ARV - Arvida Group

[Basil]

Fair enough.  One thing ARV directors need to wake up too is this, they have "enjoyed" lowest of sector development margins for many, many years now which is very clear evidence of very deep systemic weaknesses in their development model.  What is the point of developing new units at a pretty pathetic 15% margin, (which really is a loss in cash flow and profit when you factor in the full extensive infrastructure and common area buildings costs at new villages and this is also cash flow negative), when you can buy your own shares back and make 100% return compared to NTA ? 

Might attend this year's annual meeting and do some serious barking. 

[Untamed]

I can now share as it is now public knowledge. This is the organisation I work for. I have mixed feelings to be honest.

Presbyterian Support South Canterbury are delighted to announce the purchase of Strathallan Lifecare in Konini Street Timaru offering Rest Home and Hospital-Level Care, Specialised Dementia Care, and also independent Living Villas and Serviced Apartments.

The purchase represents a significant step forward for our organisation with the merger formally taking effect in May 2024.

With our long history or providing care for the elderly for 106 years and a continuing growing elderly population it is a wonderful opportunity for Presbyterian Support South Canterbury to keep services owned locally.

[Basil]

I think several of Oceania's villages were originally owned by Presbyterian Charitable interests.

[BlackPeter]

I think several of Oceania's villages were originally owned by Presbyterian Charitable interests.

Would be interesting to find out who made money from this property merry-go-round?

[Greekwatchdog]

     Here it is. http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/429131/416258.pdf

[winner (n)]

ARV latest update reads well and it seems as if things are heading in right direction.

But they seem to gettin into the habit of selling heaps more (full year v pcp 21 more new sales / 33 more resales) but only making a little more

It seems the increase in resales generated about $5m more in way realised gains but 21 more new sales only generated about the same in realised gains as last year.

From what they've disclosed today my estimate for FY23 Underlying Profit is $91m .....last year was $88m .......not much if an increase is it .......and doesn't seem to reflect Jeremy's really enthusiastic rave.

Whatever it's better than going backwards and things will get much better from here.

Market will like what he said about cash flows.

[winner (n)]

Forgot to add if Underlying Profit is $91m they remain miles behind where they would be if they had kept to the 'promises' they made in that capital raise a while ago

[Basil]

Just as well that acquisition was eps accretive eh Winner...just like OCA's one 
Interesting how far they're dialing back their build rate going forward.

[Greekwatchdog]

Just as well that acquisition was eps accretive eh Winner...just like OCA's one 
Interesting how far they're dialing back their build rate going forward.

Wouldn't you want them to react that way when things aren't all that favorable. Dammed if they do dammed if they don't. They can always increase build rate early next year when the interest start to moderate downwards.

As a shareholder I am happy with this

Annual meeting will be fun given they have a lot ot explain why they didn't give shareholders the $1.70 takeover offer to look at.

[Basil]

I wasn't damming them for dialing back the build rate, I just said it was, and I quote, "interesting".
What is damming is they didn't engage properly on that takeover and put it before shareholders and simply trotted out the same B.S. Steel and Tube directors did with Fletchers takeover at $1.90..."its below intrinsic value".  How's that worked out for STU shareholders...same thing here ?

[Greekwatchdog]

I wasn't damming them for dialing back the build rate, I just said it was, and I quote, "interesting".
What is damming is they didn't engage properly on that takeover and put it before shareholders and simply trotted out the same B.S. Steel and Tube directors did with Fletchers takeover at $1.90..."its below intrinsic value".  How's that worked out for STU shareholders...same thing here ?


Well as I said the shareholders will get there say come annual meeting. Who knows where the share price will be then.

As for STU they have underperformed for years. Maybe next year will be there year with all the infrastructure the country requires...

[Greekwatchdog]

For Bars Review.

Arvida Group's (ARV) semi-annual investor update was on the whole, positive. It delivered: (1) strong resale gains, driven by both solid unit sales and margins, and (2) illustrated net debt was tracking better than our expectations. We were also encouraged by the reduced FY25 build guidance, suggesting a focus on reducing debt and realising the potential of its Arena acquisition. A sensible prioritisation given how the stock is currently valued. On the negative side was slightly weak new unit sales. But alongside this ARV provided some positive outlook comments that it has 'started to see an up tick in settlement activity' and applications are up >+20% year-on-year. We increase our target price to NZ$1.30, NEUTRAL.
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NZX Code   ARV
Share price   NZ$1.18
Target price   NZ$1.30 (from 1.21)
Risk rating   Medium
C&ESG rating   B
Market cap   NZ$854m
Avg daily turnover   431.2k (NZ$481k)




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Financials: Mar/   23A   24E   25E   26E
Rev (NZ$m)   318.9   352.5   355.4   381.9
NPAT* (NZ$m)   88.0   88.0   71.1   77.0
EPS* (NZc)   12.2   12.2   9.8   10.6
DPS (NZc)   4.9   3.0   3.1   3.3
Imputation (%)   0   0   0   0
*Based on normalised profits





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Valuation (x)   23A   24E   25E   26E
PE   9.7   9.7   12.0   11.1
EV/EBIT   13.9   14.4   16.9   15.4
EV/EBITDA   12.8   13.3   15.3   14.0
Price / NTA   0.6   0.6   0.6   0.5
Cash div yld (%)   4.1   2.5   2.6   2.8
Gross div yld (%)   4.1   2.5   2.6   2.8









What's changed?



Earnings: Annuity EBITDA increased +18%/+4%/+1% over FY24/FY25/FY26 given higher resale gains while underlying earnings are +21%/-6%/-2% over the same forecast horizon given lower new sale units in FY25/FY26, in-line with the lower build rate
Target price: Increased to NZ$1.30 (from NZ$1.21) given increased Annuity EBITDA and lowered net debt.


Strong resales a positive sign


The key positive from ARV's update was the strength of its resale gains achieved. Both (1) strong unit sales, up +12% year-on-year for 2H24, and (2) improved resale margins, 31.5% in 2H24 versus 27.1% in 1H24, drove the result. The strength in margins comes despite our MI index suggesting aged care operators have held unit prices broadly flat for the last 18 months. We believe this suggests ARV has sold units with longer occupant times over 2H24, similar to Summerset's recent result. With some of these sales likely from its acquired Arena villages, we view this as a positive that its sizeable embedded value in its portfolio is starting to translate to cash gains.

Net debt controlled well


ARV's indication that drawn debt increased +NZ$27m over 2H24 was ~NZ$30m better than we expected and marks an impressive turn around from 1H24. It appears this result was driven by improved cash collection of sales and the higher resale gains, with deliveries in-line with expectations. We reduce our estimate of net debt growth over the medium term due to its lowered build rate and also aided by the NZ$30m sale of its Timaru village.

Build rate tempered — living within its means, a sensible choice


ARV has indicated a lowered build rate target for FY25. At ~150 units it is comfortably below our prior estimate and the ~200 delivered in FY24, but we believe this a logical move for ARV and illustrates its more conservative approach to capital management rather than a considerable drop in expected demand for its product. Of this 150 units for FY25, ~60% will likely come from its Queenstown Country Club development (care suites and apartments) with the remainder villas.

[winner (n)]

So Forbar impressed that Arvida are working on realising the potential of its Arena acquisition.

Good grief that was a couple of years ago ...what have been doing since ...bugger all as profit remains lot less than they 'promised' in the eps accretive raise.

And one can't be too impressed with the profit trend Forbar come up with for F23 through F26 -
NPAT* (NZ$m)   88.0   88.0   71.1   77.0

For me Arvida always seems to disappoint and never seem to deliver on what they say (or sort of indicate)

No wonder share price starting to drift again

[Basil]

EPS* (NZc)   12.2   12.2   9.8   10.6

Agree Winner, its hard to be impressed by those projected eps numbers and also its not like you are being paid well with dividend income to hold either, all future years <3%, when you can get as much as 6.5% on term deposit at the bank.  As you say, its a bitter pill to swallow when they raised funds at $1.80 for a so called eps accretive acquisition.  Turning down a takeover offer at a massive premium to the prevailing share price is just rubbing salt into the wound.  There's no growth here and hasn't been since they listed 10 years ago so just take a no growth PE of 8 and apply it to average expected earnings for the next 3 years (10.87 cps) and the real fair value is only 87 cents....but wait...the directors think $1.70 is not good enough...

[winner (n)]

Forbar have/looking after  10 million less shares than a few months ago