ARV - Arvida Group

[Shareguy]

If you want some as a play on the deep discount to NTA thing, I see this as a somewhat better opportunity, (opps sorry, that should be less worse, opportunity than OCA) as OCA's very high level of care acts as a massively powerful handbrake on future eps growth.  That said, in my view it's a close call as the ARV development team are the least skilled in this sector by quite a long way.   Pick the dog with the least fleas and mange...unfortunately they are both pretty badly infected.

Watch for that closing match price on Thursday this week as it exits the MSCI small company's index.  Massive selling pressure is coming shortly. 

Good points Basil. Watching...

[Basil]

Good volume today at $1.03 but the big test is coming.
Looks set to join the 50% off NTA club with OCA.
I see it like a Briscoes 50% off sale...best to get an even bigger discount or go to K Mart instead  

[winner (n)]

Two years ago Arvida held out the begging bowl to raise $330m to buy Arena

At the time they said F22 Underlying profit was going to be $67m and a pro-forma basis Arena would add $32m to $34m .....so F22 full year on proforma basis Underlying Profit was going to be $100m ....with bright prospects for future growth (of course) and even hinted F23 could be $110m plus

Currently last 12 months Underlying Profit is $83m

Obviously things have not gone to plan .....another failure to deliver as indicated ....no wonder the share price is where it is today

Hope anybody on here who forked out the $1.80 two years ago sold before too much damage was done.

[BlackPeter]

Two years ago Arvida held out the begging bowl to raise $330m to buy Arena

At the time they said F22 Underlying profit was going to be $67m and a pro-forma basis Arena would add $32m to $34m .....so F22 full year on proforma basis Underlying Profit was going to be $100m ....with bright prospects for future growth (of course) and even hinted F23 could be $110m plus

Currently last 12 months Underlying Profit is $83m

Obviously things have not gone to plan .....another failure to deliver as indicated ....no wonder the share price is where it is today

Hope anybody on here who forked out the $1.80 two years ago sold before too much damage was done.

Just from memory - 2 years ago was the peak of the property boom, and currently we are at the bottom. Bit harsh to bash ARV management for the cyclical nature of the industry they are depending on - I can not see how they are supposed to control the property market - do you?

[winner (n)]

Just from memory - 2 years ago was the peak of the property boom, and currently we are at the bottom. Bit harsh to bash ARV management for the cyclical nature of the industry they are depending on - I can not see how they are supposed to control the property market - do you?

1- Some in sector have increased Underlying Profit since 2021

2- So Arvida were unlucky to buy Arena at the top of the market?

[BlackPeter]

1- Some in sector have increased Underlying Profit since 2021

2- So Arvida were unlucky to buy Arena at the top of the market?

Not wanting to break here a lance for Arvida, however - underlying profit is the most meaningless number one can use to measure success. It is neither standardized nor comparable, so - who cares?

And yes, assuming it was not just idiots who bought property in 2021 - I suppose you could say they have been unlucky.

[Basil]

Two years ago Arvida held out the begging bowl to raise $330m to buy Arena

At the time they said F22 Underlying profit was going to be $67m and a pro-forma basis Arena would add $32m to $34m .....so F22 full year on proforma basis Underlying Profit was going to be $100m ....with bright prospects for future growth (of course) and even hinted F23 could be $110m plus

Currently last 12 months Underlying Profit is $83m

Obviously things have not gone to plan .....another failure to deliver as indicated ....no wonder the share price is where it is today

Hope anybody on here who forked out the $1.80 two years ago sold before too much damage was done.

I dumped mine at just over $1.60 and took the loss on the chin but then thought they must be cheap at $1.20 and then again sold at took another loss on the chin at $1.15.  You've got to be a special kind of stupid or very brave, or both, lol, to have a third crack at something that's already bitten you on the backside, twice.

[Greekwatchdog]

I dumped mine at just over $1.60 and took the loss on the chin but then thought they must be cheap at $1.20 and then again sold at took another loss on the chin at $1.15.  You've got to be a special kind of stupid or very brave, or both, lol, to have a third crack at something that's already bitten you on the backside, twice.

That depends on your investing Philosophy doesn't it Basil? If your long term you ride the rollercoatser and potentially buy in trying to pick the lows (Good Luck), or your buying in fr a trade thinking you have picked the bottom and see on the bounce at its high (good luck)

I am long term. My average buy on ARV is in the $0.80's, so I just watch and let the rollercoaster do its thing.

[Basil]

That depends on your investing Philosophy doesn't it Basil? If your long term you ride the rollercoatser and potentially buy in trying to pick the lows (Good Luck), or your buying in fr a trade thinking you have picked the bottom and see on the bounce at its high (good luck)

I am long term. My average buy on ARV is in the $0.80's, so I just watch and let the rollercoaster do its thing.

How's that strategy worked compared to the NZX50 ?

[Greekwatchdog]

How's that strategy worked compared to the NZX50 ?

Honestly I don't think of it like that.

I have invested in a 6 companies at various stages of their life for long term to fund a comfortable retirement. I don't follow the rest of the market to closely to be that heavily involved with it.

As I said, comes down to each persons investing Philosophy.

[Basil]

Each to their own strategy I suppose but, in my book, if you're not aiming to beat the NZX50 then you might as well put your money in an index tracking fund and go fishing.

[Greekwatchdog]

Each to their own strategy I suppose but, in my book, if you're not aiming to beat the NZX50 then you might as well put your money in an index tracking fund and go fishing.

That's why we spend our own money and do our own research. I have enough cash put away earning a healthy income currently, however will deploy some of thus around 2nd half next year.

I have enough OCA and ARV. I have bought into SUM over last 12 months at average of $8.37. RYM happy to watch for another 12 months, still not totally comfortable where their debt levels are. So sector covered.

Good luck with your investing strategy.

[Greekwatchdog]

For Bars take on result

NEUTRAL

Arvida Group (ARV) reported a weak and somewhat messy 1H24 result, but with sprinkles of hope for the future mixed in. Excluding an insurance accrual and development gains from non-cash transfers of residents treated as sales, we estimate underlying earnings were down ~-45% versus 1H23. A poor start to ARV's first period for some time, without any prior period acquired growth. That said, the results did have some positives. ARV's care revenues grew strongly, up +15% per bed as both occupancy and government funding improved meaningfully — a welcome change from recent history. ARV also disclosed a good start to 2H24. We estimate ~25 new sales in October versus the run-rate of ~13 per month in the 1H24, excluding non-cash transfer sales. We retain NEUTRAL with a reduced target price of NZ$1.18.

What's changed?
Earnings: Annuity EBITDA down -11%/-13%/-9% with higher care fees offset by higher costs and lower resale gains.
Target price: Reduced to NZ$1.18 from NZ$1.30 on reduced dividends, increased net debt, and lowered annuity EBITDA.
Net debt likely to continue up for the foreseeable future — but leverage should stabilise
In-line with its pre-announcement, ARV reported net debt up ~+NZ$200m (+37%) YoY, with gearing +600bps to 34%, near the upper end of its 25% to 35% target range. On our forecasts ARV is likely to remain at or slightly above the upper end of its target range. We were encouraged by ARV's clear message that future development would be path dependent. The level of future developments will be dependent on demand and ARV guided to lower deliveries in FY25. We see a tougher path for ARV to meaningfully reduce debt versus Oceania Healthcare (OCA). ARV has ~NZ$100m of available unsold new stock, ~13% of its debt, compared to ~60% for OCA.


Care revenues and profitability are recovering
On a positive note, care revenues grew ~+20% driven by a combination of: (1) improved occupancy rate, (2) three months of increased funding, and (3) better staff availability. We estimate that care EBITDA margins for ARV will improve by ~+800bps in FY24 versus FY23, taking it to near breakeven. This is a sharp reversal of the dramatic deterioration in profitability over the last three years.


Transfer sales and insurance recoveries, but what is underlying earnings?
ARV included NZ$8.4m of insurance recoveries and, we estimate, ~NZ$4.5m of development gains from the non-cash sale of 21 apartments at Aria Bay to residents transferring there (from an apartment block that is being de-commissioned). We have some sympathy for the inclusion of insurance recoveries as they relate to estimated lost earnings, but to date only a small portion has been settled for cash. We have also left our estimate of non-cash transfer development gains in underlying earnings to make our estimates comparable to that of consensus and company communication.

Forecast changes
We downgrade our underlying earnings and annuity EBITDA estimates over the forecast horizon due to: (1) lower resale gains driven by lower number of resales, (2) higher total costs, led by increased employee and property expenses given the growth seen in 1H24 and indication by management these levels are likely to be the new base, (3) higher interest costs. Offsetting these are increased care fees, given the higher care fees earned per bed, on sustained elevated care occupancy on 1H24. We decrease our dividend forecasts to assume a pay out at the bottom end of its 30% to 50% range over our forecast horizon. Our net debt estimates increase on higher capex and lower ongoing operations cash flow.

[winner (n)]

Thanks gwd

Love how they summarise, esp the sprinkles of hope bit — Arvida Group (ARV) reported a weak and somewhat messy 1H24 result, but with sprinkles of hope for the future mixed in.

[winner (n)]

Not wanting to break here a lance for Arvida, however - underlying profit is the most meaningless number one can use to measure success. It is neither standardized nor comparable, so - who cares?

And yes, assuming it was not just idiots who bought property in 2021 - I suppose you could say they have been unlucky.

So when Arvida say 'underlying profit is a financial measure to monitor financial performance and reference dividend distribution' they are talking meaningless shit.

I take it you 'methodology' is along the lines of 'value is in the story being told'