas."

[BlackPeter]

Relative to who we are losing (the young, skilled, professionals and wealthy), how else would you describe the tens of thousands of semi-skilled workers NZ is importing from India, Philippines, South America and Fiji? Bus drivers, tire changers, painters, laborers, beauticians, and scammed workers.

https://www.rnz.co.nz/news/national/509925/vietnamese-migrants-sold-everything-to-pay-for-work-visas-claim-promised-jobs-non-existent

"A group of 16 Vietnamese allegedly paid $203,000 after being promised work and new lives, but arrived to find no jobs and were left with a mountain of debt that they say will be impossible for them to pay off. A spokeswoman for the group, Sky Duong, said the group were recruited through Facebook to work for New Zealand company Do Painters Limited and had been promised a wage of $50 an hour. She said they each paid $35,000 and an additional $15,000 for those with spouses and children for the job offer and an agent referred to them by the company to support their application for the work visas."

Look, whatever ones view on our current governments immigration policies (I admit, that I have as well problems to understand the current selection criteria), this is clearly not a discussion for the OCA thread.

Any chance, you put that under general discussion, if you have a desire to follow up on that?

[Untamed]

I know what you meant but I think you could have chosen a much less disrespectful and judgmental phrase.

"Low grade" implies an assessment of poor quality and value, in whatever job they do. Which is unfair.

Never forget that we have immigrants who come here, with a Degree in Medicine or Nursing, who are working as Uber drivers because they can't get registration here (for whatever reason).

Besides which, the vast majority of the immigrants you are referring to, are hard working people, who are good at what they do.

Just saying. Be careful with your words.

Relative to who we are losing (the young, skilled, professionals and wealthy), how else would you describe the tens of thousands of semi-skilled workers NZ is importing from India, Philippines, South America and Fiji? Bus drivers, tire changers, painters, laborers and unqualified scammed workers.

[Teitei]

Look, whatever ones view on our current governments immigration policies (I admit, that I have as well problems to understand the current selection criteria), this is clearly not a discussion for the OCA thread.

Any chance, you put that under general discussion, if you have a desire to follow up on that?

It is pertinent, BP because those who are leaving are by and large also leaving properties for sale while those who are coming here have zero capacity to buy the highly priced properties here.

What will that do to property prices and the RVs' prices?

[Clearasmud]

 

What will that do to property prices and the RVs' prices?


[/quote]
Drop them, hopefully.

[Azz]

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.

Untamed, if you wish, reply back with your thoughts; there's no "enemy" here, there's nothing personal going on, this is a discussion between people with different viewpoints, and opinions can always change given enough legitimate evidence.

I understand now that you are more interested in the company (OCA) and the retirement home industry and the wellbeing of the retired/elderly, than the shares you hold in OCA (I'm pretty sure that's what you meant). I apologize for misunderstanding you; I just thought as it was the OCA stock thread... oh doesn't matter, my bad! :-)

"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."-- Untamed

That's not correct. There are various ways to utilize home equity upon retirement. Reverse Mortgage being one of them. Any financial advisor not going through these options with the retiree would be negligent. (And I sincerely hope retirees are seeking independent financial advice before making big decisions.)

Re your passion for the retirement village concept - I get what you're saying. And I respect it. I just don't happen to agree with current practices regarding the way it's charged for. Why not just long-term lease? Make it a purely rental situation where the unit can be rented until the occupant passes away. Why force the sale of the retiree's [most likely] largest asset, and the proceeds of that to be used for another home that they then live in (and they also pay a weekly fee that could be considered rent anyway). In other words, tying up capital when all the retiree really wants is to live in a unit within a village, and subsequently enjoy its security and social aspects (see: I agree with you on these two aspects). To me, this is not the retirement home industry, it is instead a part of the real estate industry (with special character). To me, the primary focus of companies like OCA is selling (and re-selling) high-priced real estate.

The medical side that you describe, I think falls into "private hospital" territory, but is strange because the government seems to be setting prices for aged care as well as handing out subsidies. This situation is worrying. Maybe I don't have full information. But how does OCA do out of this? Price controls never end well. This care bit really interests me; I'm annoyed I can't figure it out; any information appreciated, especially on the viability of this what appears to be forced partnership with government, and especially in regards to 1) good service to the customer, and 2) profit to OCA.

Re the stock, I think you misunderstood what I was saying. Even though I was saying it in reply to [me misunderstanding] you, it's pretty important, and I'll try and explain it better... :-)

Your backing of the retirement home industry and this company OCA, is great: you believe in both. I operate in the same manner: when I back something, after research, I back it fully as well. But as part of that research, what I do is look at the stock that represents the company on a specific exchange, keeping in mind that the stock, while related to, is actually separate from, the company itself.

You, and others, might be quite correct about OCA being a good company with a good product. But this may not translate into a good stock investment. This is a very important investment concept. When it comes to the stock market, I don't invest in companies as such, I first and foremost invest in stocks. An amazing company, even a reasonably profitable one, might have a terrible share price journey. These bad journeys can last several years, even decades.

So we have:

* The industry/sector
* The company
* The exchange
* The stock

There are economic factors too, especially for a real estate company, and we're in a terrible recession in NZ right now, but let's keep it simple. Let me drop the first item off as well, and go from there.

We have:

* The company
* The exchange
* The stock

For OCA, the following:

* The company -- There are different viewpoints on its greatness; I'm not a fan; others very much are. Of interest is the CEO currently working through his notice. (I'm not going to publish my list of negatives found; I don't see the point - read on to understand why.)

* The exchange -- The NZX is dog tucker; liquidity is only going to get worse; it is my view that we need to merge our companies over to the ASX (we just need agreement on seamless imputation), and put the NZX out of its misery; a big factor negative to the NZX is that the overwhelming desire for A.I. riches means a lot of money moving offshore. For OCA, even with some successes of their business, there is not going to be a big scramble for the shares.

* The stock -- I arrived at five probabilities, one of which will dominate for the next two years or so (and possibly much longer): 90% chance share price will continue to drift sideways; 5% chance of a low-ball offer; 2% chance share price falls substantially; 2% chance share price increases in value by between 67% and 99%; 1% chance share price increases in value by 100% or more.

I love dividends, when a company is in safe waters; I don't think this company should be paying a dividend under current economic conditions (and it's not going to pay one, so that's a good defensive move by the company). I'm basically ignoring possible future dividends as a consideration for valuing the stock. (Please note I'm not a trader; I'm long-term, and I either eventually dump a stock for hopefully only a small loss, or I continue to hold winners.)

I haven't properly talked about time, as to how long is too long for a stock to have terrible share price performance. It depends on the stock. I could own a stock that is down 50% for a couple of years, and I'll still back it (continue to hold), and eventually it becomes a winner. What I'm saying for OCA is that enough time has already passed; if I had been a holder, even sitting on a loss, I would have sold a while back (and the capital used elsewhere).

To sum up: I do not think it's actually relevant as to whether OCA is a great company or not, in regards to [positive] share price performance; my view is there is no share price win here, I don't see much gain from current levels.

I want to add my view on what I'm witnessing some OCA longs doing (maybe it's just one person doing it). And that is averaging down, to hold. Look, people can do what they want; this is merely my opinion, after decades of fruitful investment across a multitude of markets and assets. Averaging down on a problematic stock, a stock at or near an all-time low with no obvious oversold condition, so as to increase a long position, is what I'm talking about. I'm not talking about dollar cost averaging to regular tranche buy a solid stock that is generally on the up and up, which is a completely different and wholly worthwhile approach. Averaging down, we all know what that means. DO NOT DO IT. I have literally never seen this end well. Think about the overall concept: buying a stock on a downward trajectory, and people will do it not just once but over and over, each time the stock is at a lower price - and way more often than not there is very good reason for the low price. Just keep cool if the stock held is lowly priced and research doesn't disallow it entirely; when it starts consistently rising on company news of actual turnaround, that might be the signal to buy more shares. (There are exceptions I guess, such as a stock obviously oversold after a single-session major selloff. But I can't think of any exceptions that would apply to OCA at this time.)

Everyone, do your own research. I may, of course, be completely wrong about the OCA share price. (Disclosure: I currently hold no NZ stocks, except in an allegedly aggressive fund where I disagree with their purchase but I have no choice except to exit the fund entirely.)

Just one last thing: longs on this thread, please stop being so defensive. It's not a good look. You don't need to attack people who have a differing view. Just reply back to negative-sentiment posts with reasoned argument. Be confident. I truly do not understand why people get angry when someone doesn't like the stock they like. I have the opposite approach: for a stock I'm in, and that includes any that are down big, I want all knowledge, I want all opinions, I especially want negative opinions, I do not want to restrict any of it because it's all of benefit (with the exception of defamatory assault of a named officer of the company, and no this exception does not include evidence-backed statements of opinion on, for example, CEO performance). What's actually detrimental is hiding away negative opinion, and living in an echo chamber - that's the quickest way to ruin. (Here's a prime example of a disastrous echo chamber: those delusional folk who say Bitcoin has zero value - patting each other on the back and missing out on millions of dollars of pure-profit derived from some of the best percentage gains ever seen in the history of investment.)

[Untamed]

I will give credit where credit is due, and say, this is one of your more mature posts, so that is nice to see. Having said that, I honestly just don't have the energy to respond right now. Maybe another day.

Untamed, if you wish, reply back with your thoughts ...

[Azz]

I will give credit where credit is due, and say, this is one of your more mature posts, so that is nice to see. Having said that, I honestly just don't have the energy to respond right now. Maybe another day.

Tell ya what, I'll be mature 86% of the time. Is that ok? It'll be a struggle but I reckon I can do it. Reply to my post at your leisure. Re energy replenishment, there's a health drink called Mountain Dew I can recommend. Happy Easter/chocolate day two and a half hours early!

[ValueNZ]

Re your passion for the retirement village concept - I get what you're saying. And I respect it. I just don't happen to agree with current practices regarding the way it's charged for. Why not just long-term lease? Make it a purely rental situation where the unit can be rented until the occupant passes away. Why force the sale of the retiree's [most likely] largest asset, and the proceeds of that to be used for another home that they then live in (and they also pay a weekly fee that could be considered rent anyway). In other words, tying up capital when all the retiree really wants is to live in a unit within a village, and subsequently enjoy its security and social aspects (see: I agree with you on these two aspects). To me, this is not the retirement home industry, it is instead a part of the real estate industry (with special character). To me, the primary focus of companies like OCA is selling (and re-selling) high-priced real estate.

Remind me again how coercion is involved... There is no "force" being used. Whether it's something you would consider yourself to have utility is not the question, there is clearly a market for this sort of product.

The medical side that you describe, I think falls into "private hospital" territory, but is strange because the government seems to be setting prices for aged care as well as handing out subsidies. This situation is worrying. Maybe I don't have full information. But how does OCA do out of this? Price controls never end well. This care bit really interests me; I'm annoyed I can't figure it out; any information appreciated, especially on the viability of this what appears to be forced partnership with government, and especially in regards to 1) good service to the customer, and 2) profit to OCA.

There is definitely merit in your argument (although being forced to deal with the government can be seen as a good thing too), but you're totally missing the forest for the trees. What's important over the short term is getting their "ocean" (ha) of stock sold down. The long term is all about continuing their epic growth of their asset base via development or focusing on allocating capital elsewhere from the inflow of ORA's.

Re the stock, I think you misunderstood what I was saying. Even though I was saying it in reply to [me misunderstanding] you, it's pretty important, and I'll try and explain it better... :-)

Your backing of the retirement home industry and this company OCA, is great: you believe in both. I operate in the same manner: when I back something, after research, I back it fully as well. But as part of that research, what I do is look at the stock that represents the company on a specific exchange, keeping in mind that the stock, while related to, is actually separate from, the company itself.

You, and others, might be quite correct about OCA being a good company with a good product. But this may not translate into a good stock investment. This is a very important investment concept. When it comes to the stock market, I don't invest in companies as such, I first and foremost invest in stocks. An amazing company, even a reasonably profitable one, might have a terrible share price journey. These bad journeys can last several years, even decades.

Ever heard the quote "In the short run, the market is a voting machine but in the long run, it is a weighing machine"? An amazing company with a 'terrible' short/medium-term share-price performance will in the long run eventually become fairly valued for very obvious reasons.

* The exchange -- The NZX is dog tucker; liquidity is only going to get worse; it is my view that we need to merge our companies over to the ASX (we just need agreement on seamless imputation), and put the NZX out of its misery; a big factor negative to the NZX is that the overwhelming desire for A.I. riches means a lot of money moving offshore. For OCA, even with some successes of their business, there is not going to be a big scramble for the shares.

I agree that companies listed on the NZX are mostly overvalued. But having low liquidity is a good thing, not a bad thing for a long-term investor. Higher volatility is something to take advantage of.

* The stock -- I arrived at five probabilities, one of which will dominate for the next two years or so (and possibly much longer): 90% chance share price will continue to drift sideways; 5% chance of a low-ball offer; 2% chance share price falls substantially; 2% chance share price increases in value by between 67% and 99%; 1% chance share price increases in value by 100% or more.

This is unreal. WTAF? How are these probabilities calculated?

To sum up: I do not think it's actually relevant as to whether OCA is a great company or not, in regards to [positive] share price performance; my view is there is no share price win here, I don't see much gain from current levels.

Screw the underlying fundamentals eh? Pathetic. You should be happy for a stocks intrinsic value to compound away from the stock price, who doesn't like a good discount?

I want to add my view on what I'm witnessing some OCA longs doing (maybe it's just one person doing it). And that is averaging down, to hold. Look, people can do what they want; this is merely my opinion, after decades of fruitful investment across a multitude of markets and assets. Averaging down on a problematic stock, a stock at or near an all-time low with no obvious oversold condition, so as to increase a long position, is what I'm talking about. I'm not talking about dollar cost averaging to regular tranche buy a solid stock that is generally on the up and up, which is a completely different and wholly worthwhile approach. Averaging down, we all know what that means. DO NOT DO IT. I have literally never seen this end well.

The world's greatest investors all average down, because the forward return becomes greater as a share price falls. Basic math will tell you that.

Here's a prime example of a disastrous echo chamber: those delusional folk who say Bitcoin has zero value - patting each other on the back and missing out on millions of dollars of pure-profit derived from some of the best percentage gains ever seen in the history of investment.

Process vs outcome. You ask those crypto millionaires to repeat a fraction of their returns in the past and none would be able to do it. The statistics are very clear, those who take a Graham-Newman approach to investing are the only ones who can consistently beat the market over decades.