TUA - Turners Auctions. A Case Study.

[percy]

Under 110,000 shares to go."Piece of cake,"!!!!

[noodles]

Found my post 198 on this thread where I declared that TUA was NZ's best finance company.
Can't find anywhere that I said DPC was better.


SNOOPY

I was referring to our debate on the DPC thread
http://www.sharetrader.co.nz/showthr...l=1#post485182

[Snoopy]

I was referring to our debate on the DPC thread
http://www.sharetrader.co.nz/showthr...l=1#post485182

Ah, OK thanks for that. So I did and Apples vs Oranges calculation and you corrected me.

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Noodles has pointed out that for TUA I used EBT and for DPC I used EBIT, so the above comparison is not fair. To fix this I will add back the interest paid into the TUA result.

So the FY2014 EBIT for the DPC finance division is $3.360m - $0.01014m = $3.350m

We also are told the segment assets for the finance division total $37,953m at years end.

So EBIT /Segment Assets = $3.35m / $37,953m = 8.83%

Now compare this with the equivalent TUA finance division result:

TUAF FY2013 ($1.861m-$1.151m+$1.926m) / ($10.684m + $14.916m) = 10.3%

and you can see that TUA makes an 'operating profit' which is one and a half basis points above the earnings of DPC for doing essentially the same job on a similar sized loan book.

------

The end result, with my screw up taken out, was that TUA had the better finance business. That was the bit I remembered.

SNOOPY

[Snoopy]

You don't think they will get the last .4%?

Waikare's 'hold out' is looking more important than ever. I imagine they will send all TUA shareholders another letter stating the takeover offer has been extended and hope that will shake the tree enough. Failing that, they will ring up some older shareholders and bully them with fear.

If they do jump the 90% hurdle in the next few days, I will take cash for the balance of my holding. Like Birmanboy, I feel DPC have yet to earn my trust.

I feel there will be an occasion over the next couple of years when I can buy DPC shares on market for less than 25c.

SNOOPY

[percy]

With only 110,000 shares required I do not think DPC will have to shake the tree very hard.
Once they have the 100% of TUA, I think you will find DPC's share price will move up to over 30 cents.
You will then not see the sp drop below 30 cents again.
You and Birmanboy will look back in a couple of years, and see in hindsight, your lack of foresight has cost you dearly.

[biker]

With only 110,000 shares required I do not think DPC will have to shake the tree very hard.
Once they have the 100% of TUA, I think you will find DPC's share price will move up to over 30 cents.
You will then not see the sp drop below 30 cents again.
You and Birmanboy will look back in a couple of years, and see in hindsight, your lack of foresight has cost you dearly.

:-) Totally agree Percy! (but hold quite a few so I'm biased )

[blackcap]

Back of envelop stuff... please critique.

DPC shares outstanding 494 million
extra shares $30m/.25 = 120 million.

Shares issued 614 million.

Profit forecast $25 million if 100% takeover of Turners.

EPS = 25/614 is 4.07cps

Seems cheap to me at 26 cents?

Ahha but then there are still those pesky bonds that need to be converted (and will probably be converted to equity) Now I do not know how many have been issued as of yet but that will have to be included in the above calculation. I do not have the info here at present but if the bond take up was about 25%, DPC seems cheap at this stage....

[noodles]

Back of envelop stuff... please critique.

DPC shares outstanding 494 million
extra shares $30m/.25 = 120 million.

Shares issued 614 million.

Profit forecast $25 million if 100% takeover of Turners.

EPS = 25/614 is 4.07cps

Seems cheap to me at 26 cents?

Ahha but then there are still those pesky bonds that need to be converted (and will probably be converted to equity) Now I do not know how many have been issued as of yet but that will have to be included in the above calculation. I do not have the info here at present but if the bond take up was about 25%, DPC seems cheap at this stage....

While DPC may not pay much tax in FY16, I think it is worth normalising the NPAT figure to include full tax as they will pay tax in subsequent years. So I would use 25*.72 to get normalised NPAT $18mill. eps=2.93

Bonds:
It is difficult to know the impact on eps.
If everyone takes cash, then DPC may have to do a capital raising to ensure they are well capitalised. Thus more shares on issue.
If everyone takes shares, then there will be dilution as well.

But the important thing to remember is that they won't be payment 9% to bond holders after 2 years. This will increase earnings and the dilution should not be material form an eps perpective.

The tax credits they have also helps the balance sheet.

[noodles]

Ah, OK thanks for that. So I did and Apples vs Oranges calculation and you corrected me.

-------

Noodles has pointed out that for TUA I used EBT and for DPC I used EBIT, so the above comparison is not fair. To fix this I will add back the interest paid into the TUA result.

So the FY2014 EBIT for the DPC finance division is $3.360m - $0.01014m = $3.350m

We also are told the segment assets for the finance division total $37,953m at years end.

So EBIT /Segment Assets = $3.35m / $37,953m = 8.83%

Now compare this with the equivalent TUA finance division result:

TUAF FY2013 ($1.861m-$1.151m+$1.926m) / ($10.684m + $14.916m) = 10.3%

and you can see that TUA makes an 'operating profit' which is one and a half basis points above the earnings of DPC for doing essentially the same job on a similar sized loan book.

------

The end result, with my screw up taken out, was that TUA had the better finance business. That was the bit I remembered.

SNOOPY

Paul Byrnes has stated that the finance division is "sub-scale". So I think we need to monitor "EBIT /Segment Assets" going forward to see if DPC can get some operational leverage. This is key to DPC FY16 forecasts.

[Snoopy]

While DPC may not pay much tax in FY16, I think it is worth normalising the NPAT figure to include full tax as they will pay tax in subsequent years. So I would use 25*.72 to get normalised NPAT $18mill. eps=2.93

<snip>

The tax credits they have also helps the balance sheet.

Not sure who 'they' are. But DPC currently doesn't pay tax because they are using up tax losses. TUA has just paid a special dividend to wipe out their tax credits. So AFAICT any tax credits going forwards will have to be earned. Currently Dorchester/Turners have none.

SNOOPY