ARV - Arvida Group

[Basil]

Thanks Shareguy for asking Jeremy for a response which was interesting.
Ostensibly Labour have hung this sector out to dry in terms of challenges with covid.
I see earlier this week, finally, after multiple interest groups and National calling for it for over a year, Labour have finally, only now after all this time and challenges with staff shortages put a group of occupations on the fast-track residency pathway, including Nurses.
Unfortunately, many other countries have done the same and pay rates across the Tasman remain considerably more attractive.

[Shareguy]

Your welcome. Yes it should of been one of the first things they did with the nurses. Terrible.

Good to see the share price back over $1.00. There is a lot to like about this company, including the CEO. Arvida is now my portfolios largest retirement stock. Go you good thing.

[winner (n)]

Good one shareguy asking for this stuff ... does show to them shareholders are keenly interested in how the company is going

Re In terms of new sales, we haven't provided guidance on 2H margins or gains.

However from the numbers given in the report and 'measuring' the total gains from the chart provided and filling in the gaps in the info one can make a pretty good estimate as to what the answer to that question is (of course indicative and subject to change)

I'd say H2 new sales margin was 15% - H1 was 19.9% which makes full year about 17% (F22 was 16.3%)

Just as well sales prices were well up so $ gains on new sales are up a few million.

Jeremy has a point about comparing margins on new sales to previous year (and not to others in sector). Need to trust them when they say they do calculate differently. Over the last 5 years the average margin on new sales has been 16%

[lorraina]

Thanks Shareguy for asking Jeremy for a response which was interesting.
Ostensibly Labour have hung this sector out to dry in terms of challenges with covid.
I see earlier this week, finally, after multiple interest groups and National calling for it for over a year, Labour have finally, only now after all this time and challenges with staff shortages put a group of occupations on the fast-track residency pathway, including Nurses.
Unfortunately, many other countries have done the same and pay rates across the Tasman remain considerably more attractive.



And  nurses living in Australia  are finding  wages in USA more attractive.....

[Basil]

One final point, development margins are best compared against prior years. Comparison of development margins between operators can be misleading unless you make adjustments to align the different calculations. As highlighted in the recent Summerset reporting, they are achieving similar project margins but reporting much higher development margins. An explanation would be a different methodology applied in calculation between the two operators

Not sure i really accept that entirely at face value.  My understanding around the accounting rules for new developments is pretty rusty and I acknowledge there is a certain amount of judgement involved to assess stage of completion from one year to another and allocate costs appropriately, but how you assess stage of completion of a village washes through from one year to another and under or overestimates cancel things out over the years. 

There could be something to this in terms of how they allocate some overhead cost but in my (admittedly subjective opinion), there's probably two significant material factors in why SUM consistently achieve higher development margins over the years compared to ARV which Jeremy would never admit too.

1. Senior management with the development team at SUM are very highly experienced and have a very long track record at the company so their systems for managing staff, quality control and work throughput are probably extremely well honed.
2. I know from previous discussions with Julian Cook SUM place great emphasis on procurement cost efficiencies and use their buying power (building ~ 650 units a year about 3 times ARV's current build rate) to their advantage.  Put simply, they have a lot more negotiating power with suppliers, because of their size, to command better prices for materials.

Possibly worth noting, (in terms of the development programs of the two companies) that ARV had a pretty significant miss with their Aria bay development in FY23.  As recently as the call on 29 November 2022 management were confident thsi development would be completed by 31 March 2023, 4 months hence.  Now talking June which pushes the project back to 7 months hence from that call, a 3 month delay.
By comparison, despite all the vast numbers of challenges with staff, procurement supply chain problems and Covid, SUM have never missed with their development target ever since they listed.      They consistently do what they say they are going to do and make results while others make excuses.

[winner (n)]

By comparison, despite all the vast numbers of challenges with staff, procurement supply chain problems and Covid, SUM have never missed with their development target ever since they listed.      They consistently do what they say they are going to do and make results while others make excuses.

...and the more I do on ARV the more they don't always achieve what they say they will do .......almost there but always come up  a bit short

[winner (n)]

Basil ....Jeremy seems to confirm you estimate of debt as at March ......well over $625m

Gives the reasons why but heck no worries as it'll fix itself up in F24 when things come right.

[Basil]

I'm comfortable with their debt level, lowest of sector.  Bought some more ARV010 bonds this morning at a 7.27% yield to maturity.
Huge volume in that security this morning, nearly 3m of the 125m issue traded, not all the buying was mine 

From memory, ARV had some massive cost overruns on the main community center building in a couple of their villages a while back.  Talking millions of dollars extra per building.  I notice he is quick to blame shift / attribute the low development margin to accounting differences between them and SUM just like he was quick to blame shift the low share price to the huge equity raise RYM did recently.   

One thing I found interesting with his response.  Independent living units change hands every 8-9 years.  Care units and apartments more often.   
Embedded value last reported as $1.34 per share.  If on average that's released over a 7.5 year period, (which is what I think we can take from his response) that's ~ 18 cents per annum average in underlying earnings just from existing stock churn but the average estimate on market screener is for earnings this year of 11.6 cps, so more than 6 cps disappears.  Hmmm

[winner (n)]

Since June 2021 when share price was over 2 bucks it's behaved almost perfectly in a long downtrend

The share price has been contained in a linear regression channel being +/- 14 cents (+/- 0.4 standard deviations) from the trend line

currently 5 cents above the trend line and positive momentum .... heading to $1.13 which is upper band of the channel ..... break through that and one TA view is that breakout could go 28 cents higher and start a new channel - uptrend this time

So $1.40 here we come

As they say the strong hands are winning at the expene of the weak ends these days

[Basil]

Clear break up through 30 day MA probably getting some people excited.
Need a break above the 200 day, (just over $1.25), to confirm a new uptrend.

[BlackPeter]

So $1.40 here we come

As they say the strong hands are winning at the expense of the weak hands these days

They always do ... as long as they hold the right stock ;

[winner (n)]

Holding above 100 ...pretty strong

I reckon we'll never see sub 100 again

Almost like .'Arvida, can't have too many of them' is a good catch cry

[Basil]

Holding above 100 ...pretty strong

I reckon we'll never see sub 100 again

Almost like .'Arvida, can't have too many of them' is a good catch cry

I love your dry sense of humour.  You can't lose and what could possibly go wrong...pretty sure we've seen that movie before... lol

[Auto Rower]

Holding above 100 ...pretty strong

I reckon we'll never see sub 100 again

Almost like .'Arvida, can't have too many of them' is a good catch cry

Oh no the kiss of death !!!

[winner (n)]

Oh no the kiss of death !!!

No no - this time is different

I predict share price over 130 by Kings Birthday week