ARV - Arvida Group

[Greekwatchdog]

Investor Newsletter any day now ...last year was first week April.

Number to look for is Total Gains on Sales. They don't usually say the $ and you have to add it up from the chart they put in.

Gains on sales +/- a few million gives you Underlying Profit for the year

Let's hope it's a lot more than $73.5m  achieved in F22

If we use SUM's result which I thought was outstanding given all the Macro Head winds against the sector this past 12 months. To me this points to a solid full year for ARV. Not that solid results are doing anything for share price currently. However I do enjoy buying at lows...

[Basil]

At this level considering the last stated NTA was $1.93 there's an AWFUL lot of bad news already fully priced in and this would be my only buy in this sector if I was to action anything at this point.  Floated at 95 cents in December 2014 on a prospective yield of 5.9% its now ostensibly done a full boomerang trip back to where it started.  To get back to that float yield with 5.5 cps in annual dividends it would need to be 93 cents.

My view is in the short term a retest of the float price is likely.  Why?
I believe the huge Ryman cash issue is acting like a giant Dyson vacuum cleaner sucking all the wind out of the sails of the other companies in this sector and to some extent the market as well.  My view is this is FAR better buying at $1 than RYM at $5 but so much energy is being sucked out of the market by so many investors thinking RYM at $5 is cheap.

Long term, its hard to see anyone going wrong at $1.  I like ARV's business model and management are executing well. 
Very cheap at $1 but the headwinds are so fierce in this sector....and while the massive RYM vortex is sucking all the energy out of the market its hard to see this gaining traction before that's over on 6 March.

I do agree that downside should be limited from here in a rational market but sentiment often isn't rational.

It took a full month but it happened.  Half last stated asset backing of $1.93 = 96.5 cps so at 94 cents it closed at that's under half NTA and under the float price of 95 cents more than 8 years ago!

I think management are executing far better than is reflected in the share price, their business model is sound and leverage is lowest of the sector but with sentiment in this sector so negative I struggle to see what's the catalyst for any near term recovery?  Thoughts ?

[Breezy]

It took a full month but it happened.  Half last stated asset backing of $1.93 = 96.5 cps so at 94 cents it closed at that's under half NTA and under the float price of 95 cents more than 8 years ago!

I think management are executing far better than is reflected in the share price, their business model is sound and leverage is lowest of the sector but with sentiment in this sector so negative I struggle to see what's the catalyst for any near term recovery?  Thoughts ?

Well yes but your predicted 60c for OCA hasn't happened yet, under the right circumstances any sp could go to zero couldn't it. Bit like a monkey chucking darts at a dart board, if he throws the dart enough times then the occasional bulls eye is quite likely. I like ARV and OCA for long term plays from here and at current prices and see no advantage buying RYM or SUM over the former.

[Basil]

If a high quality well managed, modestly geared company like ARV can trade at under half NTA...

[Plata]

Never thought it would go this low, thankful I took my losses and left on this sector. Is this being weighed down by market blues...other property stocks are not fairing as bad, is this being weighed down by banking woes...banks are not fairing as bad, is this being weighed down by political woes... hmmmmmm. Do you think a labour government will be empathetic and pragmatic when the news starts being flooded with headlines about shortages and vulnerable elderly getting "fleeced" by greedy retirement companies. Too many loaded guns in the room with ARV, I dare not get shot again...

[winner (n)]

Price/Book (NTA) multiples in this sector continue to decline

This trend been going for over 7 years

The secular bear market is now 7 years old ....and showing no signs of ending

[Ferg]

I struggle to see what's the catalyst for any near term recovery?  Thoughts ?

At the risk of stating the obvious, in the absence of any different news there is currently no catalyst.  What you are hinting at is 1 possibility but the horse will have bolted by the time such news makes it to the market.  Another will be a flattening of interest rates (or a reduction greater than the market expects) or maybe even a change in Government or a boost for the opposition in a reliable poll.  All property/RV stocks are currently heavily discounted without any sort of catalyst on the short term horizon.  Provided a business is not rotten, then these are good buying opportunities but trying to pick the bottom..?  We all know how that ends....

[Breezy]

Price/Book (NTA) multiples in this sector continue to decline

This trend been going for over 7 years

The secular bear market is now 7 years old ....and showing no signs of ending

7 is the number of completeness so its likely near its end and 8 is the number of new beginnings so there you go.

[BlackPeter]

...

I think management are executing far better than is reflected in the share price, their business model is sound and leverage is lowest of the sector but with sentiment in this sector so negative I struggle to see what's the catalyst for any near term recovery?  Thoughts ?

I am pretty sure the catalyst will be a turnaround in the property market combined with a general recovery of the economy.

When this is going to happen will be anybody's best guess. Economists continue to talk about a likely recovery later this year (and I do see their points). If anybody wants to know how fast the price recovery can be ... just look at the price recovery after the COVID dip. Might be difficult for all these clever people waiting for a confirmed bottom to get their fill (at bottom prices) after the rocket has launched ...

Obviously -

If Putin's dear friend Xi joins him and North Koreas Dear Leader in increasing their dirty war games ... then things might look quite different.
 
If the global debt mountains are not just rocked but crushed by deep biting interest rises, things might look quite different as well.

Who knows when it happens, but it will - and this is in my view the most likely trigger for the trend to turn. 
 

[winner (n)]

Maybe an Investor News will come out next week

Once market sees they are going well with increased sales and margins share price will recover a lot of recent losses

It was about $1.25 was announced .....financials probably better state now so could get back to that level pretty quickly.

[Greekwatchdog]

Maybe an Investor News will come out next week

Once market sees they are going well with increased sales and margins share price will recover a lot of recent losses

It was about $1.25 was announced .....financials probably better state now so could get back to that level pretty quickly.

I don't know W69. SUM result hasn't done much for their share price and I thought that was pretty good considering head winds and SUM's commentary was positive. Its been nice adding under a $1.

Like you say we must be due a Investor Update. What is it? Heads you win, tails you win?

[Basil]

With the lowest gearing in the sector I think their bonds (ARV010) are quite good buying at around 7% yield to maturity.  Expecting a March quarter sales update in early April and to hear that sales have been quite good in the circumstances of a weak market overall.
Bit sad to see the shares where they are.
Disc: Have a decent sized holding in the bonds, no shares at this point, waiting for a confirmed new uptrend in the shares before buying them again....once bitten twice shy....

[Shareguy]

With the lowest gearing in the sector I think their bonds are quite good buying at around 7% yield to maturity.

Yes I agree but think the market is worried about ARV breaching debt covenants. 

From FBar report

ARV's published covenants are the most onerous as they (1) are the highest (2.25x); (2) currently do not include all development gains; and (3) no part of the capitalised interest expense is excluded. Assuming ARV gets the technical amendment relating to its development gains (both OCA and RYM include almost all development gains), our modelling suggests that ARV will be close to but not below its covenants. However, should it need to, we expect a similar amendment to RYM. Longer term, for both RYM and ARV, they would likely need to either move some debt into a dedicated development facility like OCA or reduce the level of net debt in relation to EBIT.

Hopefully we get a update soon

[Basil]

Acknowledge their debt covenants are the most restrictive in the sector which gives plenty of scope for it to be renegotiated whilst also ensuring they make prudent decisions around the timing of progress on new developments.  Worth noting ARV have already signaled they are throttling back on new developments for FY24 with the previous target of 300 coming back to circa 250.  They also noted in the late Nov 2022 call they have the ability to tailor and adapt their development pipeline to changing economic conditions i.e. throttle things further back if need be.

[Shareguy]

Yes the covenants are nothing to worry about in my opinion.  To me its a screaming bargain.  Back to float price.