Retirement village business, Aveo Group [ASX:AOG] dropped more than 8% today, to $2.80 per share.
What caused the ASX:AOG share price to drop?
The last thing Aveo wants is to be seen as ripping off the elderly. But this is exactly what the ABC’s Four Corners believes Aveo is doing.
As reported by the ABC:
‘Chief executive of the Consumer Action Law Centre Gerard Brody described some of Aveo’s contracts as among the worst he had seen.
‘“Not only are they over 120 pages in length, they’re dense, they’re hard to understand, they’re legalistic,” Mr Brody said.
‘Current and former residents also described the company’s model — which takes an exit fee as high as 40 per cent of the original purchase price, leaving outgoing residents often forking out in excess of $100,000 — as “financial abuse of the elderly”.’
This morning Aveo responded to statement made by Four Corners on 21 June 2017. Executive director, Ben Myers said:
‘Our industry is supportive of attempts to make contracts as simple and easy to understand as possible, so residents have certainty about what they pay, when they pay it, and how much they (or their next of kin) get back when resold.
‘The Aveo Way contract is a prominent and leading example of a contract that fulfils this simplification promise, with straightforward fees and clauses. It allows residents to have much more certainty about their financial circumstances, to enable them to spend more time enjoying their retirement lifestyle.’
Thanks to the decline today, the stock looks pretty cheap. It’s trading at only 9.1-times earnings. However, if their fee structure deters future residents, Aveo might be a company worth watching from afar.
Junior Analyst, Money Morning
PS: If you’re interested in investing in smaller growth stocks, check out Sam Volkering’s new report, ‘Top Three Aussie Small-Cap Stocks’.
Sam is a small-cap guru. He’s managed to find growth in a market where many investment professionals simply can’t find any.
To get your free copy of Sam’s report, click here.