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

[janner]

Been in a downward trend for just over a year now..

[BlackPeter]

Been in a downward trend for just over a year now..

Great sleuthing ;);

However - what makes you think that this could not be the bend in the trend?

Last minimum was in March 2018 - since than higher highs (well, depending on how you measure them) and clearly higher lows.

MACD just turned "green" - indicating the start of a new uptrend.

Why do you think the share is still stuck in a downtrend?

[ratkin]

Great sleuthing ;);

However - what makes you think that this could not be the bend in the trend?

Last minimum was in March 2018 - since than higher highs (well, depending on how you measure them) and clearly higher lows.

MACD just turned "green" - indicating the start of a new uptrend.

Why do you think the share is still stuck in a downtrend?

Seem to be a big queue of sellers.

[trader_jackson]

Been in a downward trend for just over a year now..

Hopefully the downtrend continues until September, before a huge rapid bigly rebound

Disclosure: small time shareholder, big time bond holder

[BlackPeter]

Seem to be a big queue of sellers.

Big queue?

9706

I guess it depends on your definition of "big" and "queue".

[winner69]

Great sleuthing ;);

However - what makes you think that this could not be the bend in the trend?

Last minimum was in March 2018 - since than higher highs (well, depending on how you measure them) and clearly higher lows.

MACD just turned "green" - indicating the start of a new uptrend.

Why do you think the share is still stuck in a downtrend?

Suppose punters seeing what they want to see

[Beagle]

Have to concede TA doesn't look especially encouraging right at the minute but as Percy reminds us from time to time share prices follow earnings...
My thinking behind buying in before TA confirmed a new trend is this stock is very cheap and sometimes you have to go with FA over TA and let TA follow after all there is a vast number of fully priced shares on the market and it is very difficult to find real value with growth in EPS thrown in for nothing. No growth PE with the current low interest rates, (amendment to Benjamin Graham's 8.5 PE for no growth based on 4% risk free 10 year rate) I reckon is 10 based on 10 year Govt stock under 3% presently. Turners are trading on ~ 10 times last years earnings therefore I maintain that effectively shareholders are getting the growth for free and a divvy yield of 8.2% gross...so we're being paid handsomely to be patient and get free growth...how good is that !

[LAC]

Have to concede TA doesn't look especially encouraging right at the minute but as Percy reminds us from time to time share prices follow earnings...
My thinking behind buying in before TA confirmed a new trend is this stock is very cheap and sometimes you have to go with FA over TA and let TA follow after all there is a vast number of fully priced shares on the market and it is very difficult to find real value with growth in EPS thrown in for nothing. No growth PE with the current low interest rates, (amendment to Benjamin Graham's 8.5 PE for no growth based on 4% risk free 10 year rate) I reckon is 10 based on 10 year Govt stock under 3% presently. Turners are trading on ~ 10 times last years earnings therefore I maintain that effectively shareholders are getting the growth for free and a divvy yield of 8.2% gross...so we're being paid handsomely to be patient and get free growth...how good is that !

Now that you are in the tent, the old dog has seen the light;)

[janner]

Great sleuthing ;);

However - what makes you think that this could not be the bend in the trend?

Last minimum was in March 2018 - since than higher highs (well, depending on how you measure them) and clearly higher lows.

MACD just turned "green" - indicating the start of a new uptrend.

Why do you think the share is still stuck in a downtrend?

It may or may not be the be the " bend in the trend " It has not been confirmed.

With fuel increases and the huge indebtedness of the general public. What is going to encourage them to buy cars..??

Why still stuck in a down trend. ?? . Did not say that.

[BlackPeter]

With fuel increases and the huge indebtedness of the general public. What is going to encourage them to buy cars..??


I could think about a number of reasons for people to buy newer but pre-loved cars now (or soon-ish) ...

- old car breaking down? Remember the overall age of the NZ car fleet ...
- looking for a more reliable ride ... (again ref to age of our car fleet)
- looking for a safer ride ... some people do appreciate the higher safety rating of newer cars.
- looking for a more economic (but still affordable car) with petrol prices going up?
- the urge to invest the gummit's winter subsidy not just in smokes and booze?
- feeling rich after all these expected outrageous pay rises this year?

So many good reasons to look for a better used car.

This must be glorious times for a well organised one stop shop serving second hand car buyers with cars, finance, insurance and maintenance ...

[peat]

Have to concede TA doesn't look especially encouraging right at the minute

There are some encouraging signs using different methods.
Eg over the last two months we have seen a 5 wave impulse followed by a 3 wave correction
The correction demonstrated divergence in the RSI (blue lines)
That correction would appear to have reversed on strong volume

9708

[Beagle]

Now that you are in the tent, the old dog has seen the light;)

That's what happens when the tent material is rose colored, you see things differently :)


There are some encouraging signs using different methods.
Eg over the last two months we have seen a 5 wave impulse followed by a 3 wave correction
The correction demonstrated divergence in the RSI (blue lines)
That correction would appear to have reversed on strong volume

9708

Thanks mate. Not just the early "bird" that gets the worm is it :)

[couta1]

Hey Percy, I've now got the same number of shares as yourself but not as many as you and your wife combined. Now I can do my ramp, I reckon there is around $1 upside here over the next 18 months plus divvies, on a current PE of 10, what's not to like. After the latest result the business has been derisked further to boot. PS-As we have seen with other stocks over time, the market can be very slow to wake up.

[JayRiggs]

What would it take for us to get into the NZX50?
At the AGM, Grant Baker said it was their goal to get into the NZX50.

TRA have a current market cap of $251 million.
Looking at who's above us in the NZX50, we have CVT ($271M) and NZX ($300M).
Seems like we need a 20% boost to the share price to get over CVT and NZX, about $3.55.

If we make it into the NZX50, index funds will pile into TRA to push us up even more.

Can we make it? I think so, we were only at $3.55 merely a year ago :)

[percy]

Hey Percy, I've now got the same number of shares as yourself but not as many as you and your wife combined. Now I can do my ramp, I reckon there is around $1 upside here over the next 18 months plus divvies, on a current PE of 10, what's not to like. After the latest result the business has been derisked further to boot. PS-As we have seen with other stocks over time, the market can be very slow to wake up.

Good for you.
Time for ..........................We are "well positioned." ....lol.
You will receive your first dividend ,which are paid quarterly on 18th July.Think ex date is 2nd July.NZX site shows 5 cents,fully imputed.

[steveb]

yes but CVT are being taken over (still) according to Ogg so they will be gone!

[Beagle]

Hey Percy, I've now got the same number of shares as yourself but not as many as you and your wife combined. Now I can do my ramp, I reckon there is around $1 upside here over the next 18 months plus divvies, on a current PE of 10, what's not to like. After the latest result the business has been derisked further to boot. PS-As we have seen with other stocks over time, the market can be very slow to wake up.

I think my shareholding may be scale-able too. Not many growth shares out there that scream "cheep cheep" like a budgie are there mate :)

[percy]

TRA's result showed their business model is sound and is scalable.
Vehicle sales,finance,insurance and now service.All scalable.
They have the capacity to expand by developing their own sites,and clip the development margin.Should be a nice earner.
They can expand by organic growth, or by acquisition.
Sounds as though they have two major developments on the drawing board , Auckland and Christchurch.
This result traded through the election and stink bug issue,so was very credible.
Two disappointments were MTF non-recourse loans,and old stock at Buy Right Cars.Both issues have been identified,and corrective action has been taken.
The age of NZ vehicle fleets means the future is assured for TRA.
NZders love cars, and need their car to get to work.

[Beagle]

Percy reckons you should look for companies that are capable of growing dividends. What a superb example and currently only paying 50-60% of earnings out but still expecting 8.2% gross return for FY19 inclusive of imputation credits. With ongoing growth and a minor further tweak to payout ratio we could easily be looking at 10% dividends a couple of years from now plus growth going forward after that ! All that and a share price of under $3 trading cum a final divvy of 5 cps in five minutes time so too speak, WOW ! Not to forget an estimated FY19 PE of just 9.4 at $3.00. What an absolute bargain !

Buy right cars had an earn out provision included as part of the purchase consideration which has been adjusted accordingly.
New management team in place from 1 November after taking over management 1 year earlier than scheduled addressing older legacy stock issues well.
Once these go into the NZX50 they'll pop up 20% overnight just like PPH and CVT did ! Talk about a free future lunch !
(Thought you might enjoy a little more yapping in tune with the company music Percy ) :)
Might have to do a Couta1 and Percy and get my snout into a "nifty fifty"

[winner69]

Beags ...you forgot to say TRA essentially trading at $2.91 allowing for the divie

[percy]

Beagle.
We all look forward to your very best behaviour on this thread.
You are doing well.
No more hate barking,love,hate love etc.

[couta1]

Beagle.
We all look forward to your very best behaviour on this thread.
You are doing well.
No more hate barking,love,hate love etc. If he takes his meds daily, he should be okay.

[Beagle]

If he takes his meds daily, he should be okay.

:lol: :lol: :lol:

Winner - Can't believe I overlooked that, I must be slipping eh :) Just need to get some more shares on board and move down the other end of the tent where Couta1 and Percy are where the sun shines more brightly through the rose colored material then I'll have 20-20 vision :D

[percy]

:lol: :lol: :lol:

Winner - Can't believe I overlooked that, I must be slipping eh :) Just need to get some more shares on board and move down the other end of the tent where Couta1 and Percy are where the sun shines more brightly through the rose colored material then I'll have 20-20 vision :D
And a very big bag of Ziwi Peak treats for well behaved hounds.!!.................lol.

[couta1]

:lol: :lol: :lol:

Winner - Can't believe I overlooked that, I must be slipping eh :) Just need to get some more shares on board and move down the other end of the tent where Couta1 and Percy are where the sun shines more brightly through the rose colored material then I'll have 20-20 vision :D I have a very clear vision Mr Beagle, if it drops below $2.95, I buy more.

[ratkin]

I have a very clear vision Mr Beagle, if it drops below $2.95, I buy more.

Not concerned that any rally so soon after the good announcement has already run out of steam?? People not exactly queuing up to buy.
Have my eye on it but it really needs to head north of 3.00 with some conviction

[couta1]

Not concerned that any rally so soon after the good announcement has already run out of steam?? People not exactly queuing up to buy.
Have my eye on it but it really needs to head north of 3.00 with some conviction Chasing prices down is part of my modus operandi if I smell value, I'm not concerned with market sleepiness.

[blackcap]

What would it take for us to get into the NZX50?
At the AGM, Grant Baker said it was their goal to get into the NZX50.

TRA have a current market cap of $251 million.
Looking at who's above us in the NZX50, we have CVT ($271M) and NZX ($300M).
Seems like we need a 20% boost to the share price to get over CVT and NZX, about $3.55.

If we make it into the NZX50, index funds will pile into TRA to push us up even more.

Can we make it? I think so, we were only at $3.55 merely a year ago :)

Hi Jay,

I am not sure if making it into the NZX 50 will have that much of an impact, well as far as index funds go anyway. Currently there are 2 index funds (listed) that would include TRA into their funds if it made the top 50. Those being FNZ and MDZ. They have a combined market cap of $537m. Lets be generous and say TRA would make up 1% of each of these funds (that is being very generous) that would mean a purchase on market of $5.37m worth of shares or about 1.7 million shares. I think that would be absorbed quite easily.
I just realised though, there may be other index funds that I am unaware of (not listed ones) that would also have to purchase under their arrangement. So yes it probably would have a benefit, maybe not as much as some think.
The biggest one maybe is that top 50 inclusion would put it on the radar for a few other funds as well....

[Joshuatree]

The market says I am wrong.
The charts confirm I am wrong.
TRA's, CEO,Todd Hunter, posts on this thread; post #2157 page 144, and post #2196 page 147, confirm to me I am right.
Judgement day is not far away,infact next Tuesday the 29th May.
Either right or wrong.Simple as that.Buy/sell.Easy.

Your a legend percy. i doubled up a few weeks back partly due to your great sharing on here. hat tip:)

[JayRiggs]

Hi Jay,

I am not sure if making it into the NZX 50 will have that much of an impact, well as far as index funds go anyway. Currently there are 2 index funds (listed) that would include TRA into their funds if it made the top 50. Those being FNZ and MDZ. They have a combined market cap of $537m. Lets be generous and say TRA would make up 1% of each of these funds (that is being very generous) that would mean a purchase on market of $5.37m worth of shares or about 1.7 million shares. I think that would be absorbed quite easily.
I just realised though, there may be other index funds that I am unaware of (not listed ones) that would also have to purchase under their arrangement. So yes it probably would have a benefit, maybe not as much as some think.
The biggest one maybe is that top 50 inclusion would put it on the radar for a few other funds as well....

Hmmm yes you make some good points blackcap. There probably aren't that many funds that track the NZX50 to make much of a difference.
I did find AMP have a NZ shares index fund, worth $560m.
"Aims to provide a return that closely matches the return of the S&P/NZX 50 Index (on a gross basis and including imputation credits)."
http://www.ampcapital.co.nz/investing-with-us/index-funds

Still, can't hurt getting onto the NZX50 for bigger exposure alone. It'd be an achievement for us :t_up:

[winner69]

So many legends and gurus can’t be wrong. There has to be wisdom in the masses. The most favoured picks in the competition always seem to do well.

With so much in the credentials etc I’ve reluctantly joined the party and become a shareholder in Turners.

Sort of reluctant because it’s not that cheap, share price is trending down, some key financial ratios aren’t improving and social conscience / diversity doesn’t seem to be on their agenda. As far as diversity goes its appalling that the only female on the Board and Leadership Team is the the HR person (funny that). But then cars are ‘boys’ things aren’t they.

But you all (even Snoops said it’s pretty good);so I’m on this train to riches and looking for at least 50% return in next year (or maybe two)

At least seeing I have a vested interest in Turners I can do the occasional rave eh

[peat]

and dont forget to keep an eye on the bonds over the next few months for opportunity to accumulate ordinary's with a 5% discount.

it just seems like yesterday we were applying Black Scholes to them... is there optionality still valuable? it doesnt appear to be at this point, but who knows.
but a 5% discount to cost of acquisition could be.

[winner69]

This baby will definitely be rerated over next 12 months

Current eps of 29.3 cents so PE of 10

Years time eps to be at least 33 cents ....on a PE of say 14 will give share price of $4.62

That’s more than 50% gain ...plus divies

You guys collectively were right (can’t give all credit to percy) and convinced me to join the party

Loving it ..getting super excited

Did drop an email to Todd about what the Board and Management Team look like.

[freddagg]

Good for you.
Time for ..........................We are "well positioned." ....lol.
You will receive your first dividend ,which are paid quarterly on 18th July.Think ex date is 2nd July.NZX site shows 5 cents.however this one is 5.5 cents fully imputed.

5.0 cents percy. Now you are $500 poorer, sorry.

[Beagle]

This baby will definitely be rerated over next 12 months

Current eps of 29.3 cents so PE of 10

Years time eps to be at least 33 cents ....on a PE of say 14 will give share price of $4.62

That’s more than 50% gain ...plus divies

You guys collectively were right (can’t give all credit to percy) and convinced me to join the party

Loving it ..getting super excited

Did drop an email to Todd about what the Board and Management Team look like.


Nice ramp mate.
http://www.turnersautogroup.co.nz/site/turnerslimited/files/2018News/Final%20-%20FY18%20Full%20Results%20Presentation.pdf
Now that the initial excitement and (arguably the biggest fizzer in years the MSCI change) has died down I suppose we should dissect this and TNR's financials a bit.

[minimoke]

Sort of reluctant because it’s not that cheap, share price is trending down, some key financial ratios aren’t improving and social conscience / diversity doesn’t seem to be on their agenda. As far as diversity goes its appalling that the only female on the Board and Leadership Team is the the HR person (funny that). But then cars are ‘boys’ things aren’t they.
You may have missed this nit "

With a tight labour market and requirements for more resource Turners are


working hard to make sure they are an employer of choice and will continue to


attract the right sort of people. We continue to measure and focus on


improving employee engagement, a commitment to ongoing workplace diversity,


building a culture of developing people and promote from within

[Beagle]

^^^ Applies to most companies.

[minimoke]

Well, heres another who has just bought into TRA. I'm liking their numbers and their offering. Tipping point for me though was Auckland regional fuel tax. I'm picking increase fuel prices and an increased tax n NZ' largest population will force that population to look at their fuel economy. What better than to be eased into a more efficient vehicle with purchase and finance options which can be paid for an increasing minimum wage and public service salaries.

[Beagle]

Well, heres another who has just bought into TRA. I'm liking their numbers and their offering. Tipping point for me though was Auckland regional fuel tax. I'm picking increase fuel prices and an increased tax n NZ' largest population will force that population to look at their fuel economy. What better than to be eased into a more efficient vehicle with purchase and finance options which can be paid for an increasing minimum wage and public service salaries.


Welcome on board. My 6.4 liter V8 Chrysler running 98 Octane is going to be even more painful to fuel up. I'm thinking about a cheap supplementary city car as a general office hack...might even go and have a look at what Turners have to offer :) Second hand Suzuki swift or similar would do the job just fine for most of my city running.

I've pulled my head in a fair bit with high growth companies and am going back to my core belief's as a value investor. Cheap PE, good dividend yield and growth.
TNR a very good fit with my core value investor belief system.

[percy]

5.0 cents percy. Now you are $500 poorer, sorry.

Apologies.
5 cents it is.

[winner69]

You may have missed this nit "

With a tight labour market and requirements for more resource Turners are


working hard to make sure they are an employer of choice and will continue to


attract the right sort of people. We continue to measure and focus on


improving employee engagement, a commitment to ongoing workplace diversity,


building a culture of developing people and promote from within



Weasel words mini ....sounds good but not all things they say put into practice

But as I said cars are mainly for the boys eh

[percy]

Weasel words mini ....sounds good but not all things they say put into practice

But as I said cars are mainly for the boys eh

Not so.
TRA have a history of doing what they say they will do.

ps.Note the high level of directors' shareholdings.

[freddagg]

Welcome on board. My 6.4 liter V8 Chrysler running 98 Octane is going to be even more painful to fuel up. I'm thinking about a cheap supplementary city car as a general office hack...might even go and have a look at what Turners have to offer :) Second hand Suzuki swift or similar would do the job just fine for most of my city running.

Do not weaken Beagle. If we buy more fuel efficient cars the govt know we will then be able to afford even higher fuel taxes.

[RTM]

.... Second hand Suzuki swift or similar would do the job just fine for most of my city running.

Wow...small cars aren’t as safe, take care!

[BlackPeter]

Wow...small cars aren’t as safe, take care!

Not true. Obviously - we don't know the years, but e.g. a 2013 Chrysler has a 5 star safety rating, and so has a 2014 Suzuki Swift ;);

[James108]

Not true. Obviously - we don't know the years, but e.g. a 2013 Chrysler has a 5 star safety rating, and so has a 2014 Suzuki Swift ;);

Big cars are safer in collisions with small cars but big car vs big car collisions are less safe than small car vs small car. So driving a big car for safety reasons is selfish.

[Joshuatree]

There was a world first test done in nz on a nigel latta show which proved a small modern car is safer then a larger older car when they crashed them head on.

[Brain]

There was a world first test done in nz on a nigel latta show which proved a small modern car is safer then a larger older car when they crashed them head on.

so does that mean that if a hummer crashes into a suzuki swift head on then the hummer driver will sustain more injuries then the swift driver

[blackcap]

so does that mean that if a hummer crashes into a suzuki swift head on then the hummer driver will sustain more injuries then the swift driver

Sounds like a rubbish test to me. Id rather be in the Hummer all day and any day and I am sure JT would concur.

[janner]

Not true. Obviously - we don't know the years, but e.g. a 2013 Chrysler has a 5 star safety rating, and so has a 2014 Suzuki Swift ;);

Irrelevant.. It is cheap... It is what I want.. It is no deposit.. Cool...

Can any one remember Fanny May in this fast moving world . ????

[Beagle]

Lets move on from the crash test debate shall we, and leave that debate for a more appropriate off market thread...

However misguided and morally repugnant (Labour promised no new taxes remember ?) these new fuel taxes being imposed on us are, the fact is they will encourage some people towards updating their vehicle to something more fuel efficient which is good for vehicle volume turnover and therefore good for Turners.

[winner69]

Irrelevant.. It is cheap... It is what I want.. It is no deposit.. Cool...

Can any one remember Fanny May in this fast moving world . ????

Is there going to be another Fanny Mae?

How will Turners cope if another GFC?

[percy]

Is there going to be another Fanny Mae?

How will Turners cope if another GFC?

As they have always coped over the past 50 years...…...carefully.
NIM of 9% provides TRA with plenty of "wriggle room."

[BlackPeter]

Is there going to be another Fanny Mae?

How will Turners cope if another GFC?

Good question - you are concerned about the sub-prime-car-securities?

I'd expect the risk is lower ... they don't bundle these car loans and sell them as A-rated securities to unsuspecting investors - and individually I suppose most of the buyers are interested in keeping their cars to still get to work. Lower risk of "jingle mail" with car loans.

[Snoopy]

Winner69 wrote:
"How will Turners cope if another GFC?"

Good question - you are concerned about the sub-prime-car-securities?

I'd expect the risk is lower ... they don't bundle these car loans and sell them as A-rated securities to unsuspecting investors -

I am not so sure about that BP. This is what Todd Hunter said in the March 2018 "Shareholder News" on page 1

"To help fund the growth of our finance book we have been diversifying our funding and now utilise bank funding bonds and equity. We are looking to extend the securitization we put in place last year (see AR2017 note 14 was $71m with the BNZ only) to $250m and are close to finalising a new banking syndication."

If you look back into note 14 in AR2017, there is more information about Turner's securitization arrangements.

"The Group has a wholesale funding facility with the Bank of New Zealand (BNZ) under which it securitises finance receivables through the Turners Marque Warehouse Trust 1 (The Trust). Under the facility BNZ provides funding to the trust secured by finance receivables sold to the trust from the finance sector.....

The Trust is a special purpose entity set up solely for the purchase of finance receivables from the finance sector..."

The third paragraph from the end states:

"The Group has the power over the trust , exposure or rights to variable returns from its investment within the trust and the ability to use its power over the trust to affect the amount of the groups returns from the Trust. Consequently the Group controls the Trust and has consolidated the Trust into the Group financial statements."

My first thought on reading this was, why has Turners gone to all this trouble setting up a 'special trust' to package loans which is fully consolidated into the results anyway and still owned by Turners? What a complete waste of time!

But then I thought perhaps I am looking at this from the wrong angle. Perhaps it was the banks that had the idea of setting up the trust. And perhaps it is the banks that want to on sell the syndicated loans to third party punters? IOW it is the banks that are setting up their own (potential) sub-prime car loans to be packaged up for sale to hapless punters?

I may have got the wrong end of the stick with this and am happy to be corrected. But the above is how I interpreted what was written in the annual report.

SNOOPY

P.S.{note 29th May Presentation, Slide 11}

"Growth in Securitisation Warehouse reflects growth in finance book and substitution of corporate bank funding."
"• $140m syndication facility with ASB and BNZ completed May 2018."

The fact that the securitization of loans is a "substitution" for bank funding suggests to me that the securitized loans must be being "on sold" to third party punters.

[janner]

Good question - you are concerned about the sub-prime-car-securities?

I'd expect the risk is lower ... they don't bundle these car loans and sell them as A-rated securities to unsuspecting investors - and individually I suppose most of the buyers are interested in keeping their cars to still get to work. Lower risk of "jingle mail" with car loans.

A little less of the sneering would help. IMHO.

W69. Asked a good question.. No job,, No need to pay for the car.

Did hear Hunter saying that they are looking for higher quality loans..

Ergo.. Lower sales.. With possibly the same profit at higher rates..

Disc. Small holder.

[GTM 3442]

If the BNZ are looking to acquire these loans, it's either because they're a good deal in their own right, or it's to on-sell them.

Or perhaps a Kiwisaver fund might just be interested in a bit of "alternative" or "high-yield" fixed interest.

[Snoopy]

NIM of 9% provides TRA with plenty of "wriggle room."


I think investors need to be very careful with using 'net interest margin' as an indicator of how well a finance operation is being run. 9% may be double what the likes of Heartland are doing. But as Jeff Greenslade (or was it one of his underlings?) said, and if I may paraphrase it:.

"If a sharemilker's loan goes bad, we can always kill the cows."

With all the high tech in cars today, if you are shy about servicing, you may find a $15,000 car needs $15,000 worth of repairs to get it on the road. IOW from a lenders perspective, it is worthless. Even before that it is depreciating as soon as it drives out of the car yard gate. OTOH, Feed your cows right and they should be increasing in value each time they are driven through the farm gate. IOW the extra margin at Turners is needed to make up for the lower quality asset being financed.

Another reason why the Turners NIM is so much higher, is because it can largely be run from a centralised office, with no need to have a Turners finance person at every 'Buy Right' car yard. Contrast that with Heartland who have an extensive branch network of finance people throughout the country.

I would suggest that 'net profit margin after tax' is a better indicator as that takes into account all the other costs of running the business, including the cost of writing down loans.

I have calculated both sets of figures on the 'Investment Story Thread' started by Winner.

https://www.sharetrader.co.nz/showthread.php?10678-An-Investment-Story-Geneva-Turners-Heartland/page3

An Investment Story: Chapter 4a 'Net Interest Margin' (note these figures are for the Finance Arm of Turners 'separated out' which makes them look even more impressive).

An Investment Story: Chapter 4b 'Net Profit Margin' (I have calculated these for both the Finance Arm of Turners and the whole thing - because you can't buy shares in the finance arm alone.)

Turners still come out well in the latter comparison from a finance group perspective. But from a Turners Limited (now Turners Automotive Group) perspective, the net profit margin is less than half that being achieved by Heartland.

SNOOPY

[percy]

TRA with low impairment loan rates and high NIM tick the boxes for me,and for securitization.
Cars today are very reliable,so faults are few.Lenders will not lend on uninsured vehicles.
Yes regular servicing saves large repair bills.
The majority of cars under $10,000 to $20,000 are not high tech.
Machanics just plug the car into a computer to see if their are any faults,so dealers can check them out before trading them in.
A friend of mine's Merc was under water in a ChCh flood.All eclectrics etc ruined.Vehicle therefore written off. Could not even get into it.!!

[Snoopy]

Cars today are very reliable,so faults are few.
Yes regular servicing saves large repair bills.
The majority of cars under $10,000 to $20,000 are not high tech.
Machanics just plug the car into a computer to see if their are any faults,so dealers can check them out before trading them in.


'High Tech' is a moving feast. I remember a story from fifteen years ago about a Subaru owner who somehow managed to fry a circuit board under the cars bonnet. The car was over 8 years old so there was no stocks on hand for the part he wanted. The car IIRC was worth around $15,000 (an upmarket niche coupe called the Vortex) retail and the cost quoted to bring in a new circuit board was $30,000. The reason? There were no stocks in Japan so the factory that made the circuit board in the first place would have to tool up to produce a run of new ones!

The problem is not with cars that are regularly serviced (in general). It is with cars that are not regularly serviced as might happen if you were struggling to pay your car loan. IOW the cars that Turners might have to repossess.

SNOOPY

[winner69]

Snoops ......how much do Turners have to ‘discount’ the loans by when they are packaged up, ie what is BNZ’s cut ....before funding the SPV to buy them

[Marilyn Munroe]

Securitization can involve the splitting of the loan repayment cash flows into repayment of principal or interest payment.

Thus a financier may subscribe to the principal payment stream assuming the risk that borrowers will repay on schedule or be in arrears. However they can win if interest rates go down and borrowers refinance elsewhere at cheaper rates because they will get their money earlier.

Boop boop de do
Marilyn

[Beagle]

TRA with low impairment loan rates and high NIM tick the boxes for me,and for securitization.
Cars today are very reliable,so faults are few.Lenders will not lend on uninsured vehicles.
Yes regular servicing saves large repair bills.
The majority of cars under $10,000 to $20,000 are not high tech.
Machanics just plug the car into a computer to see if their are any faults,so dealers can check them out before trading them in.
A friend of mine's Merc was under water in a ChCh flood.All eclectrics etc ruined.Vehicle therefore written off. Could not even get into it.!!

Agree 100%. It's the $30K - $50K 5-6 year old European cars that are the real worry from a technological point of view. I reckon for example one would be a brave person to buy a 6 year old BMW just out of its 5 year manufacturers warranty especially one with the V8 engine (type N63). https://en.wikipedia.org/wiki/BMW_N63

[winner69]

As long as Turners objectively revolutionise sticky core competencies they should be able to take the business to the next level

Think I bought at the right time

[percy]

As long as Turners objectively revolutionise sticky core competencies they should be able to take the business to the next level

Think I bought at the right time

W69 I don't know why you procrastinate so often.
Investing is simple, when you know you will make money if you get 6 out of 10 share market investments right.
Like me you should be getting 9 out of 10 right.
Do your research.Give a company a year to do what they say they will do.If they do, buy more,if they don't sell.
Can't be easier than that.

[Beagle]

As long as Turners objectively revolutionise sticky core competencies they should be able to take the business to the next level

Think I bought at the right time
As cunning as a hungry Beagle mate. Let the shares fall all the way to under $3,, (feel a bit sorry for anyone paying close to $4 a year or so ago) and then a solid result slightly exceeding market expectations with a great outlook and buy under $3 when the shares have effectively been de-risked and trading cum a 5 cps fully imputed divvy in five minutes time so too speak. Then you can look forward to regular quarterly divvies that grow each year.

This is the next big thing. Couta1's relativity theory has them at $3.84 within a year, what could possibly go wrong :D All aboard this train, last chance to buy under $3 tomorrow.

[winner69]

As cunning as a hungry Beagle mate. Let the shares fall all the way to under $3,, (feel a bit sorry for anyone paying close to $4 a year or so ago) and then a solid result slightly exceeding market expectations with a great outlook and buy under $3 when the shares have effectively been de-risked and trading cum a 5 cps fully imputed divvy in five minutes time so too speak. Then you can look forward to regular quarterly divvies that grow each year.

This is the next big thing. Couta1's relativity theory has them at $3.84 within a year, what could possibly go wrong :D All aboard this train, last chance to buy under $3 tomorrow.


Yep, being patient (procrastinating) has 'saved' me heaps eh ....and the what it would have cost a year ago had been put to good use in the meantime. Could say the $3.70 it would have cost a year ago to buy Turners but buying other things has made me a $1 profit and I've got 25% more Turners shares now ....and spending that $1 profit on other good things ... like a double whammy


But then again I'm under water at the moment with these TRA shares and might have made a huge blunder in joining you gurus and legends .....the market might have the last laugh after all.

Hope not

[winner69]

Second hand Suzuki swift or similar would do the job just fine for most of my city running.

.

Is only short haul but don't forgey to check pitch and seat width ....... could be worse than one of those Jetstar sardine tins

[percy]

Just enjoy the growing fully imputed dividends.
I am.

[percy]

Is only short haul but don't forgey to check pitch and seat width ....... could be worse than one of those Jetstar sardine tins

My Nissan Bluebird Slyphy is fantastic.
Good boot too.
Great for trips .
No cam belt to replace.
Going by the number of them on the road, there are great many happy owners.

[Beagle]

Is only short haul but don't forgey to check pitch and seat width ....... could be worse than one of those Jetstar sardine tins

Bet ya the seats, steering wheel and cup holders aren't heated either...hmmm...

Like anything you get what you pay for...why travel economy when you don't need too ?

[Snoopy]

Snoops ......how much do Turners have to ‘discount’ the loans by when they are packaged up, ie what is BNZ’s cut ....before funding the SPV to buy them

Near the end of note 14 in AR2017, Turners have this to say:

"The group retains substantially all of the risks and rewards relating to the finance receivables sold and therefore the finance receivables do not qualify for derecognition and remain on the groups consolidated statement of financial position."

If Turners ultimately retain all the risk, then there is no reason to offer a discount to those buying the repackaged loans. So my guess is the amount of discount offered to the BNZ who are securitizing the loans for "on sale" is - none!

SNOOPY

[winner69]

Near the end of note 14 in AR2017, Turners have this to say:

"The group retains substantially all of the risks and rewards relating to the finance receivables sold and therefore the finance receivables do not qualify for derecognition and remain on the groups consolidated statement of financial position."

If Turners ultimately retain all the risk, then there is no reason to offer a discount to those buying the repackaged loans. So my guess is the amount of discount offered to the BNZ who are securitizing the loans for "on sale" is - none!

SNOOPY

snoops, it’s pretty clever how that Trust has a bond issue (which Turners take up) to pay for 8% of the debt securitised. (Bank funds the other 92%)

[winner69]

Boomer of a day on the NZX

Most things seem to be up except TRA (and PEB)

Maybe the market is laughing at me for buying TRA

[Beagle]

Boomer of a day on the NZX

Most things seem to be up except TRA (and PEB)

Maybe the market is laughing at me for buying TRA


I got my snout into some more this morning @ $2.96....why look a gift horse in the mouth ? The other thing that I really like about this one is I think about all the fat margins I've paid to car dealers over the years with vehicle deals I've done. Its so remarkably refreshing to be on the other side of the ledger !! Steadily working my way up towards Percy's end of the tent :)

[percy]

Boomer of a day on the NZX

Most things seem to be up except TRA (and PEB)

Maybe the market is laughing at me for buying TRA

Sell and move on.
Win win situation for everyone.

[couta1]

Sell and move on.
Win win situation for everyone. I want them at $2.96.

[Beagle]

I want them at $2.96.

Me too, I have a healthy appetite for more at that level, (only really $2.91 taking into account the pending 5 cent divvy, but sssshhh, let's keep the real price to ourselves)

[percy]

I want them at $2.96.

Looks as though he wants $3.05....lol.

[couta1]

Looks as though he wants $3.05....lol. HaHa, Classic, give that man 200 claps.

[Beagle]

Looks as though he wants $3.05....lol.

Ouch...poor Winner...that's a little harsh...

[percy]

Was a bit.
Apologies W69.

[couta1]

Ouch...poor Winner...that's a little harsh... I reckon winner has a big enough sense of humour to cover it.

[winner69]

I love you guys ......really good of you propping up the shareprice at the moment

Hoping like anything rest of week will be better

Got to stop checking the price as often as I do

[sb9]

Someone seem to keep reloading more on offer around 2.97 and 2.98 level.

Could that be Milford or some other big fund?

[winner69]

Not for TRA .....jeez 1.4% for the NZX is some sort of day‏

@MarkListerNZ
The NZX 50 finished up 1.4% today, hitting fresh all-time highs in the strongest trading session for two and a half months.

[Snoopy]

Snoops, it’s pretty clever how that Trust has a bond issue (which Turners take up) to pay for 8% of the debt securitised. (Bank funds the other 92%)

Winner, I may have read this the wrong way. But after I read the March 2018 newsletter in which Todd said on p1

"To help fund growth in our finance book, we have been diversifying our funding and now utilise bank funding, bonds and equity. We are looking to extend the securitisation we put in place last year to $250m and are close to finalising a new banking syndication (since achieved)"

I had assumed the only bonds being referred to were the TRAHB bonds that are NZDX listed. I had assumed it was these bonds that Turners referred to as funding part of the securitised debt under the "Turners Marque Warehouse Trust 1".

As at 31st March 2017 balance date, the BNZ part of the Trust funding was for a facility of $150m. But the carrying value of financial receivables in the Trust was only $73m. So why did Turners 'top up' the funding of the Trust via a bond issue, when there was so much underutilised BNZ funding still available? I can't make much sense of it all. The only possible answer I can offer is that if there was no co-funding by a party other than the bank, then "The Trust' would be little more than just another lump of bank debt, indistinguishable from the company's term bank debt. And another lump of bank debt is not "funding diversification".

SNOOPY

[Fox]

As at 31st March 2017 balance date, the BNZ part of the Trust funding was for a facility of $150m. But the carrying value of financial receivables in the Trust was only $73m. So why did Turners 'top up' the funding of the Trust via a bond issue, when there was so much underutilised BNZ funding still available? I can't make much sense of it all. The only possible answer I can offer is that if there was no co-funding by a party other than the bank, then "The Trust' would be little more than just another lump of bank debt, indistinguishable from the company's term bank debt. And another lump of bank debt is not "funding diversification".
SNOOPY

Subordinated notes are held as security against the securitisation warehouse (beyond that of the asset back securities), which allows Turner's to earn their 8% of waterfall distributions before the trust/SPV. Further bonds were issued to pledge more security against the facility to enable an increase in the facility limit for further growth when required.

[percy]

Today's announcement, director Paul Byrnes, buying 100,000 shares on market,taking his holding to 3,414,860 is positive.
Directors have a lot of skin on the line,which again is very positive.

[Beagle]

Today's announcement, director Paul Byrnes, buying 100,000 shares on market,taking his holding to 3,414,860 is positive.
Directors have a lot of skin on the line,which again is very positive.

Agreed - link http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/318973/280540.pdf

[winner69]

Today's announcement, director Paul Byrnes, buying 100,000 shares on market,taking his holding to 3,414,860 is positive.

Good to see ...especially as paid about the same as I did

We both can’t be fools

Good pruchuse by him

[trader_jackson]

Today's announcement, director Paul Byrnes, buying 100,000 shares on market,taking his holding to 3,414,860 is positive.
Directors have a lot of skin on the line,which again is very positive.

Must be too cheap, hence the buying, on top of an already large holding.

[BlackPeter]

Today's announcement, director Paul Byrnes, buying 100,000 shares on market,taking his holding to 3,414,860 is positive.
Directors have a lot of skin on the line,which again is very positive.

I think that's a fair comment ;);

Jeez - 3.4 million shares, he certainly has some "skin" in the game.

[Beagle]

Good to see ...especially as paid about the same as I did

We both can’t be fools

Good pruchuse by him
LOL Nicely spotted - Extremely cunning buying so we'll forgive him the typo :)

[sb9]

https://www.interest.co.nz/news/94138/new-car-sales-records-still-being-broken-buyers-choose-bigger-vehicles-suvs-now-account

Like this bit from the article above..

"The stink bug diversion is now behind us and the import traffic seems to be trending higher yet again. "

[percy]

I think that's a fair comment ;);

Jeez - 3.4 million shares, he certainly has some "skin" in the game.

Modest compared to some of the other directors...????...lol.

[Beagle]

https://www.interest.co.nz/news/94138/new-car-sales-records-still-being-broken-buyers-choose-bigger-vehicles-suvs-now-account

Like this bit from the article above..

"The stink bug diversion is now behind us and the import traffic seems to be trending higher yet again. "


The rise and rise of SUV sales continues to really astound me. Was 57% of all sales last year...now up to a whopping 65% of all vehicle sales. Hope Todd Hunter is well aware of this trend and stocking up on SUV's at the expense of sedan's and hatchbacks. Medium sedan's now just 4% of the market....WOW !!! I guess people don't care about a low center of gravity and are prepared to sacrifice better handling and fuel economy for increased versatility. Been considering the idea of a low mileage 7 Series BMW sedan...fair to say the dealer embraced me like a long lost friend when looking at their 2 year old demo, (two years sitting on a car lot..the mind boggles on how much floor plan finance costs that's eaten up). I think very very few people are looking at large sedan's anymore, especially high end ones with business confidence at a very low level. Mind you if business confidence is so incredibly low how come new vehicle sales are at an all time record ??? Doesn't make sense...

[percy]

I would think Todd would get up earlier than you and I.
Most probably sleeps with the light on too.!
Go to TRA's next agm and talk to him.

[Beagle]

I would think Todd would get up earlier than you and I.
Most probably sleeps with the light on too.!
Go to TRA's next agm and talk to him.

Will do. Maybe he'll talk some sense into me about the waste of money high end Euro cars are lol
Depreciation redefined !

[percy]

Will do. Maybe he'll talk some sense into me about the waste of money high end Euro cars are lol
Depreciation redefined !

But would you listen to sense.?

[Beagle]

But would you listen to sense.?

Probably not when it comes to cars...best to rely on "the handbrake"...she has learned to bark very loudly lol

[Beagle]

Topped up with some more at $2.99 this morning. Working my way down to your end of the tent Percy :)

[blackcap]

Topped up with some more at $2.99 this morning. Working my way down to your end of the tent Percy :)

Not that it means much, but its looking good on the depth for the first time in a long time. 5 cent (quarterly fully imputed) dividend coming up shortly too. With these quarterlies, you get it in the bank and the following one is almost already being announced. Long term hold for me. Paul Byrnes buying more shares at these prices is a great signal. (Apart from Todd Hunter he probably knows the company best)

[Snoopy]

Subordinated notes are held as security against the securitisation warehouse (beyond that of the asset back securities), which allows Turner's to earn their 8% of waterfall distributions before the trust/SPV. Further bonds were issued to pledge more security against the facility to enable an increase in the facility limit for further growth when required.

"The quick brown fox jumps over the lazy dog." This is a sentence I had to copy out several times in finest hand script in my primary school days. Yet, I can honestly say that I never fully understood what it all meant until this moment.

It looks like you definitely have the jump on me on this matter Fox. I get the idea that used cars on which their owners have fallen behind in their repayments, may not provide great security. So the idea of Turners providing some bonds as extra 'cash' security could be appealing for those who want to buy their securitized loans.

Note 14 of AR2017 implies 8% of the securitized loan balance is funded by subordinated notes issued by the Turners Group. I have figured out that 'Waterfall Distributions' refers to the order in which funds are distributed. And you are implying that Turners, with their 8% stake in the funding, get paid out before the BNZ who fund the rest of the loans. However, I cannot find anything in the annual report that confirms this is the case. And I am left wondering why the BNZ would agree to this? What you seem to be saying is that by packaging up securitized loans, BNZ have moved down the payout order, and the BNZ would have been better off just making a straight loan to Turners in which case they would be paid out first!

As at 30th September 2017 I see the securitized receivables were up to $117m (up from $73m) at 31st March 2017 balance date. Likewise total borrowings have gone up from $265.889m to $306.786m over the same period. However in the half year report, there is no break down of how the increase in borrowing is made up. Also I can find no announcement during the year of more bonds being issued. So I am curious about your "Further bonds were issued..." statement. Hoping you can help demystify the situation for this lazy old dog?

SNOOPY

[percy]

[QUOTE=Snoopy;717474]"The quick brown fox jumps over the lazy dog." This is a sentence I had to copy out several times in finest hand script in my primary school days. Yet, I can honestly say that I never fully understood what it all meant until this moment.

Really.?
It contains all the letters of the alphabet.

[Joshuatree]

Thanks for the memories:). "Pack my box with five dozen liquor jugs" as well.
And this one for Hobbit fans
”The quick onyx goblin jumps over the lazy dwarf”:

[Fox]

"The quick brown fox jumps over the lazy dog." This is a sentence I had to copy out several times in finest hand script in my primary school days. Yet, I can honestly say that I never fully understood what it all meant until this moment.

It looks like you definitely have the jump on me on this matter Fox. I get the idea that used cars on which their owners have fallen behind in their repayments, may not provide great security. So the idea of Turners providing some bonds as extra 'cash' security could be appealing for those who want to buy their securitized loans.

Note 14 of AR2017 implies 8% of the securitized loan balance is funded by subordinated notes issued by the Turners Group. I have figured out that 'Waterfall Distributions' refers to the order in which funds are distributed. And you are implying that Turners, with their 8% stake in the funding, get paid out before the BNZ who fund the rest of the loans. However, I cannot find anything in the annual report that confirms this is the case. And I am left wondering why the BNZ would agree to this? What you seem to be saying is that by packaging up securitized loans, BNZ have moved down the payout order, and the BNZ would have been better off just making a straight loan to Turners in which case they would be paid out first!

As at 30th September 2017 I see the securitized receivables were up to $117m (up from $73m) at 31st March 2017 balance date. Likewise total borrowings have gone up from $265.889m to $306.786m over the same period. However in the half year report, there is no break down of how the increase in borrowing is made up. Also I can find no announcement during the year of more bonds being issued. So I am curious about your "Further bonds were issued..." statement. Hoping you can help demystify the situation for this lazy old dog?

SNOOPY

My apologies for the confusion, the distribution from the trust to Turner's has the lowest seniority after the more senior tranches are paid first. The reverse occurs for credit losses as well, any bad debts or impairments are covered by the lowest tranches first i.e. Turner's, then any remainder credit losses beyond that tranche are shared with the next tranche i.e. BNZ. This is why the finance receivables are still reported on the Group's balance sheet as they still retain the substantial risks and rewards of those loans.

The bonds referred to were the TRAHB sub notes of $25m that are held as security over the trust. These, along with other assets, provide that buffer to absorb any potential credit losses before BNZ up to the agreed upon 8% contribution by Turner's.

[Snoopy]

My apologies for the confusion, the distribution from the trust to Turner's has the lowest seniority after the more senior tranches are paid first. The reverse occurs for credit losses as well, any bad debts or impairments are covered by the lowest tranches first i.e. Turner's, then any remainder credit losses beyond that tranche are shared with the next tranche i.e. BNZ. This is why the finance receivables are still reported on the Group's balance sheet as they still retain the substantial risks and rewards of those loans.


OK, the fact that Turners are last on the waterfall to get the rewards of the Securitization but first on the waterfall to absorb the losses of the Securitization makes much more sense. Thanks.



The bonds referred to were the TRAHB sub notes of $25m that are held as security over the trust. These, along with other assets, provide that buffer to absorb any potential credit losses before BNZ up to the agreed upon 8% contribution by Turner's.


In the March 2018 newsletter (p1), Turners state they are looking to extend their securitization facility in the future to $250m.

8% of $250m is $20m.

There are just over $25m of TNRHB bonds outstanding. So there are more than enough bonds to satisfy the Turners Automotive Group Guarantee (amounting to 8% of the securitized loan balance) of the 'Turners Marque Warehouse Trust 1' (the loan securitization entity).

However the quantum of current loans securitised at EOFY2018 balance date has not yet been disclosed. As at the half year it was $117m. So it seems not all of the TNRHA bond capital is required to guarantee the securitised loans.

I had another look at the bond prospectus and found this quote on p21

"The Turners Group’s primary finance activities include the Bank Borrower Finance Companies which rely on borrowers to repay their loans and make interest payments on due date. The Bank Borrower Finance Companies take security over assets to secure most of the loans they make. However if a borrower fails to repay the loan on its due date and the value of the secured asset (if the loan is secured) and/or the amount recovered under any guarantee is insufficient to cover the outstanding payments, the relevant Bank Borrower Finance Company will make a loss on that loan (credit risk). If this occurs in relation to a significant number of loans, Turners may default with its lenders (including Bondholders)."

From what Fox is saying, it seems that as the quantum of securitized loans goes up, so does the quantum of TNRHB bonds tied to supporting those loans. So rather than TNRHB bonds being used as 'general loan capital' to support the wider activity of the group, we are heading for a situation where the TNRHB bonds support securitized car loans only. Thus it appears to me that the underlying risk profile of the TNRHB bonds is changing over time. It does look to me as though they have become riskier over FY2018!

SNOOPY

[percy]

Looks as though he wants $3.05....lol.

Well well well.?
Looks as though this seller of 200 shares will be gone on the open today.! ..

[oldtech]

Well well well.?
Looks as though this seller of 200 shares will be gone on the open today.! ..

Only one buyer so far at that level, everyone else down at $3.02 or lower ... I will be watching closely to see who blinks first, the buyers or the sellers.

[minimoke]

Well well well.?
Looks as though this seller of 200 shares will be gone on the open today.! ..
not going to break the bank if the buyers mop up the $3.06 as well

[Timesurfer]

Given that I am new to this game - can you explain the strategy of listing 39, 57 shares? And maybe you could tell me what broker one would use whereby that is economical viable? Cheers

[BlackPeter]

Given that I am new to this game - can you explain the strategy of listing 39, 57 shares? And maybe you could tell me what broker one would use whereby that is economical viable? Cheers

Just robots trading and trying to manipulate the share price, triggering stop losses and similar ... and no, they pay significantly lower trading fees than you and I ;)

[Timesurfer]

I see ... it becomes a little clearer. Thanks!

[JoeGrogan]

Business bakery now out, i'm guessing the selling pressure will ease off now?

[winner69]

Business bakery now out, i'm guessing the selling pressure will ease off now?

What’s the announcement that followed say?

[JayRiggs]

There are 2 announcements for the Business Bakery.

SPH Notice - The Business Bakery L.P.
https://www.nzx.com/announcements/319102

SPH Notice - Baker Investment Trust No 2
https://www.nzx.com/announcements/319105

First one says: Details of the transactions or other events requiring disclosure: In specie transfer of 8,461,723 shares held in TRA by The Business Bakery L.P. to its limited partners

Second one says: In specie distribution of shares in TRA held by The Business Bakery LP to its limited partners, including 2,464,124 shares to the trustees of the Baker Investment Trust No 2

Doesn't look like they're selling their shares on market, but rather transferring of shares around. Who are these limited partners I wonder?

[JoeGrogan]

What’s the announcement that followed say?

yeah just saw that lol, so they just transferred half to a different trust?

[winner69]

Our friend Mark says NZX going gangbusters

Turners a laggard ...an undernperformer

Possibly a case of just a strong market dragging stocks like Turners up (the rising tide thingie) ...fundamentals don’t deserve much more

Mark Lister (@MarkListerNZ)
8/06/18, 8:49 AM
The NZX 50 is up 3.05% so far this week, with one day to go. If it holds onto those gains this will be the best week since July 2016.

[winner69]

Doesn't look like they're selling their shares on market, but rather transferring of shares around. Who are these limited partners I wonder?

Geoff Ross, Steve Sinclair and Grant Baker

[percy]

There are 2 announcements for the Business Bakery.

SPH Notice - The Business Bakery L.P.
https://www.nzx.com/announcements/319102

SPH Notice - Baker Investment Trust No 2
https://www.nzx.com/announcements/319105

First one says: Details of the transactions or other events requiring disclosure: In specie transfer of 8,461,723 shares held in TRA by The Business Bakery L.P. to its limited partners

Second one says: In specie distribution of shares in TRA held by The Business Bakery LP to its limited partners, including 2,464,124 shares to the trustees of the Baker Investment Trust No 2

Doesn't look like they're selling their shares on market, but rather transferring of shares around. Who are these limited partners I wonder?

The Business Bakery [GP]Limited was 40% owned by Grant Baker,40% Geoff Ross and 20% Stephen Sinclair.
The Business Bakery [GP] Limited controlled The Business Bakery LP.I do not know the make up of partners or their holdings.
What we can see is the in specie distribution of TRA shares means Grant Baker held 35.28%% of the LP.,and existing shareholder Harrison had only a modest holding in the LP.

[peat]

The NZX 50 is up 3.05% so far this week, with one day to go. If it holds onto those gains this will be the best week since July 2016.

It looks to me as if the market has broken out of a lengthy consolidation phase lasting best part of 2 years.

[BlackPeter]

yeah just saw that lol, so they just transferred half to a different trust?

Not sure the numbers completely add up, but yes - it looks like the Baker family restructured their investment trusts without changing their interest in TRA. Non event for holders.

[Snoopy]

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' ) annual reports:


[TR]
FY2011FY2012FY2013FY2014FY2015FY2016


Interest Expense (A)$3.064m$2.928m$3.857m$7.381m$11.436m


Total Liabilities$48.634m$49.932m$70.765m$52.630m$207,97 0m$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.


A couple more years worth of results are now out from Turners. So time to revisit this exercise, and check out if my 'headwind' fear was realised.

Turners have not insignificant borrowings. But borrowed funds are not a problem provided they are used wisely and the cost of servicing the loans has not become too risky. How can we judge if this is the case? It is hard for a small investor, with skin in the game, to give a dispassionate view on the topic. But professional lenders are likely to be more dispassionate. The interest rate charges that a company faces can be thought of as a bank's measure of risk for the company.

Question: So how is the 'interest rate charged' trend for TNR looking?



FY2013FY2014FY2015FY2016FY2017FY2018


Interest Expense (A)$2.928m$3.857m$7.381m$11.436m$11.350m$14.344m


Total Liabilities$70.765m$52.630m$207.970m$232.491m$384. 917m$437.662m


Total Borrowings$22.784m+$10.857m$17.565m$156.995m$174.8 16m$265.889m$317.373m


Averaged Borrowing Balance (B)$25.603m$87.280m$165.906m$220.353m]$291.631m


Implied Borrowing Interest Rate (A)/(B)15.1%8.5%6.9%5.2%4.9%



Answer: Pretty favourably, and the fear of rising interest rates was unfounded.

It looks like the banks have confidence in the direction that Turners Automotive Group is heading. We should note though that the general interest rate environment remains benign for all borrowers.

SNOOPY

[peat]

5.1 and 4.9% (the figures werent there so I worked em out myself)
so getting lower all the time then Snoops. the banks must think they're as safe as houses.

[Snoopy]

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.



FY2013[FY2014FY2015
FY2016FY2017


NPAT (Turners Limited) (A)$3.056m$4.606m$12.722m$15.373m$17.849m


Shareholder Equity (Turners Auctions :TUA)$17.811m$13.378m


Shareholder Equity (Dorchester Pacific: DPC)$33.190m$74.052m


Shareholder Equity (Turners Limited: TNR)$121.002m$129.812m$171.716m


Total Combined Shareholder Equity (B)$51.001m$92.430m$121.002m$129.812m$171.716m


Return On Equity (A)/(B)6.0%5.0%10.5%11.8%10.4%



Turners Limited have never achieved an ROE greater than 15%. The latest year deterioration looks unfortunate, but is connected to the timing of the capital raising.

Result: Fail Test

SNOOPY

P.S. The equity raising took place in October 2016, approximately half way through the financial year. This means the new equity was only available to work with from that date. This means a more accurate ROE figure could be obtained by simply using the 'average' shareholder equity between the two most recent end of year balance dates. Using this method:

ROE (2017) = $17.849m /($129.812m + $171.716m)*0.5 = 11.8%

That figure exactly matches the figure from FY2016.

I am not going through the full Buffett analysis for FY2018. The key sticking point is the far from stellar (based on a 15% target) return on equity over many years.



FY2014FY2015
FY2016FY2017FY2018


NPAT (Turners Limited) (A)$3.823m$12.210m$15.332m$16.789m$21.696m (e)


Shareholder Equity (Turners Auctions :TUA)$13.378mm


Shareholder Equity (Dorchester Pacific: DPC)$74.052m


Shareholder Equity (Turners Limited: TNR)$121.002m$129.812m$171.716m$214.323m


Total Combined Shareholder Equity (B)$92.430m$121.002m$129.812m$171.716m$214.323m

[/TR]

Return On Equity (A)/(B)4.1%10.1%11.8%9.8%10.1%



(e) Profit for FY2018 assumed to be as declared in first FY2018 profit release statement. In past years the headline declared figure has required significant normalisation corrections once the detailed results are published.

If we remember that the bare ROE figure for FY2017 was distorted because of the capital raising during that year, unfortunately ROE is going backwards, away from our 15% target. Granted I believe that 10.1% is still above the company's cost of capital, but perhaps not by much. The problem is if your return on equity is only just above your cost of capital the company becomes more vulnerable (to ongoing changes in the loan/car market in this instance). It then becomes plausible that return on equity could drop below the cost of capital. And this means the company could start destroying shareholder value, should the business cycle turn. So Warren Buffett would almost certainly not invest in this company. But that doesn't mean TRA isn't a satisfactory investment, using other investment criteria and different expectations.

SNOOPY

[h2so4]

I am not going through the full Buffett analysis for FY2018. The key sticking point is the far from stellar (based on a 15% target) return on equity over many years.



FY2014FY2015
FY2016FY2017FY2018


NPAT (Turners Limited) (A)$4.606m$12.722m$15.373m$17.849m$23.192m (e)


Shareholder Equity (Turners Auctions :TUA)$13.378mm


Shareholder Equity (Dorchester Pacific: DPC)$74.052m


Shareholder Equity (Turners Limited: TNR)$121.002m$129.812m$171.716m$214.323m


Total Combined Shareholder Equity (B)$92.430m$121.002m$129.812m$171.716m$214.323m

[/TR]

Return On Equity (A)/(B)5.0%10.5%11.8%10.4%10.8%



(e) Profit for FY2018 assumed to be as declared in first FY2018 profit release statement. In past years the headline declared figure has required significant normalisation corrections once the detailed results are published.

If we remember that the bare ROE figure for FY2017 was distorted because of the capital raising during that year, unfortunately ROE is going backwards, away from our 15% target. Granted I believe that 10.8% is still above the company's cost of capital, but perhaps not by much. The problem is if your return on equity is only just above your cost of capital the company becomes more vulnerable (to ongoing changes in the loan/car market in this instance). It then becomes plausible that return on equity could drop below the cost of capital. And this means the company could start destroying shareholder value, should the business cycle turn. So Warren Buffett would almost certainly not invest in this company. But that doesn't mean TRA isn't a satisfactory investment, using other investment criteria and different expectations.

SNOOPY
If the shareholder equity is increasing every year doesn’t that increase shareholder value?

[BlackPeter]

If the shareholder equity is increasing every year doesn’t that increase shareholder value?

Depends whether they earned the increase or collected it using a capital rise;); To answer this question you would need to look at the equity per share - and yes, number of shares did increase as well.

[winner69]

Depends whether they earned the increase or collected it using a capital rise;); To answer this question you would need to look at the equity per share - and yes, number of shares did increase as well.


....and how much of the earnings is paid out in dividends

[h2so4]

....and how much of the earnings is paid out in dividends

Dividends have been paid and shareholders net worth has increased and substantially over the years in SD’s time frame. I would think excess cash is being converted to assets all with far from stella ROE.

[winner69]

If the shareholder equity is increasing every year doesn’t that increase shareholder value?

In theory yes but the market per se is the judge of shareholder value by way of giving it a market cap

Just before the Sept 17 raising of $30m Turners market cap was $251m

Even though Turners have raised $30m (making the company more valuable / richer) and reporting fantastic growth and profits and all those good things Turners market cap is about the same. The market as ascribed no value to that new capital and supposedly better future prospects.

Market Value Added is a good measure of value and how well a company is rewarding investors. It’s the difference between market cap and shareholder equity ...you can see the higher that is the more the market has rewarded investors / company for its efforts. Since just before that $30m capital raise Turners MVA has fallen by about $15m

That could be the market saying giving Turners heaps more cash to plsy around with might not have been such a good idea and we don’t have that much faith in them adding much in the way of value from that playing around.

But then again many on here will say the market is a stupid ignorant beast and has yet to grasp the potential that Turners offer in the future. Once they wake up and learn things will be different. Hope so

[hardt]

In theory yes but the market per se is the judge of shareholder value by way of giving it a market cap

Just before the Sept 17 raising of $30m Turners market cap was $251m

Even though Turners have raised $30m (making the company more valuable / richer) and reporting fantastic growth and profits and all those good things Turners market cap is about the same. The market as ascribed no value to that new capital and supposedly better future prospects.

Market Value Added is a good measure of value and how well a company is rewarding investors. It’s the difference between market cap and shareholder equity ...you can see the higher that is the more the market has rewarded investors / company for its efforts. Since just before that $30m capital raise Turners MVA has fallen by about $15m

That could be the market saying giving Turners heaps more cash to plsy around with might not have been such a good idea and we don’t have that much faith in them adding much in the way of value from that playing around.

But then again many on here will say the market is a stupid ignorant beast and has yet to grasp the potential that Turners offer in the future. Once they wake up and learn things will be different. Hope so

Automotive Retail / non-bank financial services and insurance hybrids are not known for being crowd favourites... I don't think they ever will be glossy enough for a lot of investors.

I am a very happy customer of Buy Right and I am not hating on Turners nor am I discounting the good job they have been doing leading into the peak of the cycle.

In the last year or two their financial services and insurance division continues to become a bigger part of their business, capital intensive on both ends with little room for error.

9725

Aggregate market cap / net income for financials + insurance is 10x and for Auto Retail is around 15x, TRA is sitting around 11x.

[Snoopy]

In the last year or two their financial services and insurance division continues to become a bigger part of their business, capital intensive on both ends with little room for error.


Not sure that I agree with your above comment in the Turners situation hardt. Here is what Turners said after acquiring Autosure Insurance (p16 AR2017).

"The Autosure Insurance acquisition, including the Autosure brand, mechanical breakdown and payment protection insurance portfolios, was finalised as at 31st March 2017. This provides much needed scale for our insurance group , and focuses our underwriting effort on core products - MBI and Loan Repayment Insurance. We have a 10-year partnership with Vero for underwriting our comprehensive motor vehicle insurance policies."

Autosure was bought from Suncorp. But Vero, the underwriter of Turners Autosure is a subsidiary of Suncorp. So it looks to me as though most of the insurance risk has been outsourced to Suncorp, even though Turners has taken over the 'retail face' of the Autosure insurance business.

Moving on to 'financial services', there seems to be a big push to increased securitised loans. The securitized loan arrangement appears to be offloading capital risk, in the first instance to Turners TNRHB bondholders, via the "Turners Marque Warehouse 1 Trust."

So far from taking a large capital risk with little room for error, Turners are positioning themselves as a 'middle man', in which the largest risk is outsourced to other players. Smart operators, those guys/gals in the Turners management team!

SNOOPY

[percy]

TRA are big ticket clippers.
Sale of vehicle...……………..Ticket clipped.
Finance of vehicle...………..Ticket clipped
Insurance…………………………Ticket clipped.
Vehicle service...……………..Ticket clipped.
Development of sites...…...Ticket clipped.
MTF non recourse loans.....Ticket clipped
Debt management services,Ticket clipped.
More and bigger tickets to clip.

[Beagle]

TRA are big ticket clippers.
Sale of vehicle...……………..Ticket clipped.
Finance of vehicle...………..Ticket clipped
Insurance…………………………Ticket clipped.
Vehicle service...……………..Ticket clipped.
Development of sites...…...Ticket clipped.
MTF non recourse loans.....Ticket clipped
Debt management services,Ticket clipped.
More and bigger tickets to clip.

So...let me take a wild guess :) Based on the date and time stamp of that post. Fair to say there was agreement at your sharetrader dinner meeting that in an otherwise fully priced market Turners presents as outstanding value, best value on the NZX in your opinion at this point in time ?

[Joshuatree]

Looks like Input fatigue preceded by power of suggestion after pre dinner drinks has created valuation uncertainty which was defeated by convivial bias after the coffee:D

[winner69]

So...let me take a wild guess :) Based on the date and time stamp of that post. Fair to say there was agreement at your sharetrader dinner meeting that in an otherwise fully priced market Turners presents as outstanding value, best value on the NZX in your opinion at this point in time ?

TRA outstanding value - I hope so as put heaps of faith in you all, against my better judgement

But ‘investing’ in shares is akin to punting / gambling so why not take the odd punt and follow the tipsters like you get with modern day versions of Best Bets

[Beagle]

TRA outstanding value - I hope so as put heaps of faith in you all, against my better judgement

But ‘investing’ in shares is akin to punting / gambling so why not take the odd punt and follow the tipsters like you get with modern day versions of Best Bets

:lol: That's funny mate. Its like a never ending grand national steeplechase isn't it :) but its better than horse racing because you don't have the TAB taking a HUGE margin and the horses gallop once around the track every single business day and it never ends :D Not only that the dogs interspersed among the horses are pretty easy to spot and usually get tripped up after the first few hurdles.

Anyway..please excuse me, I'm probably a little over hyped on caffeine this morning.
Back in the real world now one thing I really do like about this one is the sweet poetic justice of being on the right side of ledger in terms of vehicle deals now, after all those years of being fleeced by car dealers.

[Joshuatree]

Im picturing steeplechase horses having to jump over ever higher fences not made of brush but made of spruiks lol:t_up:

[percy]

So...let me take a wild guess :) Based on the date and time stamp of that post. Fair to say there was agreement at your sharetrader dinner meeting that in an otherwise fully priced market Turners presents as outstanding value, best value on the NZX in your opinion at this point in time ?

Total agreement...lol.

[percy]

TRA outstanding value - I hope so as put heaps of faith in you all, against my better judgement

But ‘investing’ in shares is akin to punting / gambling so why not take the odd punt and follow the tipsters like you get with modern day versions of Best Bets

Do your own research.
Then no need to gamble,or blame others.
I do,and the more research I do,the better my results I get.

[winner69]

Depth looks promising ...probably an up day today

[winner69]

TRA just can't seem to get out of first gear ....at least it's not in reverse anymore

I'll still get this 5 cent divie won't I if I hold a bit longer?

[rainey]

Where do all these small trades come from

[percy]

Where do all these small trades come from

Its W69 robot.It keeps changing its mind.Buys one minute,then sells.Very undecided.!..lol.

[couta1]

Where do all these small trades come from Some robot that decided to sell me a few more at $3.01. PS-Im hoping it changes down a gear or two to under $3.

[winner69]

Its W69 robot.It keeps changing its mind.Buys one minute,then sells.Very undecided.!..lol.

No way mate ...either in or out

Anyway waiting for that divie .....that’ll be good ....as long as the price doesn’t drop more than 5 cents afterwards. That would be a bugger

[percy]

No way mate ...either in or out

Anyway waiting for that divie .....that’ll be good ....as long as the price doesn’t drop more than 5 cents afterwards. That would be a bugger

Every three months TRA pay a fully imputed divie.


ps.And they keep increasing them.

[Snoopy]

Five Year History of Turners Limited: Operational NPAT



FY2012FY2013FY2014FY2015FY2016


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





FY2014FY2015FY2016FY2017FY2018


EBIT (Turners Auctions :TUA)$9.117m


less TUA Liabilities x TNR Interest$45.634 x 0.151= ($6.891m)


equals EBT (Turners Auctions)$2.226m


add EBT (Dorchester)$4.892m


EBIT (Turners Automotive Group)$25.645m$32.987m$35.981m$45.477m


EBIT (Turners Auctions)$5.829m(*)


add back Turners Auctions acquisition costs$0.675m


Interest Expense (Turners Automotive Group)($7.381m)($11.436m)($11.350m)]($14.344m)


less tax paid equity accounted TUA income($0.721m)($0.742m)


less foreign exchange gain($1.087m)


less one off paper gain self-caused by TUA takeover($7.058m)


less revaluation gain on investments and PPE sale($0.010m)($0.270m)($1.313m)($1.000m) (e)


equals EBT (DPC+TUA)$5.310m$16.958m$21.281m$23.318m$30.133m


less tax at 28%($1.487m)($4.748m)($5.949m)($6.529m)($8.437m)



equals NPAT (DPC+TUA)$3.823m$12.210m$15.332m$16.789m$21.696m



----------

Notes

1/ (*) '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

2/ Eagle eyed table readers will notice that I have moved the one off gain from the full takeover of Turners Auctions in FY2015 from being a taxable to a non-taxable gain.

3/ (e) is a preliminary estimate

SNOOPY

[Snoopy]

FY2014FY2015FY2016FY2017FY2018


NPAT {A}$3.823m$12.210m$15.332m$16.789m$21.696m


Shares on Issue EOFY{B}55.966m63.077m63.432m74.524m84.803m


Earnings Per Share {A}/{B}6.8cps19.4cps24.2cps22.5cps25.6cps



In the past I have used a capitalised dividend valuation method to value TRA. However, given the strong retained earnings element within Turners Automotive Group, I now consider this method sub-optimal in terms of assessing the value of the company. Instead I will look to do a capitalized earnings valuation, based on the above data.

SNOOPY

[Beagle]

TRA just can't seem to get out of first gear ....at least it's not in reverse anymore

I'll still get this 5 cent divie won't I if I hold a bit longer?

Steadily building support at the $3 level. Has sneaked its head just above the 100 day MA line. The shares look like a good value pick on the NZX but the market may take some time to ascribe a higher PE multiple so plenty of patience is required. Paid well in dividends so patience shouldn't be that much of a problem, at least in theory lol.

[winner69]

Steadily building support at the $3 level. Has sneaked its head just above the 100 day MA line. The shares look like a good value pick on the NZX but the market may take some time to ascribe a higher PE multiple so plenty of patience is required. Paid well in dividends so patience shouldn't be that much of a problem, at least in theory lol.

More like the MA100 line sneaked it’s head below the TRA shareprice line

At least a good sign that about now might be the ‘bottom’

[percy]

Pleasing seeing the improvement in liquidity.
100,000 shares traded yesterday in an off market sale, and a 200,000 traded off market sale today.

[RTM]

Pleasing seeing the improvement in liquidity.
100,000 shares traded yesterday in an off market sale, and a 200,000 traded off market sale today.

Your joking right ? I'm struggling to see how off market sales can be interpreted as an improvement in liquidity ?
Remove the 200,000 and we have 18,831 sales today. Maybe this is an improvement on prior days, not sure.
Is it the 18,831 you mean the improvement ? Does not feel great to me.
Disc. Holder.

[percy]

Your joking right ? I'm struggling to see how off market sales can be interpreted as an improvement in liquidity ?
Remove the 200,000 and we have 18,831 sales today. Maybe this is an improvement on prior days, not sure.
Is it the 18,831 you mean the improvement ? Does not feel great to me.
Disc. Holder.
Does to me.
Means should I want to sell, my broker can move our holdings.
Would not have been easy before TRA's result.
Therefore liquidity.

[couta1]

Your joking right ? I'm struggling to see how off market sales can be interpreted as an improvement in liquidity ?
Remove the 200,000 and we have 18,831 sales today. Maybe this is an improvement on prior days, not sure.
Is it the 18,831 you mean the improvement ? Does not feel great to me.
Disc. Holder. Actually I agree with you, the NZX has near double the % of off market trades compared to overseas markets. Basically the NZX is controlled by a small number of brokers negotiating large off market trades for their preferred clients, there is no transparency in this process. This is to the detriment of retail holders and keeps the NZX a dinosaur facing extinction.

[RTM]

Does to me.
Means should I want to sell, my broker can move our holdings.
Would not have been easy before TRA's result.
Therefore liquidity.

Hmmmm...that's a different interpretation than I have when I see these off market sales. What I always thought was that they were sales from one entity to another at some agreed price. I hadn't thought of them being assembled to say 200,000 from Percy and Couta and RTM and Beagle and etc by brokers for someone. Yes, if that's the case, agree, that would add liquidity and is a good thing.

Thanks, there is always another way to look at things.

[percy]

Hmmmm...that's a different interpretation than I have when I see these off market sales. What I always thought was that they were sales from one entity to another at some agreed price. I hadn't thought of them being assembled to say 200,000 from Percy and Couta and RTM and Beagle and etc by brokers for someone. Yes, if that's the case, agree, that would add liquidity and is a good thing.

Thanks, there is always another way to look at things.

Two things.Should I ring Craigs to sell 5,000 or 50,000 TRA, and they sell/cross them to another Craigs client they are shown as SP.Which is what was shown with 200,000 today and 100,000 yesterday.I do not know which broker crossed these shares.
Secondary liquidity is being able to sell 50,000 to 100,000 TRA,however way it is done.Before TRA's result if I had tried to sell 50,000 I would have driven the price down to possibly $2.50 from $2.95 ,because there were only about 10,00 on the buy side.
Tonight there are 104,876 shares wanted from $2.90 upwards.That is only what is wanted on market.So to sell 100,000 tomorrow could be done either on market,or maybe off market,.
What this means is LIQUIDITY.

[RTM]

Two things.Should I ring Craigs to sell 5,000 or 50,000 TRA, and they sell/cross them to another Craigs client they are shown as SP.Which is what was shown with 200,000 today and 100,000 yesterday.I do not know which broker crossed these shares.
Secondary liquidity is being able to sell 50,000 to 100,000 TRA,however way it is done.Before TRA's result if I had tried to sell 50,000 I would have driven the price down to possibly $2.50 from $2.95 ,because there were only about 10,00 on the buy side.
Tonight there are 104,876 shares wanted from $2.90 upwards.That is only what is wanted on market.So to sell 100,000 tomorrow could be done either on market,or maybe off market,.
What this means is LIQUIDITY.

Thanks....got it.
Did you buy those 300,000 shares ?
:p

[percy]

Thanks....got it.
Did you buy those 300,000 shares ?
:p

No...………..
Luckily the sale of my old house does not go through until Friday,so am broke until I receive the proceeds from that.Robbed the piggy bank buying the wife 10,000 on the day of the result announcement..

[Snoopy]

Very solid result and outlook. Can't argue with EPS growth of 15%.


Actually, I think you can argue this point. There are some strange things listed in the depths of the cashflow statement, in particular the "RECONCILIATION OF NET SURPLUS WITH CASH FLOWS FROM OPERATING ACTIVITIES" for FY2018.

1/ There is $1m in Property Plant and Equipment sales profit that has gone straight through to the net profit figures. That is not part of normal business operations for a start.

2/ There is a very large increase in 'deferred expenses', over $3m up on the previous year that should be scrutinised.

3/ $2.845m of 'Contingent Consideration', a non cash benefit, has appeared that requires further explanation (something to do with the Autosure insurance business?).

4/ An $0.820m gain in an investment property value looks to have bolstered the bottom line. That looks to me to be nothing to do with the core Turners Automotive business either. An equivalent figure of $0.500m was listed as an investment property increase back in FY2017. Yet if I look back in the equivalent statement in Note 30 of AR2017, no such property gain is mentioned.

I think Turners have a lot of explaining to do. And no doubt much of this will be explained when the full annual accounts, complete with all the notes are released. But based on the limited summary of results issued so far, it looks like much of that EPS gain could be explained with one offs that will not be repeated in subsequent years.

Perhaps on paper growth in EPS is around 15% year on year. But if I said the EPS growth over the last two year period is only 4% total (also true), that 'growth' sounds far less impressive.

SNOOPY

discl: holder, despite never having bought any 'on the market'!

[Beagle]

If we accept that at face value Snoopy (thank you for your post as I have been meaning to have a good look at the financials' and will as soon as I get some more time), that such extraordinary item gains are indeed one-off's then the EPS growth implied by the profit outlook guidance is even more impressive seeing as the outlook is all just normal profit and seeing as the market is always forward looking that enhances implied growth rate of normal trading profit actually enhances the value of the company by virtue of the significantly higher EPS growth rate so I had better buy more before the price goes up further when the market wakes up to this :D Besides that I need to work my way down to the big and sunny end of the tent where the clever people hang out and the warm glow of the large juicy dividends soothes my winter aches and pains :)

[Snoopy]

If we accept that at face value Snoopy (thank you for your post as I have been meaning to have a good look at the financials' and will as soon as I get some more time), that such extraordinary item gains are indeed one-off's then the EPS growth implied by the profit outlook guidance is even more impressive seeing as the outlook is all just normal profit and seeing as the market is always forward looking that enhances implied growth rate of normal trading profit actually enhances the value of the company by virtue of the significantly higher EPS growth rate


Beagle your post makes good sense, except for the bit I have outlined in bold. We actually don't know what part of next years forecast profit is made up of 'one offs'.

SNOOPY

[percy]

Get used to property profits.
TRA are also property developers.
A bare site is not worth a great deal.Yet a developed site with a national tenant is .
Rather than passing the margin onto a developer, TRA clip that ticket too.

[winner69]

Get used to property profits.
TRA are also property developers.
A bare site is not worth a great deal.Yet a developed site with a national tenant is .
Rather than passing the margin onto a developer, TRA clip that ticket too.

And they get a building fit for purpose eh

[winner69]

Snoops .....don’t get too hung up on those items you listed.

Might sound ‘abnormal’ or non-recurring on first read but Turners will always have these sort of things because of the diverse nature of their business.

You make things too complex when in fact they’re quite simple ...just saying

By the way the reported EPS of 15% was boosted by having a lower tax rate this year v last year. (Normalised you could say it was less than 10% but does it really matter when nobody knows what the F19 tax rate will be)

[percy]

And they get a building fit for purpose eh

Off course.
And from page 15 of their last presentation;
Property.
"Five years of property opportunities ahead including large projects in Auckland and Christchurch."

[percy]

Snoops .....don’t get too hung up on those items they listed.

Might sound ‘abnormal’ or non-recurring on first read but Turners will always have these sort of things because of the diverse nature of their business.

You make things too complex when in fact they’re quite simple ...just saying

By the way the reported EPS of 15% was boosted by having a lower tax rate this year v last year. (Normalised you could say it was less than 10% but does it really matter when nobody knows what the F19 tax rate will be)

The crunch comes down to whether TRA can achieve what they say they will do.
Guidance given."FY 19 NPBT of $34 million to $36 million.
We will have to wait until their interim result, or an up date, to see how they are tracking.

[couta1]

Simple is good, current price $3.01, Couta target price $3.83 plus quarterly divvies, is that simple enough.

[winner69]

The crunch comes down to whether TRA can achieve what they say they will do.
Guidance given."FY 19 NPBT of $34 million to $36 million.
We will have to wait until their interim result, or an up date, to see how they are tracking.


.....and that’s 15% earnings growth

Share price follows earnings growth .....sometimes

[percy]

.....and that’s 15% earnings growth

Share price follows earnings growth .....sometimes

Well eps growth does lead to their capacity to increase dividends.
Increasing dividends ALWAYS leads to a very happy Percy household.

[BlackPeter]

Well eps growth does lead to their capacity to increase dividends.
Increasing dividends leads to a very happy Percy household.

You clearly got your priorities right :);

[Beagle]

Simple is good, current price $3.01, Couta target price $3.83 plus quarterly divvies, is that simple enough.

Love it...the Couta1 reversion theory. This $3.83 and OCA $1.50. Investment 101 made easy. Nothing could possibly go wrong :)

[h2so4]

The A Team are doing a great job here.

I have nothing to add.:)

[winner69]

Looks like liquidity has dried up completely ...no willing buyers or sellers

But 310 on the cards when the dam bursts

[minimoke]

Looks like liquidity has dried up completely ...no willing buyers or sellers

But 310 on the cards when the dam burstsPerhaps the buyer at $3.04 should just bite the bullet and do a deal at $3.05. and create that drive to $3.10

[couta1]

Perhaps the buyer at $3.04 should just bite the bullet and do a deal at $3.05. and create that drive to $3.10 As long as the price is $3.83 a year from now, I don't give a toss about this Mexican standoff.

[percy]

Perhaps the buyer at $3.04 should just bite the bullet and do a deal at $3.05. and create that drive to $3.10

I catch up with a friend every few months,and talk shares.
A few years ago I told him KW had recommended MNF to me.Brought under 20 cents,and was buying more at 29 cents.
A couple of months later I said just as well we brought at 29 cents as they are now 49 cents.No I tried to buy them at 28 cents.Next time at 65 cents,he admitted no he tried to buy at 48 cents.
And so it went on,until finally he rang his broker and said just buy them.
He paid $1.55...………………………….lol.

[minimoke]

I catch up with a friend every few months,and talk shares.
A few years ago I told him KW had recommended MNF to me.Brought under 20 cents,and was buying more at 29 cents.
A couple of months later I said just as well we brought at 29 cents as they are now 49 cents.No I tried to buy them at 28 cents.Next time at 65 cents,he admitted no he tried to buy at 48 cents.
And so it went on,until finally he rang his broker and said just buy them.
He paid $1.55...………………………….lol.I am quite convinced there is too much Paralysis from Analysis.

Sometimes you just have to do your research and accept you aren't going to pick the bottom and you aren't going to get every iota of information. But if your analysis says you will get a return on your risk then it makes little sense delaying = especially if you intend being a long term holder.

I did my due diligence on TRA and hit the buy button on 1 June at $2.96. Two weeks later I'm enjoying a 2.7% gain and looking forward to what they will be in 5 years time. I am sure it will drop (has to with teh divi) but long term shoudl be fine. If not, stop loss will help any analysis problems I might face.

[winner69]

I catch up with a friend every few months,and talk shares.
A few years ago I told him KW had recommended MNF to me.Brought under 20 cents,and was buying more at 29 cents.
A couple of months later I said just as well we brought at 29 cents as they are now 49 cents.No I tried to buy them at 28 cents.Next time at 65 cents,he admitted no he tried to buy at 48 cents.
And so it went on,until finally he rang his broker and said just buy them.
He paid $1.55...………………………….lol.

Not like one of those 'asking for a friend' type stories is it Percy

You should have known better - don't procrastinate just do it as u told me the other day

[percy]

Not like one of those 'asking for a friend' type stories is it Percy

You should have known better - don't procrastinate just do it as u told me the other day

Reread it W69.
I did buy under 20 cents.

[winner69]

Reread it W69.
I did buy under 20 cents.

Well done

Just thought it might have been just asking for a friend yeah right story. Obviously not so sorry

[Snoopy]

Get used to property profits.
TRA are also property developers.
A bare site is not worth a great deal.Yet a developed site with a national tenant is .
Rather than passing the margin onto a developer, TRA clip that ticket too.


Turners call themselves an 'Integrated Automotive Financial Services Group'. I downloaded the FY2017 annual report, did a search for the word 'property' and it came up 21 pages later, as an item in a larger table with an entry 'Property Plant & Equipment' while going over the balance sheet. Not very forthcoming for a 'property' company, I would have thought.

I have no issue with Turners buying a building site, putting on a purpose built office set up (even if it is only a fitted out container) and flogging the whole thing off on the basis of signing a long lease deal with the buyer. As a TRA holder myself, I am very pleased any developers margin remains within the company. It all makes great sense. But eventually Turners will run out of lucrative new developments to sell. From a long time TUA shareholder, I can tell you all those existing big centre properties that TRA operate from were flogged off a long time ago. It is only the new developments that are available to be sold off. And there isn't much of a pipeline of those.

Sometimes it is useful to look at these things from an alternative scenario perspective. Let's suppose entirely hypothetically Turners had made a loss on this latest property development. Would any of you shareholders be worried? I reckon there would be a chorus on this thread saying:

"Well, it is only one site out of 22. Yet despite the small capital loss, Turners now have a fine purpose built site on which to conduct the Turners business going forwards. A small capital loss on a development property has no effect on the ability to sell trucks from that property. The loss will have no effect in future years, and should be ignored in the current year as well."

The fact that Turners actually made a profit on the latest property development, IMO, doesn't change the above argument.

SNOOPY

[minimoke]

All this analysis. 200,000 at $3.05. I'll take that thank you very much!

[Beagle]

Snoopy - To the age old question, is the glass half full or half empty there is a simple answer, depends whether you're a shareholder or not :lol:

[Snoopy]

Turners Auctions (TUA) + Turners Limited (TNR/TRA)FY2012FY2013FY2014FY2015FY2016FY2017


Modelled Dividend Paid {A}$2.506m$3.285m$2.131m


No. Shares on Issue (TNR/TRA) {B} (*)24.057m27.395m55.966m63.077m63.433m74.524m


Modelled Dividend Paid (cps) {A}/{B}10.42c12.00c3.81c


Actual Dividend Paid (cps) (**)5c + 4c6c + 6c7c + 3c +3c




(*) The number of TNR shares on isssue at the end of the financial year has been adjusted retrospectively for the 10:1 share consolidation. To see how the number of TRA shares on issue was derived refer to my post 1414 "Buffett Test 2: Increasing 'eps' Trend (FY2016 perspective): Preamble Part 2.

(**) The actual dividends paid by TNR/TRA over FY2015 and FY2016 were unimputed. This was because of prior losses incurred under the DPC/TNR/TRA structure. However, in my modelling the TUA group was already combined with DPC/TNR/TRA. Previous year TUA profits wiped out those previous year equivalent DPC/TNR/TRA losses. Under this modelled scenario, those FY2015 and FY2016 dividends would have been fully imputed. That's because looking at the combined picture, those prior offsetting DPC/TNR/TRA losses never happened. Further note that all dividends have been adjusted retrospectively to account for the 23rd March 2016 10:1 share consolidation.

From the above table the 'six year average' dividend payout was:

(10.42c + 12.00c + 3.81c + 9c + 12c + 13c)/ 6 = 10.04c (net)

Average Gross Dividend Yield (based on a 28% tax rate) is therefore:

10.04/(1-0.28) = 13.94c

Using a capitalized value gross interest rate of 7.5% (see thread An Investment Story - Geneva/Turners/Heartland, post 40), this translates to a fair value share price of:

13.94/ 0.075 = $1.86

That makes for sobering reading, when the last price paid in the market on Friday was $3.75!





Turners Auctions (TUA) + Turners Limited (TNR/TRA)FY2014FY2015FY2016
FY2017FY2018


Modelled Dividend Paid {A}$2.131m


No. Shares on Issue (TNR/TRA) {B} (*)55.966m63.077m63.433m74.524m84.803m


Normalised Earnings Per Share 6.8c19.4c24.2c22.5c25.6c


Modelled Dividend Paid (cps) {A}/{B}3.81c


Actual Dividend Paid (cps) (**)5c + 4c6c + 6c7c + 3c +3c]4c + 4.5c +3c +3c




(*) The number of TNR shares on isssue at the end of the financial year has been adjusted retrospectively for the 10:1 share consolidation. To see how the number of TRA shares on issue was derived refer to my post 1414 "Buffett Test 2: Increasing 'eps' Trend (FY2016 perspective): Preamble Part 2.

(**) The actual dividends paid by TNR/TRA over FY2015 and FY2016 were unimputed. This was because of prior losses incurred under the DPC/TNR/TRA structure. However, in my modelling the TUA group was already combined with DPC/TNR/TRA. Previous year TUA profits wiped out those previous year equivalent DPC/TNR/TRA losses. Under this modelled scenario, those FY2015 and FY2016 dividends would have been fully imputed. That's because looking at the combined picture, those prior offsetting DPC/TNR/TRA losses never happened. Further note that all dividends have been adjusted retrospectively to account for the 23rd March 2016 10:1 share consolidation.

From the above table the 'five year average' dividend payout was:

(3.81c + 9c + 12c + 13c +14.5c)/ 5 = 10.46c (net)

Average Gross Dividend Yield (based on a 28% tax rate) is therefore:

10.46/(1-0.28) = 14.53c

Using a capitalized value gross interest rate of 7.5% (see thread An Investment Story - Geneva/Turners/Heartland, post 40), this translates to a fair value share price of:

14.53c/ 0.075 = $1.94

As previously noted, I no longer believe this valuation method provides a satisfactory technique for valuing Turners Automotive Group. This is because the retained earnings of TRA are employed in growing the business, and this valuation method ignores that contribution. So why do it?

If you were able to pick up some TUA shares at $1.94, this could be justified on a dividend return basis alone. That means any growth that shareholders would get going forwards would come 'for free'. However, I don't fancy my chances of picking up many TRA shares at that price. At today's closing price of $3.05, that means the price you pay for the TRA growth premium is:

$3.05 - $1.94 = $1.11

Is it worth it? That is the next question I will seek to answer.

SNOOPY

[blackcap]

Turners Auctions (TUA) + Turners Limited (TNR/TRA)FY2014FY2015FY2016
FY2017FY2018


Modelled Dividend Paid {A}$2.131m


No. Shares on Issue (TNR/TRA) {B} (*)55.966m63.077m63.433m74.524m84.803m


Normalised Earnings Per Share 8.2c17.0c24.3c22.1c25.3c


Modelled Dividend Paid (cps) {A}/{B}3.81c


Actual Dividend Paid (cps) (**)5c + 4c6c + 6c7c + 3c +3c]4c + 4.5c +3c +3c




(*) The number of TNR shares on isssue at the end of the financial year has been adjusted retrospectively for the 10:1 share consolidation. To see how the number of TRA shares on issue was derived refer to my post 1414 "Buffett Test 2: Increasing 'eps' Trend (FY2016 perspective): Preamble Part 2.

(**) The actual dividends paid by TNR/TRA over FY2015 and FY2016 were unimputed. This was because of prior losses incurred under the DPC/TNR/TRA structure. However, in my modelling the TUA group was already combined with DPC/TNR/TRA. Previous year TUA profits wiped out those previous year equivalent DPC/TNR/TRA losses. Under this modelled scenario, those FY2015 and FY2016 dividends would have been fully imputed. That's because looking at the combined picture, those prior offsetting DPC/TNR/TRA losses never happened. Further note that all dividends have been adjusted retrospectively to account for the 23rd March 2016 10:1 share consolidation.

From the above table the 'five year average' dividend payout was:

(3.81c + 9c + 12c + 13c +14.5c)/ 5 = 10.46c (net)

Average Gross Dividend Yield (based on a 28% tax rate) is therefore:

10.46/(1-0.28) = 14.53c

Using a capitalized value gross interest rate of 7.5% (see thread An Investment Story - Geneva/Turners/Heartland, post 40), this translates to a fair value share price of:

14.53c/ 0.075 = $1.94

As previously noted, I no longer believe this valuation method provides a satisfactory technique for valuing Turners Automotive Group. This is because the retained earnings of TRA are employed in growing the business, and this valuation method ignores that contribution. So why do it?

If you were able to pick up some TUA shares at $1.94, this could be justified on a dividend return basis alone. That means any growth that shareholders would get going forwards would come 'for free'. However, I don't fancy my chances of picking up many TRA shares at that price. At today's closing price of $3.05, that means the price you pay for the TRA growth premium is:

$3.05 - $1.94 = $1.11

Is it worth it? That is the next question I will seek to answer.

SNOOPY

Sorry Snoops but you have me confused. So you are using just dividends (averaged over a x year period) and then using some arbitrary discount rate to value the stock? That is just weird especially when you consider that not 100% of divs are paid out but closer to 50-60% of earnings are paid out as divs. To me it seems obvious you are going to get figure that is a lot lower than market. (Your $1.94)
I was always taught that share prices are forward looking and to me "average of the last x years divs" is about as good as a backwards looking chart... :)

p.s keep up the great analysis work and keep posting though as I do enjoy reading it and take plenty from it. Appreciate you putting your thoughts down on this forum :)

p.s.s I would postulate that your capitalised divided valuation model probably works best on a mature company with little or no growth prospects where nearly all profit is paid out in dividends. I am sure you are right on the mark in saying that the model does not apply to a company such as TRA.

[Beagle]

Sorry my Beagle friend, I concur with Blackcap and any attempt to value Turners using historical dividends is going to give you very limited visibility on fair value.
I look at the forward PE and the expected growth rate over the next few years. Brokers use their fancy DCF models and try and NPV future cashflows using a whole bunch of assumptions and guesses followed by a terminal growth guess from the five year out point.

Then there's Ben Graham's valuation methodology historical EPS of about 29 cps multiplied by a PE that's a function of (8.5 + 2g) and even if we use a 4% sustainable growth rate overt the next 7-10 years this gives us a PE of 8.5 + 8 = 16.5 so fair value at 29.3cps = $4.83 which I note is well north of the equally famous Couta1 reversion theory which has it at $3.84.

This hound is a miserable bean counter that hates to pay a single cent more than fair value so I stick with my version of the Ben Graham valuation model using 1g but based on forward EPS not historical. That gives me a PE at 4% sustainable EPS growth average over the next 7-10 years of 12.5. I think there's very good value in the shares up to and including a forward PE of 12.5. Last year's EPS was 29.3 cps, this year I see something in the order of 32 cps on a weighted average shares on issue basis. Put a PE of 12.5 on that and we get $4.00.

Looks like Couta1's now famous reversion theory is bang on the money again. This to be $3.84 next year and OCA $1.50 !

[Snoopy]

Sorry Snoops but you have me confused. So you are using just dividends (averaged over a x year period) and then using some arbitrary discount rate to value the stock? That is just weird especially when you consider that not 100% of divs are paid out but closer to 50-60% of earnings are paid out as divs. To me it seems obvious you are going to get figure that is a lot lower than market. (Your $1.94)


Have a look at my post again Blackcap. Perhaps I should have highlighted the bit I have requoted below? :

"I no longer believe this valuation method provides a satisfactory technique for valuing Turners Automotive Group. This is because the retained earnings of TRA are employed in growing the business, and this valuation method ignores that contribution."



I was always taught that share prices are forward looking and to me "average of the last x years divs" is about as good as a backwards looking chart... :)

In a cyclical market rather than a growth market, history does tend to repeat. You can make up predictions based on what you think might happen. I prefer to use scenarios that have actually happened. I suggest that the car market is still cyclical. It is just that the last 2-3 years of growth have lead some market observers to forget this. How many consumer market sales directors ever forecast a decrease in sales? That sales sometimes decrease is not a startling revelation. And as an investor you have to consider the flow on effect if this were to happen.

I don't see a decline in Turners sales going forwards. That's because even if you assume the car market is cyclical, as I do, Turners is currently the strongest player and is gaining market share. But because the car market is very competitive, return on shareholders funds is not great. So I believe the growth forecasts that some brokers are putting out on Turners are subject to significant uncertainty. The inappropriate stock at Buy Right Cars over FY2018 is but one example of what can happen.

I think of Turners as:

1/ Riding a cyclical car market PLUS
2/ Adding an incremental growth premium on top of this.

Valuing 1/ is relatively easy. Valuing 2/ I find much more difficult.

You are right in that I have picked a discount rate. But it isn't arbitrary. It is the gross return I require after sizing up the risks inherent in this market sector verses term deposits. I want 5.5% from a fixed interest investment as a minimum. And I would add a suitable risk increment to that for equity investments. If others are seeking a different return rate that is fine. Anyone can put in their own discount rate number into my valuation equation and the valuation will change accordingly.

SNOOPY

[Marilyn Munroe]

T I downloaded the FY2017 annual report, did a search for the word 'property' and it came up 21 pages later, as an item in a larger table with an entry 'Property Plant & Equipment' while going over the balance sheet. Not very forthcoming for a 'property' company, I would have thought.

SNOOPY

My understanding is their Christchurch premises are rented from Ngai Tahu.

Boop boop de do
Marilyn

[Snoopy]

Sorry my Beagle friend, I concur with Blackcap and any attempt to value Turners using historical dividends is going to give you very limited visibility on fair value.
I look at the forward PE and the expected growth rate over the next few years. Brokers use their fancy DCF models and try and NPV future cashflows using a whole bunch of assumptions and guesses followed by a terminal growth guess from the five year out point.


Beagle I am not suggesting that my 'capitalising the dividend' is anywhere near as sophisticated as the kind of valuation techniques that the brokers use. But any modelling is only as good as the 'assumptions and guesses' put into it. And just because the mathematical model is more sophisticated, that doesn't make the assumptions and guesses more valid.

What I can say is that if you can buy a share on the basis of an historical favourable capitalised dividend valuation, then you will likely be buying any future growth 'for free'. And buying something of investment value 'for nothing' usually works out well from an investment perspective. 'Capitalising the Dividend' is a quick and easy technique using the most reliable data inputs (remember dividends cannot be distorted or faked) to identify these opportunities.

SNOOPY

[Beagle]

Beagle I am not suggesting that 'capitalising the dividend' is anywhere near as sophisticated as the kind of valuation techniques that the brokers use.

I didn't think you were either mate and as you can see from the tone of my post those DCF valuations are based on so many assumptions and guesses I think one is often best to stick their snout in the air, sniff the breeze and come up with their own guesses :)

[Snoopy]

By the way the reported EPS of 15% was boosted by having a lower tax rate this year v last year. (Normalised you could say it was less than 10% but does it really matter when nobody knows what the F19 tax rate will be)


The tax rate for DPC/TNR/TRA (I will call it Turners Automotive Group, the new name going forwards) has certainly varied wildly even since FY2015. The first factor in this is that existing tax losses had to be used up. Then there were 'asset sales' to distort the tax take. The 'normal' company tax rate is 28%. However companies tend to pay provisional tax. That means that some tax payments for the current tax year roll over to the next. And when there are significant business changes over the year, the 'catch up' tax can significantly distort tax paid in any particular year. The table below shows the actual tax rate paid by Turners Automotive Group from FY2015 to FY2018.



Actual Tax Paid


Financial YearTax paid {A}Net Profit Before Tax {B}Net Profit After Tax {B}-{A)Tax rate paid {A}/{B}


2015$0.956m$19.006m]$18.050m5%


2016$5.949m$21.551m$15.602m28%


2017$7.057m$24.631m$17.574m[29%


2018$7.773m$31.133m$23.360m25%



I don't know exactly why the tax rate has dropped for FY2018. But asset sales that are not subject to income tax could be one reason. And once an asset is sold, it cannot be sold again. So including such sales as profits are distortionary for inter year comparatory purposes.

For my own comparisons year to year, I look to take out one off asset sales and foreign exchange gains and losses. I also use a consistent tax rate (usually 28%) and work out the tax that would have been paid had none of those previously mentioned distortions existed.



Snoopy Modelled Tax Paid


Financial YearTax paid {A}Snoopy modelled Net Profit Before Tax {B}Snoopy modelled Net Profit After Tax {B}-{A)Tax rate paid {A}/{B}


2015$4.748m$16.958m$12.210m28%


2016$5.949m$21.281m$15.332m28%


2017$6.529m$23.318m$16.789m28%


2018$8.437m$30.133m$21.696m
28%




The fact that declared tax rates vary so much is an 'Orange Flag' to me that means a business is evolving. Thus extreme care is needed when projecting current declared after tax earnings trends into the future.

SNOOPY

[winner69]

TRA Bonds grossing 6.5% which TRA stock grossing about 7%

Some would say the ‘company risk’ reflects the bond yield ...if so not much of an “equity premium” or the added risk of holding shares

Those same punters might also say if a reasonable equity premium is about 3.5% (to compensate for the added risk of holding shares over bonds) then the dividend yield should be about 10% which implies a 215 share price

Market mis-pricing somewhere .....Just asking for a friend because I have no idea

[blackcap]

Probably a must go to for many of the posters on this thread. I shall attempt to go to the Porirua one:

https://www.nzx.com/announcements/319510

Nice to see they are saving money by not hiring expensive hotels for this roadshow but using existing premises. Gives us shareholders a chance to see the business first hand too. 2 birds with one arrow type of thing.

[Beagle]

Probably a must go to for many of the posters on this thread. I shall attempt to go to the Porirua one:

https://www.nzx.com/announcements/319510

Nice to see they are saving money by not hiring expensive hotels for this roadshow but using existing premises. Gives us shareholders a chance to see the business first hand too. 2 birds with one arrow type of thing.

Excellent idea. I am sure many shareholders will enjoy the chance to meet the senior team and learn more about how they're working to grow the business.
I couldn't agree more Blackcap, no point hiring an expensive corporate show pony venue, just let shareholders see more of the company first hand.
Excellent move by the Turners team and I hope to find the time to attend.

[mfd]

TRA Bonds grossing 6.5% which TRA stock grossing about 7%

Some would say the ‘company risk’ reflects the bond yield ...if so not much of an “equity premium” or the added risk of holding shares

Those same punters might also say if a reasonable equity premium is about 3.5% (to compensate for the added risk of holding shares over bonds) then the dividend yield should be about 10% which implies a 215 share price

Market mis-pricing somewhere .....Just asking for a friend because I have no idea

Is part of the answer the retained earnings? Only 50-60% of NPAT is paid out in dividends so shareholder returns can be expected to be larger than the yield would suggest. The bonds have also traded at over $1 for most of the last couple of years so any replacement bonds issued later this year could be at a lower rate.

[percy]

Probably a must go to for many of the posters on this thread. I shall attempt to go to the Porirua one:

https://www.nzx.com/announcements/319510

Nice to see they are saving money by not hiring expensive hotels for this roadshow but using existing premises. Gives us shareholders a chance to see the business first hand too. 2 birds with one arrow type of thing.

I have booked my spot.
Always learn something worthwhile from these type of presentations.

[traineeinvestor]

TRA Bonds grossing 6.5% which TRA stock grossing about 7%

Some would say the ‘company risk’ reflects the bond yield ...if so not much of an “equity premium” or the added risk of holding shares

Those same punters might also say if a reasonable equity premium is about 3.5% (to compensate for the added risk of holding shares over bonds) then the dividend yield should be about 10% which implies a 215 share price

Market mis-pricing somewhere .....Just asking for a friend because I have no idea

I've never quite got my mind around the usefulness/validity of equity risk premium, in part because the original formulation does not seem to allow for inflation which is one of the risks that concerns me most over the longer term. Although some academics have been using TIPS instead of T-bills and T-Bonds on their work which suggests that inflation is being factored in. In any case, like EMH, the usefulness of ERP to investors has been challenged by a number of people. There's a good article (and discussion in the comments) from the FT here: https://www.ft.com/content/15a56d48-dd8e-3497-8070-37cd398b9839

[Snoopy]

TRA Bonds grossing 6.5% which TRA stock grossing about 7%

Some would say the ‘company risk’ reflects the bond yield ...if so not much of an “equity premium” or the added risk of holding shares


Winner these TNRHB bonds were issued nearly two years ago. So to compare the yield offered, you really need to stack the bond yield up against what was offered as a dividend yield 'back then'.



Turners Automotive Group Limited (TNR/TRA)FY2015FY2016
FY2017FY2018



No. Shares on Issue (TNR/TRA) {B} (EOFY)63.077m63.433m74.524m84.803m


Snoopy Normalised Earnings Per Share 19.4c24.2c22.5c25.6c


Dividend Paid (per share)5c + 4c6c + 6c7c + 3c +3c]4c + 4.5c +3c +3c



Back then the share price was floating around $3 and we were looking at an historical dividend yield of 12cps.

12/300 = 4% net yield or a 5.6% gross yield. It is the 5.6% gross yield that you should compare against the 6.5% TRAHB bond yield back then. Turners provided an independent valuation of the bond yield on offer at the time. IIRC is was judged fair, but only just (coming in near the bottom of the fair value range).

Since then interest rates have fallen, although it is possible that the underlying risk of those bonds has altered over the time the bonds have been in existence too.



Those same punters might also say if a reasonable equity premium is about 3.5% (to compensate for the added risk of holding shares over bonds) then the dividend yield should be about 10% which implies a 215 share price

Market mis-pricing somewhere .....Just asking for a friend because I have no idea

With current low interest rates I am happy with a 2.0% equity premium on a solid utility share. I would say 3.5% as a rule of thumb equity premium is something that should apply only to a higher risk share: If you go back to the GFC days, consider some of those 'fringe money market players' with lending to people of doubtful credit to loans on assets of doubtful value (for example).

SNOOPY

[kiwico]

Probably a must go to for many of the posters on this thread. I shall attempt to go to the Porirua one:

https://www.nzx.com/announcements/319510



Thank you - I didn't even know there was a Turners in Porirua - saves traipsing out to Seaview.

[blackcap]

Interests associated with Grant Baker buy 500k on market at about $3.03. Great signal or just shuffling around jiggery pokery?

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/319578/281279.pdf

[Enjay]

Disclosure notice says on market purchase with parties who are not known - looks like a 17% top up for the trust.

After Trilogy was sold and de-listed, expect there's a little bit of cash sitting around in affiliated entities of Mr Baker, the magic maker.

[Snoopy]

TRA are big ticket clippers.
Sale of vehicle...……………..Ticket clipped.
Finance of vehicle...………..Ticket clipped
Insurance…………………………Ticket clipped.
Vehicle service...……………..Ticket clipped.
Development of sites...…...Ticket clipped.
MTF non recourse loans.....Ticket clipped
Debt management services,Ticket clipped.
More and bigger tickets to clip.


I agree with Percy's observation, right up until that last line. I sincerely hope it isn't Turners policy to string the buyer along all the way through the car ownership process, clipping the ticket all the way, with the ultimate objective of getting the car back as a failed debt, leaving the owner penniless and jobless (because he can't drive to work)!

Nevertheless I should point out that the strength of this business model is also its weakness:

No Sale of vehicle...…………means...
No Finance of vehicle...……….and...
No Insurance needed…………..and...
No Vehicle service needed...…which means....
Developed Sites become superfluous...(at least these have been sold off to third party landlords, so it is they and not Turners who will suffer) .
also....lower MTF non recourse loans....means a reduced dividend from that source.

What I am saying here is that a very weak car market could see all Turners divisions fall over like dominoes, bar one:

Debt management Services,Ticket clipped.

Turners should at least maximise what they can salvage by chasing their own debtors!



Turners have not insignificant borrowings. Question: So how is the 'interest rate charged' trend for TNR looking?



FY2015FY2016FY2017FY2018


Interest Expense (A)$7.381m$11.436m$11.350m$14.344m


Total Liabilities$207.970m$232.491m$384.917m$437.662m


Total Borrowings$156.995m$174.816m$265.889m$317.373m


Averaged Borrowing Balance (B)$165.906m$220.353m]$291.631m


Implied Borrowing Interest Rate (A)/(B)6.9%5.2%4.9%





The other issue for Turners going forwards is rising interest rates. It strikes me that 4.9% is unusually low as a borrowing rate for this type of business. If the average borrowing interest rate went up to 6.9%, the sort of rate Turners was paying just two years ago, then the annual interest bill could leap from $14.344m to $20.199m. A near $6m rise in interest charges would hit NPAT by about $4m - ouch!

Note that I am not forecasting that any of this definitely will happen. But I think investors should be aware of these potential risks.

SNOOPY

[Beagle]

Interests associated with Grant Baker buy 500k on market at about $3.03. Great signal or just shuffling around jiggery pokery?

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/319578/281279.pdf

Looks like a clean on market purchase as vendors are unknown so its genuine new money giving even more skin in the game ! Follow the smart money.

[Snoopy]

I think of Turners as:

1/ Riding a cyclical car market PLUS
2/ Adding an incremental growth premium on top of this.

Valuing 1/ is relatively easy. Valuing 2/ I find much more difficult.


My 'Capitalised Dividend' valuation for this share was a failure. But after some soul searching, I believe that 'capitalising earnings' is a more realistic way to go.



Turners Automotive Group Limited (TNR/TRA)FY2015FY2016
FY2017FY2018



Snoopy Normalised Earnings Per Share {A}19.4c24.2c22.5c25.6c


Dividend Paid (per share) {B}9c12c13c]14.5c


Underlying Retained Earnings (per share) {A}-{B}10.4c12.2c9.5c]11.1c



I favour using at least five years of data when doing an exercise like this. However, when considering a company as fast evolving as Turners Automotive Group there comes a point when historical data used as a proxy for what might happen going forwards becomes positively antiquated. So I have reverted to using just four years of data which covers the period from when TRA was conceived in its current form.

The valuation is in two parts. Once again I am using an acceptable gross return of 7.5% for the dividend part of it.

Average dividend received over the last four years

(9c+12+13c+14.5c) / 4 = 48.5c, divide by four = 12.1c

Gross Capitalised Dividend Component = 12.1c / (0.075 x 0.72) = $2.24 (1)

Average Retained Earnings Valuation reinvested over the last four years

All things going to best plan, retained earnings should be worth more than cash paid as a dividend. But this assumes a largely monotonic increasing profit year in year out, with very few exceptions. I don't believe that the historical underlying profitability data indicates that Turners can achieve this. So I think it wise to assume that a 'dividend in the bank account' is worth more than a 'potential dividend in the bush'. To reflect 'business execution' and 'car market volatility' risks, I am going to increase my required return for 'retained earnings' by two percentage points, out to 9.5%

(10.4 + 12.2 + 9.5 + 11.1)/4 = 10.8c (average)

Gross Capitalised Retained Earnings Component = 10.8c / (0.095 x 0.72) = $1.58 (2)

So my total 'fair valuation' for TRA becomes (1) + (2):

$2.24 + $1.58 = $3.82

Thus at a market price of just over $3, it looks like TRA might be worth accumulating!

SNOOPY

[blackcap]

The other issue for Turners going forwards is rising interest rates. It strikes me that 4.9% is unusually low as a borrowing rate for this type of business. If the average borrowing interest rate went up to 6.9%, the sort of rate Turners was paying just two years ago, then the annual interest bill could leap from $14.344m to $20.199m. A near $6m rise in interest charges would hit NPAT by about $4m - ouch!



SNOOPY

Gee you are a hard man (or woman) to please Snoops. Surely if interest rates rise, then they rise across the board and new finance will be at higher rates thus compensating Turners more. I have read somewhere that these type of borrow low and lend out at higher rates type companies do better when interest rates are higher as to maintain the % of "premium" the real amount of premium goes up. Ie if you can borrow at 2% and lend out at 4% you havea 2% margin. If you have to pay 5% for your money you can lend at 10%, now you have a 5% margin thus profits are boosted even more. I would argue that Turners would do better under a higher interest rate environment....

[Snoopy]

Gee you are a hard man (or woman) to please Snoops. Surely if interest rates rise, then they rise across the board and new finance will be at higher rates thus compensating Turners more. I have read somewhere that these type of borrow low and lend out at higher rates type companies do better when interest rates are higher as to maintain the % of "premium" the real amount of premium goes up. I.e. if you can borrow at 2% and lend out at 4% you have a 2% margin. If you have to pay 5% for your money you can lend at 10%, now you have a 5% margin thus profits are boosted even more. I would argue that Turners would do better under a higher interest rate environment....


Two I points I would make blackcap:

1/ Interest Rate Margin on Loans: I take your point, and look forward to reading your source, when you can remember where your readings came from ;-P! You may have a point here, although I suspect the reality is more complex. In the medium term your argument sounds plausible. In the shorter term I would expect a 'lag effect'. I would expect existing car loans would be 'locked in' for a contacted term, with Turners having to wear the cost of any increase in their funding while any existing offsetting pre-signed up income remains steady.

2/ Not all of the money that Turners has borrowed has gone to supporting loans. I analysed this in 'Chapter 5' of Winner's 'An Investment Story - Geneva/Turners/Heartland' thread. At EOFY2017, the Turners loan book liabilities stood at $153.305m. But total liabilities for the Turners Automotive group were $384.917m. A lot of this difference can be explained by intangible assets, such as the $71.400m on the balance sheet classified as 'brand' and $92.509m in 'goodwill'. The borrowing used to purchase these intangible assets does not have a direct offsetting consummate income stream. So any increase in this borrowing becomes a straight cost to the 'Turners Automotive Group' company.

SNOOPY

[percy]

Gee you are a hard man (or woman) to please Snoops. Surely if interest rates rise, then they rise across the board and new finance will be at higher rates thus compensating Turners more. I have read somewhere that these type of borrow low and lend out at higher rates type companies do better when interest rates are higher as to maintain the % of "premium" the real amount of premium goes up. Ie if you can borrow at 2% and lend out at 4% you havea 2% margin. If you have to pay 5% for your money you can lend at 10%, now you have a 5% margin thus profits are boosted even more. I would argue that Turners would do better under a higher interest rate environment....

Banks and finance companies benefit from higher interest rates,for the very reasons you pointed out..
Has always been the case.

[winner69]

Thanks snoops ..was wondering why TRA had high levels of debt ....leading to a pretty low ROIC

[Beagle]

My 'Capitalised Dividend' valuation for this share was a failure. But after some soul searching, I believe that 'capitalising earnings' is a more realistic way to go.



Turners Automotive Group Limited (TNR/TRA)FY2015FY2016
FY2017FY2018



Snoopy Normalised Earnings Per Share {A}19.4c24.2c22.5c25.6c


Dividend Paid (per share) {B}9c12c13c]14.5c


Underlying Retained Earnings (per share) {A}-{B}10.4c12.2c9.5c]11.1c



I favour using at least five years of data when doing an exercise like this. However, when considering a company as fast evolving as Turners Automotive Group there comes a point when historical data used as a proxy for what might happen going forwards becomes positively antiquated. So I have reverted to using just four years of data which covers the period from when TRA was conceived in its current form.

The valuation is in two parts. Once again I am using an acceptable gross return of 7.5% for the dividend part of it.

Average dividend received over the last four years

(9c+12+13c+14.5c) / 4 = 48.5c, divide by four = 12.1c

Gross Capitalised Dividend Component = 12.1c / (0.075 x 0.72) = $2.24 (1)

Average Retained Earnings Valuation reinvested over the last four years

All things going to best plan, retained earnings should be worth more than cash paid as a dividend. But this assumes a largely monotonic increasing profit year in year out, with very few exceptions. I don't believe that the historical underlying profitability data indicates that Turners can achieve this. So I think it wise to assume that a 'dividend in the bank account' is worth more than a 'potential dividend in the bush'. To reflect 'business execution' and 'car market volatility' risks, I am going to increase my required return for 'retained earnings' by two percentage points, out to 9.5%

(10.4 + 12.2 + 9.5 + 11.1)/4 = 10.8c (average)

Gross Capitalised Retained Earnings Component = 10.8c / (0.095 x 0.72) = $1.58 (2)

So my total 'fair valuation' for TRA becomes (1) + (2):

$2.24 + $1.58 = $3.82

Thus at a market price of just over $3, it looks like TRA might be worth accumulating!

SNOOPY

Eureka ! Interestingly this is very close to where I see fair value using my modified version of Ben Graham's formula ($4) and where the famous Couta1 reversion theory has it at $3.84. Take an average of all our valuations and you get ($4 + $3.82 + $3.84) / 3 = $3.89. So we're all in agreement then...

The only fly in the ointment is the two analysts covering it don't see it that way.

[Snoopy]

I think I can offer some numbers on the earnings potential of the debt collection division. The divisional operating profit is shown as $3,501m for FY2014. Just like the finance division that I have just analysed, I believe you have to take off a share of corporate costs to get a true EBIT picture. For the debt collection division, this works out to be $11,310. so

EBIT (debt collection) = $3.501m - $0.01131m = $3,490m

We are told segment assets are $13,615m

So EBIT / Segment Assets = $3,490m / $13,615m = 25.6%

That is an astonishing rate of return, three times better than their own well performed finance business when measured with the same measuring stick. Not too far short of that 37% that Percy, perhaps only slightly optimistically, calculated. More evidence that the premium price that DPC trades at with respect to other finance companies is justified?


There isn't too much discussion on the EC Credit division of Turners on this forum. Perhaps there should be more? There was an article in the June 10th edition of the Sunday Star times 'Business Section' on the debt collection business in NZ in general. A very small part of that article mentions EC Credit. I think a couple of quotes from that article would be of interest to Turners shareholders.

"Dave Wilson from EC Credit Control, New Zealand's largest debt collection agency, thinks the Australian push to create a debt sales market of scale in New Zealand is doomed to fail. 'A number of companies like Kessler and TDX have decided to push the debt side of things in NZ and it hasn't had an impact' he said."

<snip>

"Wilson had met officials who were very interested in the debt collection and repossession industry, and he believed the threat of law reforms would have a chilling effect on debt sales."

'I would be very nervous about an agency that bought debt and adds 40 to 50 percent to the debt that it's been sold.' Wilson said. He believed that such high additional fees could be deemed 'excessive'.

"By contrast debt collectors such as EC Credit Control. which is owned by NZ listed market company Turners, were paid a success fee of around 15 to 20 percent by the company that hired them."

After reading that I started to feel all warm and fuzzy about the comparatively compassionate service we Turners shareholders are offering to those dastardly debtors!

SNOOPY

[kiora]

Think Baycorp.A jewel in the crown?

[Beagle]

The market is just starting to wake up to the value of Turners shares. Good brave move by Todd Hunter to come on here and clarify a few things and then follow that up by engaging with shareholders in their inaugural series of shareholder briefings right around the country. Good stuff and well done !

[minimoke]

The market is just starting to wake up to the value of Turners shares. !Funny old world. I bought Turners at IPO way back in 2002 for $1.50 and sold in 2006 for $1.69 for a 13% (exc divis) gain over that period.

I'm back on the horse again and expecting a better ride this time around. So far up 4.7% in 2 weeks - so I have started off well.

[percy]

Funny old world. I bought Turners at IPO way back in 2002 for $1.50 and sold in 2006 for $1.69 for a 13% (exc divis) gain over that period.

I'm back on the horse again and expecting a better ride this time around. So far up 4.7% in 2 weeks - so I have started off well.
TRA's share price has moved ahead of 10,20,30,60,90,120 and 180 day moving averages,so would appear you brought at the right time to enjoy the upward share price trajectory.

[Beagle]

Funny old world. I bought Turners at IPO way back in 2002 for $1.50 and sold in 2006 for $1.69 for a 13% (exc divis) gain over that period.

I'm back on the horse again and expecting a better ride this time around. So far up 4.7% in 2 weeks - so I have started off well.

Giddy up :)

[couta1]

Funny old world. I bought Turners at IPO way back in 2002 for $1.50 and sold in 2006 for $1.69 for a 13% (exc divis) gain over that period.

I'm back on the horse again and expecting a better ride this time around. So far up 4.7% in 2 weeks - so I have started off well. I'm up roughly the same and looking forward to my $3.83 target price.

[winner69]

I'm up roughly the same and looking forward to my $3.83 target price.

Momentum is a powerful force and it’s sure building with TRA

We’ll see 320 next week and Couts I reckon we’ll see your 383 even earlier than you envisaged.

Hard to stop juggernauts ..especially when they are accelerating fast

[winner69]

Always good when head honcho buys shares ..all 25,000 of them recently

I seem to have more faith in the company’s recent performance than he does ha ha (can’t match his previous purchases though)

[percy]

Always good when head honcho buys shares ..all 25,000 of them recently

I seem to have more faith in the company’s recent performance than he does ha ha (can’t match his previous purchases though)

Try............................................... ...........lol.

[blackcap]

Always good when head honcho buys shares ..all 25,000 of them recently

I seem to have more faith in the company’s recent performance than he does ha ha (can’t match his previous purchases though)

I agree but am puzzled how he managed to make an on market purchase of 25k shares at $2.93 on 19 June?

[percy]

I agree but am puzzled how he managed to make an on market purchase of 25k shares at $2.93 on 19 June?

Very difficult when Yahoo Finance show the low for that day was $3.03.

[winner69]

Very difficult when Yahoo Finance show the low for that day was $3.03.

Maybe it was a quiet day in the office and Todd filled the day in with a bit of day trading and the $2.9291 is the average cost over the day. Car guys can’t resist a bit of gambling eh.

Hoping he’s not covering his shorts

[Beagle]

Out waddling along in the sun today I had quite an epiphany. Labour's new families package kicks in on 1 July and the head guy from Mangere budgeting service this morning on TV3's breakfast program said that the average family with 2 kids and paying rent, (with substantial long overdue changes to the accommodation supplement) will be substantially better off. He mentioned as much as a couple of hundred dollars per week for larger families paying high rent, (isn't everyone in Auckland who is renting now paying high rent ?) but still a meaningful amount for most modest income families. I think Labour haven't nearly labored (sorry couldn't resist), enough to sell the benefits of this package and it's really going to make a BIG difference. (The Carrot)

On the other side of the coin much has been made of the extra costs of the regional fuel levy about to be introduced at the same time, (The Stick)

It occurred to me that this plays directly to Turners target market ! Average man Joe Bloggs getting significantly more weekly income with an aging inefficient car is probably going to be motivated to change to something more fuel efficient and be able to fund the weekly payments from their increased entitlements.

Tailwinds coming for Turners ! (who will of course clip the ticket on finance and extended warranty as well).
To be fair this probably benefits Colonial Motors as well so those with a bob each way are quite possibly very well positioned.

[minimoke]

Out waddling along in the sun today I had quite an epiphany. .
Not really an epiphany - but maybe the dementia kicking in and triggering your short term memory. This post back on 1 June (#2289) touched on most of your realisation ”Well, heres another who has just bought into TRA. I'm liking their numbers and their offering. Tipping point for me though was Auckland regional fuel tax. I'm picking increase fuel prices and an increased tax n NZ' largest population will force that population to look at their fuel economy. What better than to be eased into a more efficient vehicle with purchase and finance options which can be paid for an increasing minimum wage and public service salaries”

(Which is why when I sold out of HBL I put the money into TRA - I think there is more potential from this govt positively impacting TRA, and more so than CML than HBL)

[MPC]

Interesting because I have also just sold HBL to buy TRA for my kids long term portfolio.
Cheers,
MPC

[Beagle]

Not really an epiphany - but maybe the dementia kicking in and triggering your short term memory. This post back on 1 June (#2289) touched on most of your realisation ”Well, heres another who has just bought into TRA. I'm liking their numbers and their offering. Tipping point for me though was Auckland regional fuel tax. I'm picking increase fuel prices and an increased tax n NZ' largest population will force that population to look at their fuel economy. What better than to be eased into a more efficient vehicle with purchase and finance options which can be paid for an increasing minimum wage and public service salaries”To be fair mate these are additional things to the new families package that kicks in on 1 July so no dementia yet, not that I can recall anyway lol

(Which is why when I sold out of HBL I put the money into TRA - I think there is more potential from this govt positively impacting TRA, and more so than CML than HBL)

I agree that TRA is a bigger beneficiary but don't rule out some benefit for CML either as there's some serious resentment about this new (and in many people's opinion grossly iniquitous fuel tax) and new vehicles are generally considerably more fuel efficient than the type Turners generally sell. I think there are benefits to HBL as well as families find it easier to meet previously committed loan agreements and sign up new loans for whatever takes their fancy with their increased income.

[percy]

Well I am seriously disappointed in fellow posters.
Got myself very excited when I was the highest bidder at $3.08 yesterday.
And then MiniMoke announced he was finding a home for his HBL funds. Absolute rotter trend setter that he is.,,lol.
Now there are 63,572 shares wanted ahead of me.!!! [and I am not looking to sell any HBL]
Just as well I already have a good holding...

[Joshuatree]

Well, heres another who has just bought into TRA. I'm liking their numbers and their offering. Tipping point for me though was Auckland regional fuel tax. I'm picking increase fuel prices and an increased tax n NZ' largest population will force that population to look at their fuel economy. What better than to be eased into a more efficient vehicle with purchase and finance options which can be paid for an increasing minimum wage and public service salaries.

Look at dat. great dot joining mm.:)

[Beagle]

Well I am seriously disappointed in fellow posters.
Got myself very excited when I was the highest bidder at $3.08 yesterday.
And then MiniMoke announced he was finding a home for his HBL funds. Absolute rotter trend setter that he is.,,lol.
Now there are 63,572 shares wanted ahead of me.!!! [and I am not looking to sell any HBL]
Just as well I already have a good holding...

I moved the needle up to $3.15 with a small top up today, do I get a free chocolate fish for that :)

[winner69]

TRA ...go you little beauty

With all this positiveness and punters swapping horses TRA is looking to be the cert of the year to make punters big money this year.

With this momentum come friday which is end June we’ll see 320 and who knows what by end of July ......340?

Hope the IRD sorts out their crap quickly and these poorer people get their extra cash when they should.

[minimoke]

Well I am seriously disappointed in fellow posters.
Got myself very excited when I was the highest bidder at $3.08 yesterday.
And then MiniMoke announced he was finding a home for his HBL funds. Absolute rotter trend setter that he is.,,lol.
Now there are 63,572 shares wanted ahead of me.!!! [and I am not looking to sell any HBL]
Just as well I already have a good holding...I did flag last week that I had sold out of HBL and had another prospect in the fire.

My scottish blood had me place a bid for TRA at $3.08 as well but sellers were tighter than me and wouldn't budge.

Felling a wee smidge of pressure given I am about to head away for awhile out of internet access I thought it prudent I lock a buy in. So refreshed to $3.10 and the deal was done. (and in the meantime I see HBL has dropped another cent to $1.74 and TRA gone to $3.15)

[percy]

I moved the needle up to $3.15 with a small top up today, do I get a free chocolate fish for that :)

Rotter...……………………
Thank you...……………
Heads I win.
Tails I win....
"Well positioned."...……...lol.

[percy]

I did flag last week that I had sold out of HBL and had another prospect in the fire.

My scottish blood had me place a bid for TRA at $3.08 as well but sellers were tighter than me and wouldn't budge.

Felling a wee smidge of pressure given I am about to head away for awhile out of internet access I thought it prudent I lock a buy in. So refreshed to $3.10 and the deal was done. (and in the meantime I see HBL has dropped another cent to $1.74 and TRA gone to $3.15)

Good on you.
You are doing well.
I am not.!!
Have/had sizable orders in for three companies.
So far have only brought just under $3,000 worth in one company...
A very long way to go.

[Beagle]

Rotter...……………………
Thank you...……………
Heads I win.
Tails I win....
"Well positioned."...……...lol.

LOL Maybe they'll have a nice morning tea, (probably better for me than a free chocolate fish), after Monday's Auckland roadshow presentation.
Anyway...after topping up in HBL, CMO and TRA recently I am also feeling rather well positioned :)

[winner69]

Usually don’t mention shares to the next door neighbour who seems to have great influence over his bowling mates .....but casually mentioned they should take their profits on ATM (got in at below 9 bucks and about their only winner so far) and sell up and put it all into Turners. I did say I was biased and was going to make heaps out of TRA

He said ‘Turners, what they do?’ And when I said you know the car people he got all interested and said he would do ‘some research’ (probably over a few beers with his mates down at the club)

I reckon this time tomorrow they will be TRA shareholders

[minimoke]

Usually don’t mention shares to the next door neighbour who seems to have great influence over his bowling mates .....but casually mentioned they should take their profits on ATM (got in at below 9 bucks and about their only winner so far) and sell up and put it all into Turners. I did say I was biased and was going to make heaps out of TRA

He said ‘Turners, what they do?’ And when I said you know the car people he got all interested and said he would do ‘some research’ (probably over a few beers with his mates down at the club)

I reckon this time tomorrow they will be TRA shareholdersYou don't by chance drive a taxi?

[couta1]

Usually don’t mention shares to the next door neighbour who seems to have great influence over his bowling mates .....but casually mentioned they should take their profits on ATM (got in at below 9 bucks and about their only winner so far) and sell up and put it all into Turners. I did say I was biased and was going to make heaps out of TRA

He said ‘Turners, what they do?’ And when I said you know the car people he got all interested and said he would do ‘some research’ (probably over a few beers with his mates down at the club)

I reckon this time tomorrow they will be TRA shareholders No way I would sell my main ATM holding(Bought at $8) for any other share including this one, you talked your mates out of doubling their money over the next year. TRA about 8% of my portfolio and ATM about 38%.

[winner69]

Further to beagles post yesterday man from AA said on the radio this am that beneficiary families have on average more than 2 cars while poor families often only have 1 car

So will many upgrade and will many get that second car

Even better for Turners

[percy]

When "the workers" have their party in government, they are more inclined to spend,and take on debt.
One of the first things they want is a new second hand motor [on tick].
Turners are here to help them,car,finance and insurance,.
A case of being in the right sector at the right time.
Should interest rates increase, they will do even better.
I am "well positioned".!
Above posted 26-10-2017
As day follows night "the workers" party delivers.!!……………...lol.

[Beagle]

https://treasury.govt.nz/sites/default/files/2018-02/families-package-dec17.pdf

Well worth a good look to get a handle on the scope of the increases the new families package provides.
Keep in mind that most people on modest incomes are spending ~ 100% of their income so an extra :-
$112 per week for a solo mum plus up to another $110 in accommodation supplement really makes a HUGE difference.
Further up the scale a couple earning $90K with two kids and paying rent can be $90 better off a week.
These are massive differences for struggling families and vastly more than just tinkering with what the minimum hourly rate will ever provide.
Happier days are coming for struggling families and I for one am happy for them.

You were spot on Percy, the workers party really is delivering.

[winner69]

https://treasury.govt.nz/sites/default/files/2018-02/families-package-dec17.pdf

Well worth a good look to get a handle on the scope of the increases the new families package provides.
Keep in mind that most people on modest incomes are spending ~ 100% of their income so an extra :-
$112 per week for a solo mum plus up to another $110 in accommodation supplement really makes a HUGE difference.
Further up the scale a couple earning $90K with two kids and paying rent can be $90 better off a week.
These are massive differences for struggling families and vastly more than just tinkering with what the minimum hourly rate will ever provide.
Happier days are coming for struggling families and I for one am happy for them.

You were spot on Percy, the workers party really is delivering.

So Jacinda (and other variants you have used) is now tops in your view

Just asking

[Beagle]

So Jacinda (and other variants you have used) is now tops in your view

Just asking

The reality is mate you're never going to agree with everything one particular political party does or doesn't do. I think it was extremely harsh of National to not increase the accommodation supplement in their 9 years in power despite skyrocketing rents...and then they wonder why so many people are now homeless :rolleyes:

Some of Labour's policies drive me to despair but something had be done about poverty and good on them for that I reckon. If you look at the example I posted above of a young solo Mum with one child, (who in reality are mostly in a desperate situation with Auckland rents) but is now $232 per week better off they can finally start to live with some dignity including possibly getting a modest vehicle.

[Joshuatree]

Just saying
just saying (https://www.urbandictionary.com/define.php?term=just%20saying)
There is an obvious (https://www.urbandictionary.com/define.php?term=obvious) implication of what I just said, but I formally disavow that implication, although (https://www.urbandictionary.com/define.php?term=although) I actually believe it (https://www.urbandictionary.com/define.php?term=believe%20it).
That might be the wrong (https://www.urbandictionary.com/define.php?term=the%20wrong) tie (https://www.urbandictionary.com/define.php?term=tie) to wear. Just saying (https://www.urbandictionary.com/define.php?term=Just%20saying). (Implication: it makes you look ridiculous.)

[winner69]

Just saying
just saying (https://www.urbandictionary.com/define.php?term=just%20saying)
There is an obvious (https://www.urbandictionary.com/define.php?term=obvious) implication of what I just said, but I formally disavow that implication, although (https://www.urbandictionary.com/define.php?term=although) I actually believe it (https://www.urbandictionary.com/define.php?term=believe%20it).
That might be the wrong (https://www.urbandictionary.com/define.php?term=the%20wrong) tie (https://www.urbandictionary.com/define.php?term=tie) to wear. Just saying (https://www.urbandictionary.com/define.php?term=Just%20saying). (Implication: it makes you look ridiculous.)

Suppose just asking is the same as just saying ...if that is what your tirade is meant to be implicating

My apologies to beagle if he took my post the wrong way

[Beagle]

Suppose just asking is the same as just saying ...if that is what your tirade is meant to be implicating

My apologies to beagle if he took my post the wrong way

Not at all mate, I enjoyed taking a shot at National's short sightedness in terms of dealing with what is arguably an extremely serious situation with the huge growth in homelessness.

I guess what I'm getting at with the size of these changes, (the biggest difference I can ever recall) it is really will empower people to start living with dignity and instead of driving some clapped out 25 year old vehicle without a warrant of fitness they should be able to get themselves into a decent and more fuel efficient car thereby alleviating some of the effect of the iniquitous regional fuel levy so this is something I see as potentially a huge tailwind for Turners.

On the other side of the ledger however I see business confidence is still extremely low with another survey out yesterday so it becomes more difficult for business's to have confidence to for example update their fleet of trucks. Net effect is still something I see as a strong positive for Turners though but it will be interesting to gauge Todd Hunters view on this.

[minimoke]

https://treasury.govt.nz/sites/default/files/2018-02/families-package-dec17.pdf

Well worth a good look to get a handle on the scope of the increases the new families package provides.

Also not forgetting a certain sector of our society will be getting extra money over the winter months. What better investment than in a new Suzuki Swift from the local Turners yard.

(not forgetting poor students who might also like a vehicle to get to their studies).

I am hoping any loss I made from Labour turning off the personal tax reduction will be offset by an increase in share value due to demand from those benefiting from the other use of my money.

[Beagle]

Also not forgetting a certain sector of our society will be getting extra money over the winter months. What better investment than in a new Suzuki Swift from the local Turners yard.

(not forgetting poor students who might also like a vehicle to get to their studies).

I am hoping any loss I made from Labour turning off the personal tax reduction will be offset by an increase in share value due to demand from those benefiting from the other use of my money. :) Ditto.
Annual report out. https://www.nzx.com/announcements/320060
First impressions:-
It looks like they're on track for solid growth over the years ahead.
I think they can do around 32 cps for FY19 so on a theoretical ex divvy price, (record date for 5 cent divvy is 3 July) of $3.10 (3.15 - .05) this puts them on a PE of just under 10 which seems good value to me considering their growth prospects.
Looking at the dividend yield, I see no reason why we shouldn't be looking at an increase from 15.5 cps to approx. 16.5 cps this year and there are sufficient imputation credits and the company is paying sufficient tax to continue to top up their imputation credit account such that they appear to be in a position to fully impute dividends for the foreseeable future. 16.5 / 310 = net yield of 5.32% or 7.3% gross forecast dividend yield for FY19.
I think this is very attractive in light of the companies ability to grow these dividends going forward and the quarterly payment adds further attraction for those looking for regular income.

Very attractive metrics and sound growth prospects and quite probably very good value indeed in an otherwise (with very few exceptions) fully priced market.
Disclaimer: There's a lot of sun down at Percy's end of the tent so I am probably now seeing the glass as half full with my newly acquired rose colored sun glasses on :)

[winner69]

Hope Snoops doesn’t analyse Note 16 of the Accounts