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  1. #1391
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    There is a company called " Delisted Australia " on the web which lists all Aust and N Z companies that have changed names both by code and name, I find it very helpful when researching companies.

  2. #1392
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    Quote Originally Posted by percy View Post
    Thank you.
    A great story watching Paul Byrnes turn the ailing DPC into a strong business that TNR is.
    So few turn arounds work,so the history makes good reading.
    Following on from the above 2015 comment, I have decided to back track a couple of years from that merger/takeover date. I will use my historical file information to 'merge' the old TUA (it was Turners Auctions) from 2012 (actual merger took place in late CY2014) with what was Dorchester back then. That means we will have a few more years of historical information to create a track record of substance. What could possibly go wrong?

    SNOOPY
    Last edited by Snoopy; 08-06-2017 at 02:13 PM.
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  3. #1393
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    Quote Originally Posted by Snoopy View Post
    What could possibly go wrong?
    There are several problems I can forsee with doing an exercise like this.

    1/ Balance date: The TUA balance date was 31st December. The DPC balance date was 31st March. So it is not possible to combine accounts between like periods. The last report from TUA was from the six month period ended 30th June 2014. The first report from TNR (as DPC became) was dated 31st March 2015. That means the last full year TUA period reported on was 30th June 2013 to 30th June 2014. And to compile that means extracting information from the FY2013 and HY2014 reports.

    2/ Before the TUA takeover, Dorchester had a strategic stake of just under 20% in TUA. That stake was equity accounted in the results. So if you add TUA to DPC, you have to take out the equity accounted bit of the DPC result or you will 'double count' it.

    3/ DPC has a considerable bank loan underpinning the underlying business in a way that TUA did not have. The combined entity that became TNR still has a considerable bank loan supporting the underlying business. To be consistent, I feel that I need to overlay the TNR funding structure back on what was TUA. This means combining EBIT figures (not NPAT figures). The effect of that would be to add, what is in effect, an 'extra interest charge' to what were the TUA accounts, based on the idea that the funding structure for TUA would have been rather different 'back then' if Dorchester had owned them 'back then'.

    No doubt other problems will emerge as I work through this task.

    The more I think about this, the more like a nightmare task it seems. However, having 'skin in the game' is a great motivator. You fellow mutts will have to wish me luck!

    SNOOPY

    discl: hold TNR, or whatever it is called these days!
    Last edited by Snoopy; 08-06-2017 at 02:15 PM.
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  4. #1394
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    Don't bother.
    Just look to their future.
    The ground work has been laid,all divisions organised,all systems in place.
    The excitement is about to happen.
    Hold tight for eps growth of over 20%,and with a bit of tail wind ,over 25% eps growth.
    The commentary on Monday's announcement should spell it out.
    I am offcourse "well positioned."
    Last edited by percy; 23-05-2017 at 11:23 AM.

  5. #1395
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    Quote Originally Posted by whatsup View Post
    There is a company called " Delisted Australia " on the web which lists all Aust and N Z companies that have changed names both by code and name, I find it very helpful when researching companies.
    Thank you.
    Will be great knowing where some came from, and where others went.!

  6. #1396
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    Default DPC/TNR/TRA and implied borrowing Interest Rates

    Interest is paid over a year and liabilities go up and down over that same period. The net interest paid, once the year has wrapped up, is a fixed amount. The 'average' amount of the loan on which that interest is paid is more nebulous. A crude way to estimate the average is to:

    1/ Take the loan balance at the end of the financial year.
    2/ Take the loan balance at the end of the previous financial year.
    3/ Work out the average of 1/ and 2/

    Take the known interest expense, divide that by the average loan balance (3 above) and you can calculate an implied interest rate paid over the financial year. This is what I have done to compile the table below. For the years 2014 and before, all figures come from the relevant year Dorchester report. For the years 2015 and beyond, the figures come from the 'Turners Limited' [TNR] (from FY2017 onwards renamed 'Turners Automotive Group' [TRA]) annual reports:

    FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
    Interest Expense (A) $3.064m $2.928m $3.857m $7.381m $11.436m
    Total Liabilities $48.634m $49.932m $70.765m $52.630m $207,970m $232,491m
    Total Borrowings $9.197m+$15.666m $7.248m+$13.787m+$5.286m $22.784m+$10.857m $17.565m $156,995m $174,816m
    Averaged Borrowing Balance (B) $25.592m $29.981m $25.603m $87.280m $165.906m
    Implied Borrowing Interest Rate (A)/(B) 12.0% 9.8% 15.1% 8.5% 6.9%

    Note that the significant drop in borrowings between EOFY2013 and EOFY2014 was largely because $10.857m of 'Optional Convertible Notes' (borrowings) converted into equity over that year.

    So why is this information useful?

    The FY2016 years interest bill was $11.436m. But what would happen if the interest rate on that increased to the same as that of the previous year (8.5%)? That would mean the interest bill would go up to

    $11.436m x (8.5/6.9) = $14.088m

    The difference ( $14.088m-$11.436m= $2.652m) adjusted by the 28% company tax rate ( $2.652m x (1-0.28) = $1.909m ) represents the amount that net profit for FY2016 could have gone down with those higher interest rates in place. $1.909m on $15.517m represents a 12% profit drop. It is those kind of headwinds that investors might be facing over the next couple of years that TRA shareholders should know about.

    SNOOPY
    Last edited by Snoopy; 22-08-2017 at 09:36 PM.
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  7. #1397
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    Default Merging DPC and TUA early

    Quote Originally Posted by Snoopy View Post
    I will use my historical file information to 'merge' the old TUA (it was Turners Auctions) from 2012 (actual merger took place in late CY2014) with what was Dorchester back then so we have a few more years of historical information to create a track record of substance.
    With the full 'Turners Automotive Group' result due out next week, time for some historical context.

    The table below is my answer to the question: "What would the combined profits of 'Turners Limited' have looked like if the merger of DPC and TUA was in place back in FY2012?"

    The financial years of DPC and TUA did not match up. However, TUA was definitely on a growth path before DPC took a cornerstone stake. So for FY2014, a financial year which for DPC ended on 31st March 2014, I have added the 1st July 2013 to 30th June 2014 financial year results for TUA. It seemed better to add the slightly higher (constructed) 1st July to 30th June 'annual figure', rather than rely on the lower January to December full year TUA figure 'as published' (Both options contain an unavoidable 3 month timing mismatch due to TUA and TNR having different reporting dates). This involved reconstructing results from the half year TUA reports, to time shift the published 'full year TUA results' forward by six months. The earnings results are generally expressed in EBIT terms as a starting point.

    I have also assumed that the capital structure of DPC was in place for the whole period of analysis. This means that the total liabilities on the TUA balance sheet must be funded by borrowing at the DPC 'parent borrowing rate' (see my post 1398).

    There are two years (FY2014 and FY2015) of 'Turners Limited' results, where 'Turners Auctions' is included as a equity accounted investment. I have removed this 'equity accounted investment income' from the 'other income' of 'Turners Limited' in both cases. Instead I have included the full year equivalent results of Turners Auctions in both instances, consistent with assuming everything was already combined by FY2012.

    I am modelling all tax to be paid at a rate of 28%. Turners Limited is now paying tax at 28%, and, barring any unforseen lending market meltdown, will continue to do this into the future. Turners Auctions was paying tax at the 28% rate before the Turners Limited takeover. Dorchester was not paying tax because of previous tax losses being carried on the books. In my hypothetical 'early takeover' scenario, as shown in the table, I have ignored Dorchester's past tax losses (they are all used up today for future comparative purposes anyway) and assumed the combined DPC and TUA paid tax at 28% historically. It is best to do this if your objective is a fair comparison with present day earnings, undistorted by the effect of 'past tax losses' on 'historical comparative earnings'.

    Five Year History of Turners Limited: Operational NPAT

    FY2012 FY2013 FY2014 FY2015 FY2016
    EBIT (Turners Auctions :TUA) $7.342m $7.948m $9.117m
    less TUA Liabilities x TNR Interest $33.272m x 0.12 = ($3.993m) $36.423m x 0.098 = ($3.570m) $45.634 x 0.151= ($6.891m)
    equals EBT (Turners Auctions) $3.955m $4.378m $2.226m
    add EBT (Dorchester) ($1.543m) ($0.133m) $4.892m
    EBIT (Turners Limited) $26.387m $32.987m
    EBIT (Turners Auctions) $5.829m(*)
    add back Turners Auctions acquisition costs $0.675m
    Interest Expense (Turners Limited) ($7.381m) ($11.436m)
    less tax paid equity accounted TUA income ($0.721m) ($0.742m)
    less one off paper gain self-caused by TUA takeover ($7.098m)
    equals EBT (DPC+TUA) $2.412m $4.245m $6.397m $17.670m $21.551m
    less tax at 28% ($0.675m) ($1.189m) ($1.791m) ($4.948m) ($6.034m)
    equals NPAT (DPC+TUA) $1.737m $3.056m $4.606m $12.722m $15.517m

    ----------

    (*) 'Turners Auctions' was absorbed into 'Turners Limited' on 20th November 2014. This was during the FY2015 Turners Limited financial year which ended on 31st March 2015. Turners Limited FY2015 contained 365 days. For 234 of those days from 1st April 2014, 'Turners Auctions' was an equity accounted investment. Note 18 in Turners Limited AR2015 shows an equity accounted contribution to profit of $0.742m up until 20-11-2014. If we annualise this contribution, assuming a constant earnings rate throughout the year, then we get an annual earnings contribution from this 19.85% strategic stake in TUA of:

    $0.742 x 365/234 = $1.157m (EBIT) for that 19.85% stake

    This means that 100% of TUA must be making an EBIT of:

    $1.157m / 0.1985 = $5.829m

    ---------

    SNOOPY

    P.S. Not entirely convinced my table is consistent, but it seemed to make sense as I was compiling it!
    Last edited by Snoopy; 12-06-2018 at 07:15 PM.
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  8. #1398
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    Default Buffett Test 3: Return on Equity (FY2016 perspective)

    In case you are wondering where tests 'one' and 'two' went, I am completing them out of order. The net profit figures for the merged group I have taken from my post 1399.

    We are looking here to see if we can apply a Warren Buffett style growth model to value Turners. We are looking for an ROE of greater than 15% for five years in a row, with one setback allowed.

    FY2012 FY2013 FY2014 FY2015 FY2016
    NPAT (Turners Limited) (A) $1.737m $3.056m $4.606m $12.722m $15.517m
    Shareholder Equity (Turners Auctions :TUA) $17.510m $17.811m $13.378mm
    Shareholder Equity (Dorchester Pacific: DPC) $26.167m $33.190m $74.052m
    Shareholder Equity (Turners Limited: TNR) $121.002m $129.812m
    Total Combined Shareholder Equity (B) $41.667m $51.001m $92.430m $121.002m $129.812m
    Return On Equity (A)/(B) 4.2% 6.0% 5.0% 10.5% 12.0%

    It is clear that despite this indicator going in the right direction, Turners Limited have never achieved an ROE greater than 15%

    Result: Fail Test

    SNOOPY
    Last edited by Snoopy; 22-08-2017 at 09:37 PM.
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  9. #1399
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    Default Buffett Test 4: Net Profit Margin (FY2016 perspective)

    We are looking here for a company's ability to raise their net profit margin above the rate of inflation, ~2% as I write this. A short term trend will suffice. A company does not have to do this every year.

    FY2012 FY2013 FY2014 FY2015 FY2016
    NPAT (Turners Limited) (A) $1.737m $3.056m $4.606m $12.722m $15.517m
    Operating Revenue (Turners Auctions :TUA) $77.552m $82.836m $97.065m
    Incremental Operating Revenue (Turners Auctions :TUA) $32.287m (*)
    Operating Revenue (Dorchester Pacific: DPC) $9.799m $19.162m $31.327m
    Operating Revenue (Turners Limited: TNR) $90.195mm $171.195m
    Total Combined Revenues (B) $87.351m $101.998m $128.392m $122.482m $171.195m
    Net Profit Margin (A)/(B) 2.0% 3.0% 3.6% 10.4% 9.1%

    (*) The incremental revenue comes about because 'Turners Auctions' was brought under the 'Turners Limited' umbrella during FY2015. The TUA accounts were not consolidated within TNR until this point. The revenue added represent the 'pre-consolidation' revenue earned by TUA before the full takeover of the company was complete.

    Over FY2015 and FY2016, the profit margin has been taken to -and consolidated at- a new level.

    Result: Pass Test

    SNOOPY
    Last edited by Snoopy; 23-08-2017 at 12:43 PM.
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  10. #1400
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    Quote Originally Posted by Snoopy View Post

    Last years interest bill was $11.436m. But what would happen if the interest rate on that increased to the same as that of the previous year (8.5%)? That would mean the interest bill would go up to

    $11.436m x (8.5/6.9) = $14,088m

    The difference ( $14,088m-$11,436m= $2,652m) adjusted by the 28% company tax rate ( $2,652m x (1-0.28) = $1,909m ) represents the amount that net profit for FY2016 could have gone down with those higher interest rates in place. And $1,909m on $15,602m represents a 12% profit drop. It is those kind of headwinds that investors might be facing over the next couple of years that TRA shareholders should know about.

    SNOOPY
    Definitely it is worth exploring. I had expected a lower interest costs for 2 reasons:
    1. The bond interest rate has drop from circa 9% to 6.5%
    2. The have started a securitisation program with a bank. This implies lower interest rates as well.

    These 2 factors should play out over FY18. After that, we might expect interest costs to follow the trend of bank wholesale rates.
    No advice here. Just banter. DYOR

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