ARV - Arvida Group

[winner (n)]

Arv already signaled that realised gains in first half >70% than last year

That's implies big increase in Underlying NPAT - unless the shortfall/loss on day to day operations is very significant.

What we might see in the numbers and the narrative is that care costs in particular are pretty dire

[Basil]

Arv already signaled that realised gains in first half >70% than last year

That's implies big increase in Underlying NPAT - unless the shortfall/loss on day to day operations is very significant.

What we might see in the numbers and the narrative is that care costs in particular are pretty dire

Care costs would have to be profoundly shocking (only 28% of their business) to drag the whole operation down.  Must be something else, only thing I can think of is development margins have come under brutal pressure...but we didn't see that with RYM so go figure ?

Market is saying this result will be ugly and the market is seldom wrong.  Its going to be interesting to see the detail....something wrong here, some big part of this puzzle that I can't sniff out...which worries me because I can usually sniff out trouble.  If care costs despite being just a modest part of their business model really are so diabolically bad, they're the culprit here what does that suggest about how bad OCA's result will be on Wednesday?

[Plata]

Arv already signaled that realised gains in first half >70% than last year

That's implies big increase in Underlying NPAT - unless the shortfall/loss on day to day operations is very significant.

What we might see in the numbers and the narrative is that care costs in particular are pretty dire

Did they not say in the investor newsletter that the div payout ratio % would increase to sustain the same dividend? IE underlying profit increase is less than number of new shares vs the last comparable period? Big increase in realized gains getting eaten up by dilution and care?

[Shareguy]

Could it be the big purchase of Arena living. The at the time "bargain" of some Stella properties with only a few leaking. From memory were we not promised 12 cents additional earnings?

OR

Is it just the general negativity that overhangs this sector for all the reasons mentioned.

[winner (n)]

OCA next Wed and ARV on 29th

Só we can see what happens to OCA and chew the fat for a few days before we hear the bad or good news from ARV

[Basil]

Opps, thought they were reporting this coming Tuesday

 

[Poet]

Did they not say in the investor newsletter that the div payout ratio % would increase to sustain the same dividend? IE underlying profit increase is less than number of new shares vs the last comparable period? Big increase in realized gains getting eaten up by dilution and care?

I think they said that in order to maintain dividend at 5.5 cps for 2023, that they would pay out approximately 50% of underlying profit. From this I think we can calculate that they expect underlying profit for FY23 to be 11c per share or $80m. FY22 underlying profit was $73.5m so, on the face of it a 10% increase. On a per share basis, would need to account for 3m shares issued under DRP so slightly less than a 10% increase in underlying profit per share. Or am I misreading their announcements?

[Basil]

What they actually said in their most recent investors news.
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/399910/380409.pdf
What they said about the dividend looks quite opaque to me.
What is crystal clear is they think there is very little money in basic care services and that care suites will provide only an "acceptable" return. 

What I read into that is it would appear care suites are okay but there are much better returns with independent living units....but make of everything they said in that newsletter what you will...

[Basil]

ARV being bashed with the ugly stick too.  Hope that acquisition they did pays off with the big eps accretion talk they said would happen.  Suckered a lot of people in with that eps accretive talk including this dog. Definitely a case for me of "Once bitten twice shy!"
I will leave this alone, despite appearing to be cheap, until TA confirms a bottom is definitely in.
Who knows where or when that will be or how low it will go ? I'll let the market tell me that.

[winner (n)]

Pretty amazing half year result

Almost spot on as they indicated in recent newsletter

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ARV/403208/384609.pdf

[Shareguy]

Going through it now. Looks good to me.

[winner (n)]

Acquistions not quite EPS (Underlying NPT) accretive yet but give them time - early days yet

Seems they did OK on he sales side but day to day costs are hurting them. The difference between realised gains on sales and Underlying NPAT is a negative $4.8m - over the last few years its has averaged positive $5m

I call this the 'Operating Surplus from Day to Day Operations'. Recent numbers are

H119    6,179
H219    5,396
H120    5,466
H220    6,964
H121    5,250
H221    4,388
H122    3,258
H222    1,624
H123    -4,282

I think recent numbers is the impact/cost of all the things like wages/costs/govt subsidiies they keep talking about - it is becoming a real drag on earnings

Anyway EPS chart still healthy looking


You cannot view this attachment.

[Basil]

Some very clear and distinctly different characteristics between this result and the OCA one.
Cash flow was satisfactory, earnings per share growth was also okay and NTA increased to about what I expected.
I'd give this result a pass mark but I expect headwinds in this sector to remain strong for the foreseeable future.

[Basil]

https://www.rnz.co.nz/news/business/479714/arvida-s-interim-profit-grows-despite-covid-19-related-challenges?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Wednesday+30+November+2022

Trades at a 35% discount to NTA (OCA 37.5%*) I like how they are completely transparent about the number of units they have available for sale (2%) of their stock, how they are honest about the challenges ahead and preapred to be proactive in slowing the build rate if its deemed prudent, how they're reviewing the level of care in their business model which is already at quite a modest level but most of all I like that they have a multi year history of growing underlying earnings per share.

Metrics.  I think we're looking at underlying around 11.5 cps for the full year, perhaps 12 which puts them on a forward PE of 10.6.
OCA I see on a PE of 10 so there's not much of a premium for ARV and yet they have obvious advantages with their business model, (far less care) and a proven track record of growing underlying earnings.

If one feels compelled to go bottom fishing in this sector I think this is a substantially better company than OCA and you're only paying a miniscule earnings premium and a very slightly lower discount to NTA than OCA, (but there are some serious questions about the veracity of OCA's NTA in my opinion, see below).. 

* OCA have 10 retirement villages for sale which have been deemed unsatisfactory to hold.  Any deal to sell them could be at a significant discount to NTA.
OCA also have hundreds of care suites they are struggling to sell so real questions hang over the value of those assets too. 

[winner (n)]

The post announcement excitement seems to have died

Share price back to where it was earlier in the week ...but not back to 112 like last week.

Retirement sector still not wanted

But Arvida does look like one to do well when sector comes back into favour ....methinks the best performer when it does.