Aevum forecasts a paper loss of up to $20 million while income remains strong – time for clear thinking

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NSW based village and care operator, Aevum, has announced they have decreased the
valuations on their villages by $17-22 million, given the market. This takes them into a
forecast accounting (paper) loss of $15-$20 million for this financial year. In just October
(four months ago) they forecast a profit $23 million – so this is a $43 million turnaround.
While grim, in truth and like most operators, the underlying business remains strong
with operating income remaining stable (at $20.4 million); in other words the business
continues on as far as residents and staff are concerned. Aevum is also one of the most
conservatively managed operators with gearing (borrowings against asset values) of
just 22-24% and yet their share price has fallen from $2.00 in June last year to $1.04 last
week and now to $0.75 – a 25% drop in a 7 days. Yet the net tangible asset per share
is $2.17, meaning the value of their villages etc is 3 times the value of their shares. A
great long term buy.