TRA - Turners Automotive Group [previously TNR - Turners Limited]

[Snow Leopard]

...I would like to know what metrics you use for your valuation of the company. Ie what discounting factor you use and I disagree slightly with your 6% growth p.a following 2016 as I believe merger and acquisition activity and general organic growth will be greater than this. So I think at 25 cents that this company may be a good prospect. Acquiring.

I am not actually prepared to reveal the details of how I arrive at my valuations, but it tends to give more conservative results than others and I find it more useful for the way I go about making and losing money on shares.

I am happy to stick to 6% pa it looks forward about a decade from now and I think realistically reflects the likely ups and downs.

You, of course may be right.

Best Wishes
Paper Tiger

[Snow Leopard]

Hi PT,
The tax losses are somewhere between 17-20million. Most of these are off balance sheet. I don't know why they are off balance sheet. In a recent presentation, Paul Bryners, reiterated that these losses still existed and would be utilised. http://www.youtube.com/watch?v=P5Aqh...6FhnvLXUz1ZZsS
So I don't think they will be utilised by 2017.

p.6,7 of the AGM make interesting reading
http://www.dorchester.co.nz/Modules/...DocumentId=159

It targets NPBT of $20mill. This assumes 2 new business streams, organic growth, and acquisitions. They indicate that they can reach this target using current equity plus the issue of 100mill shares. Obviously there is a lot of execution risk in reaching these targets. At least they have a vision and a target. A lot of companies these days are focused on cutting costs. DPC are focused on building scale in their business.

If this target can be reached, it would significant increase your valuation as FY2017 NPAT would exceed $14.4mill. I actually think it will be higher as there will still be tax credits.

I really value your analysis on this because it highlights that the current share price does not excessively exceed what I consider your conservative valuation.

Thanks for performing some analysis.

noodles

One of the few downsides of living here is that broadband internet is not very broad and I have not looked at the video. I have read the AGM doc though.

But I am 99% confident that the $17-20M is the amount of losses that can be offset against future profits before taxation (note 18 of the FY2013 report supports this view). So the actual benefit would be say $20M * 28% = $5M6.
This would mean that during 2016 they would start paying tax and reduce the 2016 profit figure.

The thing with tax losses as an asset is that they are only an asset if you can use them, so when DPC was in deep trouble the accountants would have written them off. Now that there are profits you can write them back more or less as you can use them.

If we factor in the modified tax above and NPBT of $20M with 100M new shares (we will assume in FY2017) and then leave the growth thereafter the same then we can have

Edit: This is wrong:
Value at 31-Mar-2014: $0.274
Value at 31-Mar-2015: $0.296

Which I guess would make a few people happier.

This is correct - the 100m extra shares did not get into the works:
Value at 31-Mar-2014: $0.234
Value at 31-Mar-2015: $0.248

And I guess not so many people are happy - So Sorry.

Best Wishes
Paper Tiger

[Sgt Pepper]

As a holder of DP shares is any prospect of 30cps simply unobtainable in your opinion? I value your insight and analysis.

[Snow Leopard]

As a holder of DP shares is any prospect of 30cps simply unobtainable in your opinion? I value your insight and analysis.

You should take my valuations with a pinch of salt, Pepper . I am not sure that they really cut the mustard , some seem to believe that they are as sour as vinegar .


Well I have just taken the available information and management projections as far as they go and then made a simple assumption beyond that and done my calculation.

Once the company starts to achieve the profits it is forecasting it will be reasonably efficient, so then it get more difficult to expand earnings per share without over-extending itself.

So that is what I see as the value of the company - the actual price it attains is another matter.

If I currently owned shares in this company (which I do not) I would not be selling them, and if it were to rise to $0.30, well I don't sell shares that are going up, no matter what I feel the value is.

For comparison purposes only, as you may know I own HNZ, if I do the same value calculation for HNZ then:

HNZ value at 31-Mar-14: $1.092
HNZ value at 31-Mar-14: $1.161

This currently trades at $0.88, so as you see no-one takes my valuations seriously .


There is a prize for the first person to tie the title to the contents: a free trip down memory lane.

Best Wishes
Paper Tiger

[Snoopy]

It's not something you 'figure out', it's a public fact and 493,970,000 is I believe, the correct number. If shareholders aren't aware of something as basic as shares on issue, they should be investing somewhere else.

Here is an excerpt from the May 2013 press release, talking about the increase in shareholder capital over 2013:

"As a result of these transactions, shareholders' funds of approximately $29 million at 31 March 2013 would increase by $21 million to $50 million following the exercise of the options and the share placement, and would further increase to $61 million on conversion of the Optional Convertible Notes to ordinary shares in July 2013."


Total number of shares on issue before the 2013 capital injections were 208,263,598

Substantial shareholder changes notified as part of the capital raising process were as follows:

Notified 7th June 2013:
"On 7 June 2013, Harrigens Trustees Limited qualified its beneficial ownership of 6,121,801 shares by its agreement to sell those shares to institutional shareholders arranged by Craigs Investment Partners at 25 cents each for settlement on 18 June 2013". (On 18 June 2013, Harrigens Trustees Limited settled the sale of 6,121,801 shares to institutional shareholders arranged by Craigs Investment Partners
at $0.25 each, as earlier notified on 7 June 2013.)

Notified 7th June 2013:
"The Business Bakery L.P.'s percentage shareholding in Dorchester Pacific Limited has been diluted by allotments made on 12 November 2012 on the settlement of the acquisition of EC Credit Control Limited.
On 7 June 2013, the Business Bakery qualified its beneficial ownership of 12.5 million shares by its agreement to sell those shares to institutional shareholders arranged by Craigs Investment Partners at 25 cents each for settlement on 18 June 2013. The Business Bakery LP has also exercised all 40 million share options due for settlement on 17 June 2013."

Notified 18th June 2013.
On 17 June 2013 John Jeffers Harrison was issued 875,000 shares on exercise of options held in Dorchester at an exercise price of $0.125 each.Dorchester also issued additional shares to other persons that exercised share options, which has diluted his holding (John Jeffers Harrison has not sold any shares - total number held in class now 15,000,000).

Notified 18th June 2013

"On 17 June 2013 Hugh Green Investments Limited was issued 40,000,000 shares on exercise of options held in Dorchester at an exercise price of $0.125 each. Dorchester also issued additional shares to other persons that exercised share options. Hugh Green Investments Limited's percentage shareholding in Dorchester Pacific Limited has been diluted by allotments made on 12 November 2012 on the settlement of the acquisition of EC Credit Control Limited (Hugh Green Investments Limited has not sold any shares)."

Notified 30th August 2013.

"On 30 August 2013, Paul Anthony Byrnes was issued 20,000,000 ordinary shares in Dorchester Pacific Limited (DPC) following the early conversion of 20,000,000 optional convertible notes (OCNs) that were
held by Mr Byrnes. The OCNs were issued to Mr Byrnes between December 2011 and September 2012 at an issue price of $0.10 per OCN."

Notified 30th August:
"On 30 August 2013, Hugh Green Investments Limited was issued 40,000,000 ordinary shares in Dorchester Pacific Limited (DPC) following the early conversion of 40,000,000 optional convertible notes (OCNs) that were held by Hugh Green Investments Limited. The OCNs were issued to Hugh Green Investments Limited between December 2011 and September 2012 at an issue price of $0.10 per OCN."

Notified 30th August:
"On 30 August 2013, The Business Bakery L.P. was issued 10,000,000 ordinary shares in Dorchester Pacific Limited (DPC) following the early conversion of 10,000,000 optional convertible notes (OCNs) that were held by The Business Bakery L.P. The OCNs were issued to The Business Bakery L.P. between December
2011 and September 2012 at an issue price of $0.10 per OCN."

The above quotes covers the issue of 110,875,000 new shares since May 2013. The rest of the new shares, nearly another 200m, must have been issued to shareholders who did not break the 5% disclosure threshold as a result of acquiring new shares. My point is, with so many new shares issued there must come a point where those tax credits on the books are no longer available due to a significant change in the controlling shareholders.

More than 50% of the shares on issue now are new in comparison with the comparable period last year. But the tax credits should remain accessible, as long as 50% of the total capital has not gone to all new shareholders. I am not sure there is enough information in the public to know how many more shares are allowed to change hands before those off the books tax credits that DPC may have access to are forfeited.

SNOOPY

[blackcap]

Snoopy, I think you will find most of those shares went to Baker Boys, Hugh Green Investments, and Paul Byrnes so as not to disrupt the continuity requirements too much.

[percy]

493,971,377 shares on issue,at 24.5cents gives a market cap of $121,022,987.
EPS 1.4 cents.PE 17.5 ,NTA 7.98cents .Not paying a dividend [or tax].
Paying over three times NTA for a finance company not paying a dividend [or tax] ,seems a lot to me!
You do not have the added safety of them being registered as a bank either.

[blackcap]

493,971,377 shares on issue,at 24.5cents gives a market cap of $121,022,987.
EPS 1.4 cents.PE 17.5 ,NTA 7.98cents .Not paying a dividend [or tax].
Paying over three times NTA for a finance company not paying a dividend [or tax] ,seems a lot to me!
You do not have the added safety of them being registered as a bank either.

Percy, that EPS is old news. Their new acquisition is going to add $3m to the bottom line and thus the projected profits in 2015 and 2016 are 10-11m and 14-15m respectively which gives a EPS of 2-2.2 cps in 2015 and 2.8-3 cps in 2016 which is a PE of 8.75 which to me is very adequate with further merger and acquisition activity possible.

[percy]

Percy, that EPS is old news. Their new acquisition is going to add $3m to the bottom line and thus the projected profits in 2015 and 2016 are 10-11m and 14-15m respectively which gives a EPS of 2-2.2 cps in 2015 and 2.8-3 cps in 2016 which is a PE of 8.75 which to me is very adequate with further merger and acquisition activity possible.

Thanks Blackcap.Very modest PE.
Is the NTA old news too?
The profit projections seem to mean to me the $39.5mil of assets are being worked very hard.
Your 3 cents per share is a profit of $14.8 mil. 37% return on assets ??
That's Incredible!

[blackcap]

Thanks Blackcap.Very modest PE.
Is the NTA old news too?

I have no idea about their NTA at present Percy. All I know is that to date they have done what they have promised since the restructuring in 2010 and till now have not disappointed. They go about their business quietly as another member has alluded and I have met Paul Byrnes on a few occasions and think he is the right man for the job going forward.