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

[couta1]

People selling TRA at $2.48 and OCA at $1.14, completely rational market they tell me.PS-A 2 for 1 deal almost, both undervalued.

[percy]

There's no need to worry mate, just look at Percy's assurance posted on 30 November 2018.

i take it you have fallen out of love again?...lol.
Keep the faith,you will be well rewarded,may take two years,.may take three.

ps.Next years agm will be a cracker.
McGinty and Beagle in full flight.!!.
Beagle be like McGinty, and keep one share so you can attend it.Be nice if they had it at Turners Invercargill branch.!

[LAC]

$2.48 gees that’s not good, massively in the red now. Next AGM is going to be fireworks agreed, wonder if the chairman will show up knowing that’s in store.

[minimoke]

$2.48 gees that’s not good, massively in the red now. Next AGM is going to be fireworks agreed, wonder if the chairman will show up knowing that’s in store.
I think its part of the directors cunning plan. Do what you can to get as many as cheaply as possible. Then as SP rises be a little more fussy on price paid and % of target to be reached. Early days but plan seems to be working so far

[Snoopy]

Here's how I see it:

- Grant has lost it being quoted saying "This positive outlook supports the Share Buyback initiative” in the same announcement which is warning of a possible downgrade (Either that or he's talking fluff).


Or perhaps Grant Baker has a time horizon longer than one year?



- Directors may know about the business, but they don't know the first thing when it comes to understanding how market sentiment works (and how it can work against you)


You give management no credit for dropping the regular conversion of capital notes which ends the 'gaming' between notes and shares in the run up to each conversion date? Or the recognition of not endlessly issuing new shares that will depress the share price in the medium term? Or the lesson learned from not having a pro-rata rights issue?



- I would even question if the directors are any good at investing as they've failed to generate a positive return in their own TRA holdings (but we know they can certainly trough)


IIRC not many of those Business Bakery shares were issued at an equivalent price of greater than $2.50.



- TA wise (due to the trapped holders) it will take ages (possibly years) for TRA to hit $3.30 again.
- This buyback won't hold up the price if it's limited to just 30% of weekly volume.
- The buyback is the last defence of the SP by the directors (as a buyback has previously never been mentioned as a part of TRA's capital management)


The intention of the buyback is not to 'hold up the price' or distort the market in any way (at least in the short term). The 30% sharemarket volume limit is Turners way of not breaking the rules.



- They will struggle to maintain the current dividend unless market conditions improve, so a yield play this may not be.


Turners are only planning a dividend payout ratio of 60%. So profits would need to drop 40% before dividend payouts would likely be affected. And even then Turners can generate short term cash by reducing stock levels. They have done this before to retain dividends in the old TUA days.

SNOOPY

[winner69]

BlackCross, from your reading up on buybacks have come across the studies that show that PE ratios for companies that do buybacks often go lower because their equity debt profile changes (seen as more leveraged thus more risky)

So, yes EPS might increase (from less shares) but if PE contracts the share price won’t go up as much (if at all) as some punters assume/hope.

Turners could be a case in point seeing they pretty highly leveraged to start with

[percy]

I think its part of the directors cunning plan. Do what you can to get as many as cheaply as possible. Then as SP rises be a little more fussy on price paid and % of target to be reached. Early days but plan seems to be working so far

You are onto it.!........................lol.

ps.With the Dow down heavily over night, I expect the buyback could be very successful today.!!

[Ggcc]

You are onto it.!........................lol.

ps.With the Dow down heavily over night, I expect the buyback could be very successful today.!!
Or expect a further drop. Not only in this share to be fair. No share will be exempt today I think

[winner69]

$2.48 gees that’s not good, massively in the red now. Next AGM is going to be fireworks agreed, wonder if the chairman will show up knowing that’s in store.

LAC, not really ‘in the red’ are they as the shares have been cancelled.

[winner69]

Jeez, that Craig’s forecast of EPS of 22 cents for F19 (F18 was 29 cents) is a shocker

According to that marketscreener thing here are brokers earnings trend —

2018 23.4m
2019 23.3m
2020 21.3m
2021 24.6m

Pretty dismal picture and makes lies of the words/hype from the company

No wonder the share price is sinking

A strong trend in place. Trends don’t change unless there’s a shock to the system

Time for heads to roll ....whose going to be the first sacrificial lamb

[Mickey]

I took a contrarian investor approach to Chorus when it fell to the $1.30's and Air NZ when it eased back into the $1.70's and both investments paid off. I'm not so sure about this one though....but whenever there is fear and negative sentiment, there are investment opportunities (albeit for the bravehearted) and so I'm watching this one with interest.

Discl. holder

[BlackPeter]

Jeez, that Craig’s forecast of EPS of 22 cents for F19 (F18 was 29 cents) is a shocker

According to that marketscreener thing here are brokers earnings trend —

2018 23.4m
2019 23.3m
2020 21.3m
2021 24.6m

Pretty dismal picture and makes lies of the words/hype from the company

No wonder the share price is sinking

A strong trend in place. Trends don’t change unless there’s a shock to the system

Time for heads to roll ....whose going to be the first sacrificial lamb

Just wondering whether Craigs considered the recent investigation into NZTA ... They seemed to have been pretty lax in allowing dodgy garages for many years to issue warrant of fitness statements when the vehicle was anything but fit for driving on public roads.

I'd expect that the publicity of this case will make warrants in general a bit more fit for purpose, meaning many rustbuckets will leave our roads over the next 12 months for good.

This must be good for the used car business - and Turners can even make money with the rustbuckets which are past their useful life:);

[winner69]

Just wondering whether Craigs considered the recent investigation into NZTA ... They seemed to have been pretty lax in allowing dodgy garages for many years to issue warrant of fitness statements when the vehicle was anything but fit for driving on public roads.

I'd expect that the publicity of this case will make warrants in general a bit more fit for purpose, meaning many rustbuckets will leave our roads over the next 12 months for good.

This must be good for the used car business - and Turners can even make money with the rustbuckets which are past their useful life:);

Good stuff BP ......windfall profits on the horizon for Turners ...that’s good news

[LAC]

LAC, not really ‘in the red’ are they as the shares have been cancelled.
Nah what i meant was, when I saw the price yesterday I realised how much in the Red "I" was in my portfolio because of TRA being $2.48

[minimoke]

Nah what i meant was, when I saw the price yesterday I realised how much in the Red "I" was in my portfolio because of TRA being $2.48
Their much appreciated dividend wont cover the loss

[winner69]

Nah what i meant was, when I saw the price yesterday I realised how much in the Red "I" was in my portfolio because of TRA being $2.48

I see ....but take consolation you now own more of the company than last week.

[Beagle]

Jeez, that Craig’s forecast of EPS of 22 cents for F19 (F18 was 29 cents) is a shocker

According to that marketscreener thing here are brokers earnings trend —

2018 23.4m
2019 23.3m
2020 21.3m
2021 24.6m

Pretty dismal picture and makes lies of the words/hype from the company

No wonder the share price is sinking

A strong trend in place. Trends don’t change unless there’s a shock to the system

Time for heads to roll ....whose going to be the first sacrificial lamb

Those numbers make somber reading mate but no worries for Percy as he's married to this company and his infatuation is insatiable.

[Ggcc]

Those numbers make somber reading mate but no worries for Percy as he's married to this company and his infatuation is insatiable.
I still remember being in this position a few times, my arrogance got the better of me (definitely not calling Percy Arrogant) and I lost big time. I really appreciate both sides of whether a share is good or bad and do understand people need to do their own research. I lost by not listening to some comments on this site concerning different shares. Sometimes it pays to listen.

[bull....]

wheres the buyback bids lol

[bull....]

i have tra gearing at 65% they really are leveraged hope sales dont fall of too bad

[BlackPeter]

i have tra gearing at 65% they really are leveraged hope sales dont fall of too bad

Actually - At last report time liabilities to assets was 69%. But maybe you use a different formula.

However - don't forget that they are not just a car dealer. For a finance company 65 to 70% leverage would be quite low. Have a look at Heartland - they sit at 85% (and ANZ well above 90%) and nobody seems to worry ...

[percy]

I still remember being in this position a few times, my arrogance got the better of me (definitely not calling Percy Arrogant) and I lost big time. I really appreciate both sides of whether a share is good or bad and do understand people need to do their own research. I lost by not listening to some comments on this site concerning different shares. Sometimes it pays to listen.

I too have been in this position a few times,however I was lucky to read the book Billionaire,The Life and Times of Sir James Goldsmith,a number of years ago.
He wrote at length about buying Caversham Foods,putting in good managers and more cash.Took time for the turn around,but he knew putting the right ingrediants into the business he would get results.Caversham Foods went on to be a great business.
My first big win that set me up was buying Smiths City shares, when they delisted and went into receivership.Their share registry stayed open,and brokers were keen to clear up clients estates' SCY holdings.Sold them to me.So when SCY came out of receivership I was "well positioned."I made my money,however I no longer hold any SCY shares.
When Heartland was formed I went to every meeting,presentation,agm etc until I felt I fully understood where they were,and where they were going. Took time for their reverse equity loans to get traction,but are now flying.HGH is my second largest holding after Turners.
My third largest holding I have been slowly adding to over the past 7 years seven years,and I expect it will be my largest by value holding in a few years time.
I do my own research,buy into a company and if they do as they say they will do,or I like the progress they are making I will buy more shares.
Should I find the reasons for buying in change,or I am unhappy with the progress or direction the company is taking, I sell.
I would recomend people to read the history of Mainfreight.Great management taking set backs as opportunities.
My own research into Turners confirms I like the directors,management and their business strategy.Vertically integrated,vehicle sales, finanace/insurance/service,property development,end of life vehicle disposal, makes sense to me.All sectors have been bulked up in a very short period of time,issues sorted, and therefore I see Turners as "well positioned."

[bull....]

Actually - At last report time liabilities to assets was 69%. But maybe you use a different formula.

However - don't forget that they are not just a car dealer. For a finance company 65 to 70% leverage would be quite low. Have a look at Heartland - they sit at 85% (and ANZ well above 90%) and nobody seems to worry ...

they are a car dealer that uses an integrated model , less sales means less income right thru the business. they shouldnt have this gearing level for the business they have.

12m spent on debt servicing imagine the divs they could pay if debt levels were brought down. and just to be funny they say they are looking to expand more in an environment where credit is contracting and numerous commentators are warning companies with high debt will get caught out.

[BlackPeter]

they are a car dealer that uses an integrated model , less sales means less income right thru the business. they shouldnt have this gearing level for the business they have.

12m spent on debt servicing imagine the divs they could pay if debt levels were brought down. and just to be funny they say they are looking to expand more in an environment where credit is contracting and numerous commentators are warning companies with high debt will get caught out.

I think they have much more flexibility than many other companies if they are unhappy about the liabilities to asset ratio.

They easily can reduce stock (and they have done that previously when times got rough).

They easily can reduce the number of sites they sell from. Most are only leases anyway, and the others they can sell - and even make a nice additional buck this way (like last period).

Compared to some other retailers they are not heavily invested in bricks and mortar. Flexibility is king.

Not saying that they can't go lower - I am sure, they can. But I don't see them as a candidate to go down the drain in the next recession (which might start as we type, who knows?). Quite the opposite - the largest NZ used car dealer with an integrated finance, insurance and service of the car life-cycle model is in my view most likely to come out stronger than the competition out of any downturn.

[winner69]

weird thing about the excitment/hype of the buyback is that we will never really know if it was successful and enhanced shareholder value. So many other variables in place that whatever happens re the buyback will just get lost in the big scheme of things.

Full year report will have a sentence like ‘Turners achieved a successful buyback of 5% of the company’s shares which enhanced shareholder value’

Easy said but not really provable

Best to forget about this buyback ...just let it take it course.

[winner69]

Those numbers make somber reading mate but no worries for Percy as he's married to this company and his infatuation is insatiable.

Just moved by Turners Analysis/workings into my special folder called ‘Impending Train Wrecks’

[Snoopy]

they are a car dealer that uses an integrated model , less sales means less income right thru the business. they shouldnt have this gearing level for the business they have.


You are recalling the old 'Turners Auctions' (TUA) days Bull. And back then, they didn't have the debt levels they have now - you are quite right.

However the current 'Turners Automotive Group' is more 'Dorchester' than 'Turners Auctions'. They are a finance company with an integrated automotive sales arm. And for that business model a higher level of debt is not unexpected. Nor is it a problem. If you look at 'Chapter 8' (post 21) in the 'Investment Story' thread you will see that for repayment purposes the debt level is very similar to Heartland. But the cashflow is much better, because they have fewer reverse mortgages on the books in comparison to HGH.



12m spent on debt servicing imagine the divs they could pay if debt levels were brought down. and just to be funny they say they are looking to expand more in an environment where credit is contracting and numerous commentators are warning companies with high debt will get caught out.


The act of taking 'corporate debt' and repackaging it as 'securitized debt' will reduce the interest rate paid by Turners by a whole percentage point. With interest rates so low, this is akin to a 20% reduction in Turner's interest payments. At some point Turners will probably flick off the debt collection business. That should shore up the balance sheet significantly. I don't think the debt at Turners is the critical issue that some think.

SNOOPY

[bull....]

You are recalling the old 'Turners Auctions' (TUA) days Bull. And back then, they didn't have the debt levels they have now - you are quite right.

However the current 'Turners Automotive Group' is more 'Dorchester' than 'Turners Auctions'. They are a finance company with an integrated automotive sales arm. And for that business model a higher level of debt is not unexpected. Nor is it a problem. If you look at 'Chapter 8' (post 21) in the 'Investment Story' thread you will see that for repayment purposes the debt level is very similar to Heartland. But the cashflow is much better, because they have fewer reverse mortgages on the books in comparison to HGH.



The act of taking 'corporate debt' and repackaging it as 'securitized debt' will reduce the interest rate paid by Turners by a whole percentage point. With interest rates so low, this is akin to a 20% reduction in Turner's interest payments. At some point Turners will probably flick off the debt collection business. That should shore up the balance sheet significantly. I don't think the debt at Turners is the critical issue that some think.

SNOOPY

i think doing the share buyback is good , but reducing the debt levels would make tra a much more appealing company.

Cash flows is what the market wants to see , if sales are declining so will there cash flow. 12 mil int exp is huge and not something you want to tackle in a declining market.

[percy]

i think doing the share buyback is good , but reducing the debt levels would make tra a much more appealing company.

Cash flows is what the market wants to see , if sales are declining so will there cash flow. 12 mil int exp is huge and not something you want to tackle in a declining market.

With 120 "new dealers" added in the past 6 months, finance and insurance will most probably increase,and help to improve cash flow,while Turners moving $4mil of their own originated deals to their Oxford Finance, rather than MTF, will improve margins.
Insurance reserves are being used to fund developments,rather than outside debt.

[winner69]

Snoopy

However the current 'Turners Automotive Group' is more 'Dorchester' than 'Turners Auctions'.


Maybe that’s why most don’t love Turners or want to avoid it ......the association with Dorchester

Weren’t Dorchester one of those finance companies perceived to be a bit dodgy?

[couta1]

Maybe that’s why most don’t love Turners or want to avoid it ......the association with Dorchester

Weren’t Dorchester one of those finance companies perceived to be a bit dodgy? And one of the only finance companies to survive the GFC of 2008, kudos to them.

[BlackPeter]

i think doing the share buyback is good , but reducing the debt levels would make tra a much more appealing company.

Cash flows is what the market wants to see , if sales are declining so will there cash flow. 12 mil int exp is huge and not something you want to tackle in a declining market.

I don't think you understand their business. If your business is to borrow money at low rates and loan it to others at high rates, than having lots of debts is good.

[bull....]

I don't think you understand their business. If your business is to borrow money at low rates and loan it to others at high rates, than having lots of debts is good.

if there business was so good the share price wouldnt be 2.43 and down 25% for the ytd

i have given my suggestion to help the business

[couta1]

if there business was so good the share price wouldnt be 2.43 and down 25% for the ytd

i have given my suggestion to help the business C'mon bull, only trust the market sometimes, XRO went from $12 quickly up to $45 then back to $12 and then to $50, which market was right? PS- I'm comparing the sentiment not the stocks.

[winner69]

With 120 "new dealers" added in the past 6 months, finance and insurance will most probably increase,and help to improve cash flow,while Turners moving $4mil of their own originated deals to their Oxford Finance, rather than MTF, will improve margins.
Insurance reserves are being used to fund developments,rather than outside debt.


I don't think you understand their business. If your business is to borrow money at low rates and loan it to others at high rates, than having lots of debts is good.

Maybe bull... might say you don’t understand ‘leverage’

Debt ‘segmentstion’ is not known (haven’t checked with Snoops) but I see Borrowings are higher than Finance Receivables ...I don’t know whether that is was or not

If borrowing is so good (your comment) why have the had to go cap in hand to shareholders a few times late,y

[BlackPeter]

if there business was so good the share price wouldnt be 2.43 and down 25% for the ytd

i have given my suggestion to help the business

The market is (per definition) always right about setting the price, however it frequently errs regarding the value and the future potential of a company. No other way to explain the frequent and erratic oscillations of the share market.

[bull....]

Maybe bull... might say you don’t understand ‘leverage’

Debt ‘segmentstion’ is not known (haven’t checked with Snoops) but I see Borrowings are higher than Finance Receivables ...I don’t know whether that is was or not

If borrowing is so good (your comment) why have the had to go cap in hand to shareholders a few times late,y

bit like the share market leverage works well when the tides in your favour

[winner69]

At least it didn’t go below 243 today ...that’s a positive sign

[bull....]

i see at a quick glance imports at the ports for vehicles were lower in nov continuing lower from from sept / oct this yr. doesnt necessary mean lower sales just less inventory coming in.

[percy]

i see at a quick glance imports at the ports for vehicles were lower in nov continuing lower from from sept / oct this yr. doesnt necessary mean lower sales just less inventory coming in.

Turners have stated they are sourcing more cars within NZ.
Maybe that's why there are fewer imports.?

[percy]

At least it didn’t go below 243 today ...that’s a positive sign

Maybe.
Maybe not.

[bull....]

Turners have stated they are sourcing more cars within NZ.
Maybe that's why there are fewer imports.?

could be or could be all importers have reduced imports to run down current stock levels?

[percy]

could be or could be all importers have reduced imports to run down current stock levels?

Could be.......................
But I found it interesting that Turners stated they were sourcing more cars from within NZ.

[alex f]

At least it didn’t go below 243 today ...that’s a positive sign

No SSH notices from managed funds reducing their holdings either.

[winner69]

No SSH notices from managed funds reducing their holdings either.

Looks like Milford and Salt remain in love .....and believers

[winner69]

The last set of accounts for Dorchester before they became a car company (did have 20% of Turners at the time) showed finance Receivables of $38m with debt of only $18m

Numbers are much higher these days but debt is higher than Finance Receivables ....increasing leverage to the limit?

[percy]

Looks like Milford and Salt remain in love .....and believers

As do I, directors and management.

ps.Next full moon is on the 23rd December for those who can not decide if it is true love or not.
Be a nice Christmas for them if they were in love.[again]
Peace on earth ,goodness and kindness to fellow posters etc...

[BlackPeter]

The last set of accounts for Dorchester before they became a car company (did have 20% of Turners at the time) showed finance Receivables of $38m with debt of only $18m

Numbers are much higher these days but debt is higher than Finance Receivables ....increasing leverage to the limit?

Did it ever cross your mind that their other (not finance) business might need to take on some debt as well (as any other business)? Their car dealer business might not finance all the stock with cash at hand (which would be a quite crazy), but with credit ... and even their "real estate business" might need some loans to buy another piece of free hold land in good position which they sell off after some years with a good gain.

As long as their liabilities are covered by the value of their receivables plus the value of their stock plus the value of their property plus a sensible safety margin (currently still more than 30%) would I not see where the issue is ... obviously only, as long as stock valuations and property valuations make sense.

[winner69]

Did it ever cross your mind that their other (not finance) business might need to take on some debt as well (as any other business)? Their car dealer business might not finance all the stock with cash at hand (which would be a quite crazy), but with credit ... and even their "real estate business" might need some loans to buy another piece of free hold land in good position which they sell off after some years with a good gain.

As long as their liabilities are covered by the value of their receivables plus the value of their stock plus the value of their property plus a sensible safety margin (currently still more than 30%) would I not see where the issue is ... obviously only, as long as stock valuations and property valuations make sense.

Agree ...the car business needs financing as well. It never ‘crossed by mind’ it didn’t.

that bit of yours in red - have you actually done that calculation?

[BlackPeter]

Agree ...the car business needs financing as well. It never ‘crossed by mind’ it didn’t.

that bit of yours in red - have you actually done that calculation?

Don't think they published yet their full HY report, but if you look at the balance sheet in the HY presentation:

total Assets $658 m (admittedly including $171 m "intangibles" which no question do have value, but its hard to say how much)

total Liabilities $441 m

That's a "safety buffer" of at best $217 m (33%) or at worst (intangibles worthless - unlikely) $46 m (7%).

OK - worst case admittedly does not look that flash (though much better than with many other companies I can think of), but honestly - I don't think that Turners intangibles are that excessively overvalued ...

[winner69]

Don't think they published yet their full HY report, but if you look at the balance sheet in the HY presentation:

total Assets $658 m (admittedly including $171 m "intangibles" which no question do have value, but its hard to say how much)

total Liabilities $441 m

That's a "safety buffer" of at best $217 m (33%) or at worst (intangibles worthless - unlikely) $46 m (7%).

OK - worst case admittedly does not look that flash (though much better than with many other companies I can think of), but honestly - I don't think that Turners intangibles are that excessively overvalued ...

OK but that sum is different from what you said prior (the bit in red in that post)

No doubt we’ll agree to disagree. You and others think debt levels are OK and bull and me think they are a bit high relative to actual performance.

Whatever I doubt Turners earnings cover their total cost of capital .....and that is one reason why the market is valuing the company at its book value. Even at this level that implies they need Improve financial performance

[minimoke]

Just as well TRA are cancelling the shares and not holding them as treasury stock. Last buy back was at $2.44. Down from the start of the process at $2.548.

[BlackPeter]

OK but that sum is different from what you said prior (the bit in red in that post)



Sure - I thought we better look at the full picture instead of a selected few asset classes to avoid somebody coming up with "but what about ...". What is wrong with that?

But if you insist lets look at the smaller picture:

Borrowings: $330m

financial receivables: $290m
+ Inventory: $43m
+ Property: $35m
Total assets which happened to be mentioned in above post: $368m

Leaves still a margin of $38 m;

Add to that more than $80m cash and financial assets .. plus the "other assets" minus tax and whatever - and you end up with the bigger picture (as in my previous post).

[winner69]

Sure - I thought we better look at the full picture instead of a selected few asset classes to avoid somebody coming up with "but what about ...". What is wrong with that?

But if you insist lets look at the smaller picture:

Borrowings: $330m

financial receivables: $290m
+ Inventory: $43m
+ Property: $35m
Total assets which happened to be mentioned in above post: $368m

Leaves still a margin of $38 m;

Add to that more than $80m cash and financial assets .. plus the "other assets" minus tax and whatever - and you end up with the bigger picture (as in my previous post).

That Life Insurance Contract Liabilities of $50m is (relatively) high

We can cut and dice it all we want but again we just have different views. You and others think debt levels are Ok and me and others think they are a little high relative to equity (and current financial performance). Probably there’s no ‘right’ answer anyway

One thing you have shown is that they are solvent ...that’s good

And by the way I did not ‘insist’

[couta1]

I'm kinda thinking this share buy back is actually dragging the SP down slowly.Lol

[percy]

I'm kinda thinking this share buy back is actually dragging the SP down slowly.Lol

Working well,only 115,302 shares brought back so far in four days.
Less than you would buy in half an hour....lol.

[couta1]

Working well,only 115,302 shares brought back so far in four days.
Less than you would buy in half an hour....lol. Yes well crafted, a bit of short term pain for a long term gain.

[McGinty]

I'm kinda thinking this share buy back is actually dragging the SP down slowly.Lol

The cause is due to lack of investor confidence of this company. Many sellers most likely from the last 2 convertible bonds conversions and the Placement/SPP last year, who are finally cutting their losses.

The buy side is thin and outside TRA's buyback and Directors purchases, there's most likely only a handful of current investors averaging down.

New potential investors will be waiting this one out until the story improves.

[BlackPeter]

I'm kinda thinking this share buy back is actually dragging the SP down slowly.Lol

Isn't this just watching Turners to make money out of thin air? They recently created (sold) plenty of new shares (in the bond conversion) for $2.85 a piece (don't remember the exact number), and now they are buying the same shares back for $2.44 ...

Just another nice little earner ...

[Beagle]

http://www.ahgir.com.au/download/2018-agm-addresses-and-presentation.pdf
Interesting to read AHG's recent annual meeting presentation and see how Australasia's largest listed automotive group is going. In brief, (because I know the vast majority of you good folks are too busy to read this link in full) their profit for the first four months of FY19, (annualised) is tracking at slightly less than half last year and this includes two of the busiest months of the year in spring when sales are normally robust. N.Z. new vehicle sales by comparison with Australian sales are very robust by comparison, go figure ? (especially given business and consumer confidence here is anything but positive).

I think some of the factors mentioned in their report help put Turners (maybe and modest) profit downgrade into its proper perspective.

[McGinty]

I wonder if that's Grant filling his boats at $2.42 - $2.43?

No end to the selling so far. Darn those buybacks pushing the price down.

[bull....]

looks like institutional volumes coming onto the market now. they better do a cash issue get the the debt down

[McGinty]

looks like institutional volumes coming onto the market now. they better do a cash issue get the the debt down

Nothing to worry about just a few more "reefies".

Do reef fish travel in schools?

[minimoke]

I wonder if that's Grant filling his boats at $2.42 - $2.43?

No end to the selling so far. Darn those buybacks pushing the price down.
The Cum Dividend is now no longer covering the loss I am carrying on this. Now waiting for a reversal or for my stop loss to be hit (again) and I suspect the stop loss will come first.

[percy]

The Cum Dividend is now no longer covering the loss I am carrying on this. Now waiting for a reversal or for my stop loss to be hit (again) and I suspect the stop loss will come first.

Do you get the feeling this share is not for you.?

[McGinty]

The Cum Dividend is now no longer covering the loss I am carrying on this. Now waiting for a reversal or for my stop loss to be hit (again) and I suspect the stop loss will come first.

It's hard to swim against an outgoing tide, especially since the smart money looks to be making a move.

Just check out what's happen to HLG this week with a large holder exiting at any cost, a 24c dividend doesn't help against a 40c drop in price.

Disc: Have been watching the price/volume action of both stocks and have reducing in sequence with the tide (I'm a reefie and just follow the current)

[couta1]

Looking extremely ugly, with this sort of anihilation of the SP divvies don't come into it at this point in time.PS-It would take me three and a half years worth of divvies to break even at this point.

[LAC]

It's hard to swim against an outgoing tide, especially since the smart money looks to be making a move.

Just check out what's happen to HLG this week with a large holder exiting at any cost, a 24c dividend doesn't help against a 40c drop in price.

Disc: Have been watching the price/volume action of both stocks and have reducing in sequence with the tide (I'm a reefie)

Last night I started listening to “The Warren Buffet Way” again. Felt a little more at ease after watching my entire portfolio over the past 2 months, especially when I was in accumulate mode, all decisions I make is for the long term yet these market fluctuations gives me the heeby geebies in the stomach lol. HLG was one I accumulated quite a few of over the last 2 months and so was SUM, doesn’t look like a smart move today...oh well time will tell.

[winner69]

Beagle


I can understand you rolling the dice at this level...odds don't look too shabby but probably best not to pretend its a one sided bet as quite a few people thought the same when the SP was higher. A downgrade could see this rapidly heading towards $2.00.

Should have listened to you mate ......you were joking about $2.00weren’t you? ...or just another guru call

[McGinty]

Last night I started listening to “The Warren Buffet Way” again. Felt a little more at ease after watching my entire portfolio over the past 2 months, especially when I was in accumulate mode, all decisions I make is for the long term yet these market fluctuations gives me the heeby geebies in the stomach lol. HLG was one I accumulated quite a few of over the last 2 months and so was SUM, doesn’t look like a smart move today...oh well time will tell.

I feel your pain over the last 2 months, it hasn't been the best market for most ST members portfolios over that period.

I'm happy to hold a stock long term as long as the story (narrative) which convinced me to enter, stays in tack. If the stock's narrative chagings (and I can usually see this from the charts), then I must change my view as well.

I prefer to lose a bit of money and admin that (in this case) I was wrong, rather than sit through years of uncertainty (paper losses) waiting patiently to be proven right. The opportunity cost of bottom draw investing is too great (In my personal case).

[Beagle]

Should have listened to you mate ......you were joking about $2.00weren’t you? ...or just another guru call

I don't joke about things this serious mate.

[minimoke]

Do you get the feeling this share is not for you.?Any share that is losing the holder capital and not replacing that loss with divies with a shrinking window of opportunity to turn the tide and recoup those losses in a timely manner ought not be for anyone.

I have bought back in purely as a speculative punt that the buy back will drive the SP above my entry price. As with all risk I have an exit strategy with a stop loss set. The stop loss allows time for a recovery.

Gotta admit my cunning plan is so far a failure.

[couta1]

Forget the reefies the Kingfish have moved in.Lol

[bull....]

divs will fall if sales decline too much ... too much debt to be otherwise

[bull....]

Forget the reefies the Kingfish have moved in.Lol

instos see the writing on the wall

[Ggcc]

Another 5 cent dividend tax free (loss) for those that sold yesterday..... and probably another one tomorrow. The knife keeps falling. I would be selling.... In saying I’m not a shareholder so DYOR

[winner69]

http://www.ahgir.com.au/download/2018-agm-addresses-and-presentation.pdf
Interesting to read AHG's recent annual meeting presentation and see how Australasia's largest listed automotive group is going. In brief, (because I know the vast majority of you good folks are too busy to read this link in full) their profit for the first four months of FY19, (annualised) is tracking at slightly less than half last year and this includes two of the busiest months of the year in spring when sales are normally robust. N.Z. new vehicle sales by comparison with Australian sales are very robust by comparison, go figure ? (especially given business and consumer confidence here is anything but positive).

I think some of the factors mentioned in their report help put Turners (maybe and modest) profit downgrade into its proper perspective.

Pretty depressing that AHG ....even the chart looks the same

Huge mountain of debt to support (one of the main reasons for the almost 50% decline in profit)

Seems a bigger impending train wreck than Turners.

Talking of impending train wrecks this was a close call in Sydney ......don’t pump the brakes too often when train going downhill
https://www.smh.com.au/national/nsw/emergency-runaway-train-107-illawarra-mountain-20181205-p50kba.html

[BlackPeter]

Another 5 cent dividend tax free (loss) for those that sold yesterday..... and probably another one tomorrow. The knife keeps falling. I would be selling.... In saying I’m not a shareholder so DYOR

Sure - hype can do anything to a share and it is clearly extreme fear time. Probably some stop losses around 240 firing as well.

Having said that ... quite high volume today and the tide might well be turning. Might well be capitulation time. Not a good move to be the last seller before the tide turns (been there, done that).

Actually - might be a good time for the share buy back, at least they can buy today a reasonable amount.

[RupertBear]

Looking extremely ugly, with this sort of anihilation of the SP divvies don't come into it at this point in time.PS-It would take me three and a half years worth of divvies to break even at this point.

I have been watching this thread with interest as I was lucky enough to bail around $3.10. I am wondering why you have watched the sp go down and down and down Couta and not bailed sooner? :confused:

[minimoke]

Forget the reefies the Kingfish have moved in.LolJeepers. the tree is being give a right old shaking. All sorts exiting. Whose shorting TRA?

[percy]

Big volume.
I hope the share buy back managed to get a few.

[blackcap]

Jeepers. the tree is being give a right old shaking. All sorts exiting. Whose shorting TRA?

I don't think there is any shorting going on to to be fair. That does not really happen in NZ due to different rules etc.

[McGinty]

Big volume.
I hope the share buy back managed to get a few.

Must be either Salt or Milford selling, wonder who is on the other side?

[winner69]

It's rather sad that while some think Turners (and their brokers) are really clever in buying so many really cheap share in the buyback they tend to overlook that collectively shareholders are now $29 million less wealthy than they were just over a week ago


All because a delusional Board think the shares are worth north of $3 ...even brokers don't think that now.

[couta1]

I have been watching this thread with interest as I was lucky enough to bail around $3.10. I am wondering why you have watched the sp go down and down and down Couta and not bailed sooner? :confused: I'm not convinced this is a stock that needs to be bailed on at this point in time, best to let the dust settle and the games to play out. If or when the times comes to bail i wouldn't give it a second thought, big holdings and big losses sometimes go hand in hand and is something you have to accept and move on without losing sleep over it.

[RupertBear]

I'm not convinced this is a stock that needs to be bailed on at this point in time, best to let the dust settle and the games to play out. If or when the times comes to bail i wouldn't give it a second thought, big holdings and big losses sometimes go hand in hand and is something you have to accept and move on without losing sleep over it.

Thanks Couta. Listening to your gut feeling has served you very well in the past, I hope this one comes right for you as well :)

[Baa_Baa]

It's rather sad that while some think Turners (and their brokers) are really clever in buying so many really cheap share in the buyback they tend to overlook that collectively shareholders are now $29 million less wealthy than they were just over a week ago


All because a delusional Board think the shares are worth north of $3 ...even brokers don't think that now.

Quite the plunge in SP these past three weeks off a steady decline since July 2017. TA says $2.10-$2.00 support is in play. A sad state of affairs off a $3.70-$3.97 high (triple top?) back to 2013. Patient cashed up bottom feeders will be lurking.

[Snoopy]

The underlying gearing ratio of a lending company is much more obvious when that company takes in deposits as well. In the case of TRA all of the 'deposit' funding is provided by their banking arrangements. Turners is free to negotiate with its parent bankers on what is a suitable level of funding for the core of the company. It seems inconceivable that they would negotiate their own loan package in a way that would put their own 'funding core' at risk. So we can use the information we have combined with a 'rule of thumb' to calculate an appropriate sized funding core.

The table below has taken items from the balance sheet (marked (1)). I have written the table with all the pieces adding up to a whole. However, the table has largely been constructed in a reverse way. That means starting with 'the whole' then figuring out a way to allocate 'the whole' to the separate constituent pieces. I start with filling in the number (1)s, then use arithmetic to calculate number (2)s. I keep on 'counting' the remaining numbers so that the table is filled in, in numerical order.



[AssetsLiabilitiesShareholder Equity


[Finance (Not Underlying)$185.368m (3)-$166.831m (4)=$18.537m (6)


[Underlying Finance$289.799m (1)-$141.715m (5)=$148.804m (6)


[Finance Sub Total$475.167m (*)-$308.546m (*)=$166.621m (2)


[Automotive Retail$176.565m (*)-$128.863m (*)=$47.702m (2)


[Balance Sheet Total (All)$651.732m (1)-$437.409m (1)=$214.323m (1)



(*) These items are from my off-line 'segmented' spreadsheet. Assets/Liabilities are sized in proportion to segmented balance sheet information, but with eliminations and corporate costs apportioned between the 'automotive retail' and 'all other finance' divisions.

Calculation (3) allows us to work out the core assets not related the underlying finance contracts of the business (everything else apart from the receivables book) by simple subtraction. The finance company 'rule of thumb' for their core is to ensure that:

(Non-Risk Liabilities)/(Non-Risk Assets) < 0.9

From this, we can work out that the Non-Risk Liabilities must be no more than:

(Non-Risk Assets) x 0.9 = $185.368m x 0.9 = $166.831m (which is answer 4 above).

Simple subtraction and addition is then used to work out the rest of the numbers in the table.

So what's the point of this so far?

By working out the minimum size of the business core (as measured by assets and liabilities), that means we can measure how well the rest of the business is set up to do the customer lending, the bit that actually generates the profits for the Turners Finance division. This is done by looking at the assets and liabilities left outside the core.

Implied Available Financing Gearing ratio
= (At Risk Liabilities)/(At Risk Assets)
= $141.715m/$289.799m
= 48.9%

( c.f. equivalent calculation for FY2017:
Implied Available Financing Gearing ratio
= (At Risk Liabilities)/(At Risk Assets)
= $87.948m/$207.143m
= 42.5% )

Generally you would want to match your 'At Risk Liabilities' with your 'At Risk Assets'. The 'at Risk Assets' is another way of saying the 'finance receivables loan book'. The less borrowings you have to support the loan book, the more resilient your operation will be in a downturn. But there is another way to look at this. The less borrowings you have, the more restricted the size of the financial receivables loan book - you are not working the borrowing capacity to maximise the size of your loan book and hence maximise your returns. The greater the utilisation of your 'borrowing capacity' the greater the potential return, but also the greater the potential risk in a downturn. The fact that the at risk liabilities have increased as a percentage of the at risk assets over the year suggests to me that the Turners lending policy has become more conservative in FY2018 compared to FY2017.



I don't think you understand their business. If your business is to borrow money at low rates and loan it to others at high rates, than having lots of debts is good.

BP, I made a post in September on this topic, where I highlighted a dichotomy of two views on having 'lots of debts'. I find that I tend to think from the point of view of the consumer as a default position. A lender, like Turners, has an opposite viewpoint.

Since this is a 'Turners' thread, I think I should challenge your line that 'having lots of debt is good'. Certainly having lots of car loans on the Turners books is good. But car loans are 'financial receivables' and therefore 'assets' for Turners. These assets are funded by Turners bonds and bank debt. I would argue that the less of this debt that Turners have the better.

If you imagine an extreme case of Turners having no debt, and all Turners car loans funded by shareholders funds, then this is the lowest risk scenario for Turners going forwards. That is because there is zero chance that any debt will go sour in a market downturn if such debt doesn't exist.

If we go to the other extreme where Turners have 'lot's of debt', and a used car market going sour (some would argue that is where Turners is now) and the financial receivables shrink to below the value of the debt used to fund them, THEN the difference is must be made up from shareholders funds. That is bad news for shareholders.

Yet 'flip the coin' and you can argue that having lots of debt means you can have a bigger book of financial receivables (car loans) for which you can provide funding. So it seems having lots of debt being good or bad can come down to a market confidence issue. If the market is going well then having lots of debt could be good.

Having criticised you, I now have to turn the spotlight of criticism back on myself, and the conclusion to my above referenced post that I made back in September. An 'at risk liability' is in all probability a bank loan. So having more of those in proportion to your loan book (risk assets) is most likely a bad thing. And that means the loan book position at Turners was in a more risky state at EOFY2018 than a year previous to that. The opposite conclusion to the conclusion I made at the time!

SNOOPY

[winner69]

Quite the plunge in SP these past three weeks off a steady decline since July 2017. TA says $2.10-$2.00 support is in play. A sad state of affairs off a $3.70-$3.97 high (triple top?) back to 2013Patient cashed up bottom feeders will be lurking.

That assumes there are punters who are even remotely interested in Turners.(except the disciples of Grant and Todd)

When is the bottom anyway?

[Beagle]

I think $2.00 is the bottom, called it there a while back and sticking with that. No growth eps (oh my goodness that phrase will upset some people) companies worth no more than a PE of 8.5 according to the legendary investor Ben Graham. Consensus eps from the two brokers is lower in FY21 than in FY18 :ohmy: How sad is that !
8.5 x ~ 26 cps, (removing one off's) = $2.21...but these things often overshoot and there is so much negative sentiment both specifically for this company and on a macro level internationally I would be at all surprised to see $2.00 tested. I might be interested in a few more at that level but wouldn't pay the current price for any more.

Now before we get any replies to this post I'll just put some popcorn on lol

[BlackPeter]

BP, I made a post in September on this topic, where I highlighted a dichotomy of two views on having 'lots of debts'. I find that I tend to think from the point of view of the consumer as a default position. A lender, like Turners, has an opposite viewpoint.

Since this is a 'Turners' thread, I think I should challenge your line that 'having lots of debt is good'. Certainly having lots of car loans on the Turners books is good. But car loans are 'financial receivables' and therefore 'assets' for Turners. These assets are funded by Turners bonds and bank debt. I would argue that the less of this debt that Turners have the better.

If you imagine an extreme case of Turners having no debt, and all Turners car loans funded by shareholders funds, then this is the lowest risk scenario for Turners going forwards. That is because there is zero chance that any debt will go sour in a market downturn if such debt doesn't exist.

If we go to the other extreme where Turners have 'lot's of debt', and a used car market going sour (some would argue that is where Turners is now) and the financial receivables shrink to below the value of the debt used to fund them, THEN the difference is must be made up from shareholders funds. That is bad news for shareholders.

Yet 'flip the coin' and you can argue that having lots of debt means you can have a bigger book of financial receivables (car loans) for which you can provide funding. So it seems having lots of debt being good or bad can come down to a market confidence issue. If the market is going well then having lots of debt could be good.

Having criticised you, I now have to turn the spotlight of criticism back on myself, and the conclusion to my above referenced post that I made back in September. An 'at risk liability' is in all probability a bank loan. So having more of those in proportion to your loan book (risk assets) is most likely a bad thing. And that means the loan book position at Turners was in a more risky state at EOFY2018 than a year previous to that. The opposite conclusion to the conclusion I made at the time!

SNOOPY

Fair enough ... though - isn't this just the typical balancing of risks and rewards for any investment?

If a company only loans money from their existing equity, than yes, the risk of default is low even if the loans go sour, but the likely gains will be low as well given taht the company is only confined to their existing capital to make money (no leverage).

If a company borrows money to lend it to others with a margin than they inevitable increase their risks (they might not get this money back and default on their own loans), but so do they increase their earnings potential.

But, yes, while it is good for a finance company to have leverage - there is obviously such a thing as too much leverage.

Need to work on the fine print for my posts ...

[winner69]

I think $2.00 is the bottom, called it there a while back and sticking with that. No growth eps (oh my goodness that phrase will upset some people) companies worth no more than a PE of 8.5 according to the legendary investor Ben Graham. Consensus eps from the two brokers is lower in FY21 than in FY18 :ohmy: How sad is that !
8.5 x ~ 26 cps, (removing one off's) = $2.21...but these things often overshoot and there is so much negative sentiment both specifically for this company and on a macro level internationally I would be at all surprised to see $2.00 tested. I might be interested in a few more at that level but wouldn't pay the current price for any more.

Now before we get any replies to this post I'll just put some popcorn on lol

That analyst from the well respected broking house starting with a C forecasts eps of 22 cents

Jeez ....22 X 8.5 = $1.87

[Beagle]

That analyst from the well respected broking house starting with a C forecasts eps of 22 cents

Jeez ....22 X 8.5 = $1.87

Isn't that the broking house one of the biggest enthusiasts for Turners uses ? You can't post that yet...I haven't finished cooking the popcorn yet...this could be quite "the show" today after us posting that. MIght cook up a double batch :D

[winner69]

You can't post that yet...I haven't finished cooking the popcorn yet...this could be quite "the show" today after us posting that. MIght cook up a double batch :D

No worries mate ......perversely the share price will go up today

Great defensive stock

[BlackPeter]

That analyst from the well respected broking house starting with a C forecasts eps of 22 cents

Jeez ....22 X 8.5 = $1.87

Hmm - that's obviously assuming that 22 cent (if it comes true ...) is the new normal - and no growth anymore from here. Forever.

You think that's it?

Just try to use your formula for some other of our listed companies (SP = 8.5 times forecasted EPS) than Ryman would be worth $5.78, MFT $11.65 and FPH $3.06!

Sounds like the big sell out is coming and TRA is already pretty close to the bottom (well, comparatively). This must be good ... :t_up:

[Beagle]

No worries mate ......perversely the share price will go up today

Great defensive stock

Is it ? Most of the vehicle manufactures and retailers got beaten down really severely during the GFC. I believe when times are really tough people simply service and fix what they have as absolutely necessary rather than upgrading. https://www.marketscreener.com/TURNERS-LTD-20699914/financials/
No two ways about it, these eps numbers are tough and have all the signs of a no growth eps company. Average eps over the next 3 years is 26.5 cps. PE of 8.5 is what I am sticking with and my updated fair value is thus $2.25. I would need to see it 10-15% below that to get interested in any more.
Just as well FCNZ have a much higher valuation as otherwise if they were similar to Craigs this could have been even uglier. I think my popcorn is ready now :)

[couta1]

169k bought back at $2.41 yesterday, need more today.

[couta1]

That analyst from the well respected broking house starting with a C forecasts eps of 22 cents

Jeez ....22 X 8.5 = $1.87 No worries, just had a quick check of the stock pick contest, C in 34th place and Couta in 9th place, C need to up their game if they are to be believed.

[Beagle]

No worries, just had a quick check of the stock pick contest, C in 34th place and Couta in 9th place, C need to up their game if they are to be believed.

Congrats on being in the top ten mate. The worry is that FCNZ who's price target is still over $3.00 is in 132nd place :eek2: Both Criags and FCNZ well behind us mate
Why would you pay them money for their research when old dogs simply follow their own noses to find the best feed bowls :)

[Beagle]

Fishing no good today...popcorn gone cold now. Maybe the optimists have been shell shocked by the lack of eps growth the brokers are forecasting and don't know how to possibly put a positive spin on that ?...but I am pretty sure they'll find a way to do exactly that at some stage soon lol

[couta1]

Fishing no good today...popcorn gone cold now. Too many Sharks in the tank at the moment.

[minimoke]

Fishing no good today...popcorn gone cold now. Maybe the optimists have been shell shocked by the lack of eps growth the brokers are forecasting and don't know how to possibly put a positive spin on that ?...but I am pretty sure they'll find a way to do exactly that at some stage soon lol
With OCA at $1.12 I'm busy pondering a top up there

[couta1]

With OCA at $1.12 I'm busy pondering a top up there That price is Nuttier than a jar of peanut butter, mop them up while you can.

[minimoke]

That price is Nuttier than a jar of peanut butter, mop them up while you can.Unfortunately there are 22 bargain hunters ahead. Would be nice to see even 1/4 that number interested in buying TRA

[Beagle]

That price is Nuttier than a jar of peanut butter, mop them up while you can.

LOL, hope that's not the smooth peanut butter variety :)

[Snoopy]

The last set of accounts for Dorchester before they became a car company (did have 20% of Turners at the time) showed finance Receivables of $38m with debt of only $18m

Numbers are much higher these days but debt is higher than Finance Receivables ....increasing leverage to the limit?


Shareholders who believe that TRA is in a debt straight jacket might be interested to see how the debt measures up against the banking covenants listed in the respective bond prospectuses.

From p34 of the TNRHB & p 'Something' in theTRA100 bond prospectus, the TNR banking covenants:

1/ Interest Cover Ratio:

EBITDA/ Total Interest > 3.5

2/ Leverage Ratio:

Gross Debt / EBITDA < (Requirement). Requirement varies as below



PeriodRequirement


Issue date to 31/12/20143.75


01/01/2015 to 31/03/20153.50


01/04/2015 to 30/06/20153.00


01/07/2015 to 30/09/20152.75


01/10/2015 to 30/03/20162.50


01/04/2016 to 30/06/20162.25


01/07/2016 to 01/09/20182.00


01/09/2018 to maturity2.00



Time to put the position of TRA under scrutiny at the 31-03-2018 balance date.

EBITDA/ Total Interest = [$31.133m+$5.626m+$14.344m] / $14.344m = 3.52 > 3.5 (=> O.K. - just!)

Gross Debt / EBITDA = $317.373m / $51.103m = 6.21 > 2.0 ( => fail test )

That last test in particular is a fairly nasty fail, albeit Turners have 'failed' this test before by my calculations.



Time to put the position of TNR under scrutiny at balance date.

EBITDA/ Total Interest = [$18.264m+$1.504m+$7.381m] / $7.381m = 3.68 > 3.5 (=> O.K.)

Gross Debt / EBITDA = $156.995m / $27.149m = 5.78 > 3.5 ( => fail test )

Granted all of this is historical. But it does appear that on balance date (31-03-2015), TNR was in breach of its banking covenants (the Gross Debt/ EBITDA figure)! Furthermore the first covenant was only rescued because of a write up in the share value of TUA shares because of the takeover offer! This is desperate stuff. Those directors at the AGM deserve a grilling!


Have I made a mistake in calculating particularly that latter bond covenant? Yet the Target Requirement Value in that latter covenant has varied a lot since FY2016. Is it just that banks are willing to be quite flexible with this one?

SNOOPY

[winner69]

Snoops ....that debt/ebitda thing might only apply to (certain/all) bank debt and not total debt

Is banking covenants eh so only want to look after their own money and not worry about other lenders like bond holders

Just a suggestion

[Snoopy]

Snoops ....that debt/ebitda thing might only apply to (certain/all) bank debt and not total debt

Is banking covenants eh so only want to look after their own money and not worry about other lenders like bond holders

Just a suggestion

I am pulling out all stops to get the relevant debt down. At your suggestion Winner I am only using the bank debt and subtracting off the cash balance. I am also using the figures averaged over the year, not just at the end of the year.

Net Debt / EBITDA = [0.5($230.459m+$191.708m) - 0.5($25.146m+$69.069m)] / $51.103m = 3.20 > 2.0 ( => fail test )

Still not low enough! :-(

SNOOPY

[winner69]

I am pulling out all stops to get the relevant debt down. At your suggestion Winner I am only using the bank debt and subtracting off the cash balance. I am also using the figures averaged over the year, not just at the end of the year.

Net Debt / EBITDA = [0.5($230.459m+$191.708m) - 0.5($25.146m+$69.069m)] / $51.103m = 3.20 > 2.0 ( => fail test )

Still not low enough! :-(

SNOOPY

Maybe debt is a little high ...and they have $30m of undrawn facilty as well (I think)

[percy]

Maybe debt is a little high ...and they have $30m of undrawn facilty as well (I think)

From announcement 27/11/2018....TRA Interim result presentation, page 9.
Undrawn at 30th September 2018...................$78mil.

[winner69]

From announcement 27/11/2018....TRA Interim result presentation, page 9.
Undrawn at 30th September 2018...................$78mil.

Jeez if they take that $78m snoopy’s calculator will blow uo when he calculates that covenant ....and put a lot of :(:mad ;::mellow::(:(:(

[Snoopy]

Shareholders who believe that TRA is in a debt straight jacket might be interested to see how the debt measures up against the banking covenants listed in the respective bond prospectuses.

<snip>

2/ Leverage Ratio:

Gross Debt / EBITDA < 2.0.

Time to put the position of TRA under scrutiny at the 31-03-2018 balance date.

EBITDA/ Total Interest = [$31.133m+$5.626m+$14.344m] / $14.344m = 3.52 > 3.5 (=> O.K. - just!)

Gross Debt / EBITDA = $317.373m / $51.103m = 6.21 > 2.0 ( => fail test )

That last test in particular is a fairly nasty fail, albeit Turners have 'failed' this test before by my calculations.
Have I made a mistake in calculating particularly that latter bond covenant? Yet the Target Requirement Value in that latter covenant has varied a lot since FY2016. Is it just that banks are willing to be quite flexible with this one?


Time to have another attempt at this. Perhaps I should have removed the 'Securitized Debt' from the gross debt? After all, technically this debt has been on sold to a third party. The only reason it is still on the Turner's balance sheet, is because Turners still have a guarantee obligation on it - should some of that debt go bad.

The breakdown on how much of the debt is securitized can be found on AR2018 p15. So I can subtract that amount from the declared 'bank debt' to find the 'Gross Debt' still attributable to Turners directly.

Gross Debt / EBITDA = 1/2 x (($230.459m - $133m) + ($191.708m - $69m)) / $51.103m = 2.15 > 2.0 ( => fail test )

There is no way to be sure that my estimate of 'representative gross debt' over the year can be calculated accurately from looking at the two end points though. That means given my 'fail' calculation is close, it could actually have 'passed', if more detail on the debt profile over the year had been published.

Have I solved the mystery?


From announcement 27/11/2018....TRA Interim result presentation, page 9.
Undrawn at 30th September 2018...................$78mil.

Certainly if Turners still have undrawn bank facilities of $78m, would this not indicate that the banks are more than satisfied with Turners current debt position?

SNOOPY

[winner69]

Snoops - good work

Phew, what a relief to know it’s all honky dory in Turnerland

[percy]

Have I solved the mystery?
Certainly if Turners still have undrawn bank facilities of $78m, would this not indicate that the banks are more than satisfied with Turners current debt position?

Snoopy.
There is no mystery.
And there is no IF about their undrawn lines of credit.
Turners have clearly set it out for us, so we do not get confused.
Announcement 27/11/2018.TRA Interin result presentation.page 9.

[Snoopy]

Snoops - good work

Phew, what a relief to know it’s all honky dory in Turnerland

Now that I have the Winner tick of approval, I will tabulate these important debt statistics over the last three year.



Leverage Ratio


Averaged Gross Bank Debt (Estimate)
EBITDA
Gross Bank Debt/EBITDA
Maximum Standard


FY20181/2 x (($230.459m - $133m) + ($191.708m - $69m))
$51.103m
2.15
2.0


FY20171/2 x (($191.708m - $69m) + ($109.327m - $0m))
$38.844m
2.99
2.0


FY20161/2 x (($109.327m - $0m) + ($95.151m - $0m) )
$35.131m
2.91
2.50



The above table indicates a 'triple fail'. However there are difficulties for investors in determining what the average gross bank debt is over the year. So in this instance the trend is of perhaps more interest that the absolute value.



Interest Ratio



EBITDA
Total Interest
EBITDA/Total Interest
Minimum Standard


FY2018
$51.103m
($14.344m-$1.343m)
3.9
3.5


FY2017
$38.844m
($11.350m - $0.206m)
3.5
3.5


FY2016
$35.131m
($11.436m - $0.353m)
3.2
3.5



It does seem that the financial position of Turners over the last three years is becoming stronger, not weaker as some may think. However these are all minimum standards. Whether these statistics are strong enough for investors putting their money into Turners today is a matter for each individual investor to decide.

SNOOPY

[winner69]

Maybe we suffer from outcome bias.

Like when Turners are perceived to be doing well and the shareprice rockets ahead we put it down to good management who can do no wrong .......conversely when performance drops away and the share price collapses we put it down to bad luck implying management still good)

Turners management surely having bad luck at the moment

[percy]

Maybe we suffer from outcome bias.

Like when Turners are perceived to be doing well and the shareprice rockets ahead we put it down to good management who can do no wrong .......conversely when performance drops away and the share price collapses we put it down to bad luck implying management still good)

Turners management surely having bad luck at the moment

Business and business growth is always a mixture of challenges,issues and overcoming those issues successfully,whether we call it bad or good luck .
When we look at the history of companies like EBO ,FRE, MFT and RYM, we know the market either loves thems, and runs up their share price [good luck] ,or hates them thinking the issues are going to destroy them [bad luck].
MFT got Australia and Europe wrong.Bad luck.To MTF it was simple,get them right.
EBO got Australia wrong.Bad luck.Then CEO Mark Waller said we either get big in Australia or get out of there.They got big.I remember in 1992 a broker had a sell on EBO as they were about to lose the Clark agency.What was the Clark agency? No one can remember except me..lol.[Metal joints].
RYM.Was a total dead duck for a couple of years before their sp started to come right.Every year since they have listed, there have been brokers with sell recommendations on them?
FRE,Can't remember a broker having a buy on them.Always no earnings growth etc.Yet they always deliver.
TRA.Like the above their business model is excellent, and their strategy will deliver.

[Beagle]

I think you're drawing a very long bow comparing those companies to Turners. Used cars is a very tough industry with very modest margins. Always has been and probably always will be because the barriers to entry are so low and the internet means small and casual operators can trade with incredibly low overheads.
I think you're also overlooking the bigger macro picture too with long term headwinds of driverless cars, ride sharing, trends towards heavy density developments beside major transport hubs so people don't need cars, electric bikes, electric scooters in tandem with public transport.

I don't think enough on here has been made of the trend towards online trading of cars. When I went to trade my Chrysler the first thing they did was look up Trade Me to assess what else was on there and to get a feel for the value of my car. I think this sort of thing is widespread by dealers and the public. Trade me has become the first point of reference for anyone looking for a vehicle. I recall the CEO of Trade Me at the Auckland shareholders presentation (I think this was in September 2018) telling us they have over 90% of the vehicle listings in N.Z. !

Trade me are looking to partner with MTF to provide finance for vehicles sold online (if they haven't already). This will remove one of the most common reasons a lot of people go to a dealership. Trade In is the other but there's more than one way of selling one's vehicle.

[percy]

History.
MFT was just another transport company.One of many.Huge competition.No moat.
EBO.Was a very small medical supply business,One of many.Huge competition.No moat.
RYM.Just another retirement operator,one of many with huge competition from the not for profit operators.No moat.
TRA.Brand,and scalable vertically integrated business model. .

[minimoke]

FRE,Can't remember a broker having a buy on them.Always no earnings growth etc.Yet they always deliver.
.Another example of SP fall not being covered by dividends

[percy]

Another example of SP fall not being covered by dividends

Work out your dividend yield had you brought at float.Can't remember whether it was $1.60 or $1.66.
The trust I am a trustee of brought at float.
NB.At the time the brokers prefered Feltex,which we did not buy..

[LAC]

I think you're drawing a very long bow comparing those companies to Turners. Used cars is a very tough industry with very modest margins. Always has been and probably always will be because the barriers to entry are so low and the internet means small and casual operators can trade with incredibly low overheads.
I think you're also overlooking the bigger macro picture too with long term headwinds of driverless cars, ride sharing, trends towards heavy density developments beside major transport hubs so people don't need cars, electric bikes, electric scooters in tandem with public transport.

I don't think enough on here has been made of the trend towards online trading of cars. When I went to trade my Chrysler the first thing they did was look up Trade Me to assess what else was on there and to get a feel for the value of my car. I think this sort of thing is widespread by dealers and the public. Trade me has become the first point of reference for anyone looking for a vehicle. I recall the CEO of Trade Me at the Auckland shareholders presentation (I think this was in September 2018) telling us they have over 90% of the vehicle listings in N.Z. !

Trade me are looking to partner with MTF to provide finance for vehicles sold online (if they haven't already). This will remove one of the most common reasons a lot of people go to a dealership. Trade In is the other but there's more than one way of selling one's vehicle.

Oh dear....a Chrysler. What made u do that?? Really hope the upgrade is something less Chrysler and more German

[percy]

Oh dear....a Chrysler. What made u do that?? Really hope the upgrade is something less Chrysler and more German

Price for one shock absorber for an Audi R8 is US $2000 ..
Stay with Japanese cars.Parts and service costs mean you don't need to mortgage the house.

[minimoke]

Price for one shock absorber for an Audi R8 is US $2000 ..
.Likely for a two year old car as well.

[Beagle]

Oh dear....a Chrysler. What made u do that?? Really hope the upgrade is something less Chrysler and more German

See my last couple of posts in this thread. https://www.sharetrader.co.nz/showthread.php?10936-Electric-Cars-have-we-reached-a-turning-point/page65
Chrysler SRT8 was an eclectic mix of performance luxury and technology and the Hemi 6.4 liter engine was a beast but after 5 years its time for a change. I won't miss the spare parts prices, the urban fuel consumption in particular which was about 20L per 100 km's, the aircraft carrier like turning circle or its weight. Was fun though but variety is the spice of life, as they say :) New Commodore is built in Germany but the Aussies absolutly hate that, I like it as its taken the car to a much higher level but the price has come down !!

[LAC]

Price for one shock absorber for an Audi R8 is US $2000 ..
Stay with Japanese cars.Parts and service costs mean you don't need to mortgage the house.
Very true, but highly doubt a Chrysler owner is looking at Japanese cars...
I love my Japper as a daily driver, the 5series which is used when taking the little one around cost about 10x more in maintenance and is used 10% of the time per year. Just need the safety in the rear part of the vehicle

[Beagle]

Very true, but highly doubt a Chrysler owner is looking at Japanese cars...
I love my Japper as a daily driver, the 5series which is used when taking the little one around cost about 10x more in maintenance and is used 10% of the time per year. Just need the safety in the rear part of the vehicle

Euro cars generally 3 times the parts prices as Japanese in my experience. Plenty of good Japanese cars out there that are 5 star safety rated. I continue to be mystified why some really wealthy people are happy to take the risk in really old cars with a very low safety rating, one, two or three star safety rated in particular. Happy to see their kids and their grandkids being driven around in substandard vehicles too. This happens in my circle of friends too despite me raising the subject from time to time.

For mine...I feel better knowing my wife is driving around our kids and grandkids in a very late model 5 star safety rated vehicle knowing I've done my bit to ensure they are as safe as possible. Friend of mine bought a 5 star safety rated vehicle for just $6,000 recently. Beggars belief that some intelligent wealthy people find this sort of thing too high a hurdle to jump.. its just bizarre !

I wonder how they would feel counting their millions on their own because their partner and kids or grandkids were killed because they were involved in an accident and because it was such a poor vehicle that was a contributing factor to their death ? I imagine they would lead an incredibly lonely and bitterly disappointed life after that. I am sure Turners sell some 5 star safety rated cars for less than $10K. Give them a call, they do need the business !

[winner69]

Is Turners in a trading halt or something ..no trades

[minimoke]

Is Turners in a trading halt or something ..no tradesSeems to be a bit of a stalemate between buyers and sellers

[McGinty]

Seems to be a bit of a stalemate between buyers and sellers

Stalemate broken with a solid 400 traded at $2.38. Not much appetite on the buy side, so now would be a great time for those insiders who think that the share price was "significantly below their intrinsic value" at $2.70 to grab a bargain.

Maybe they can help either Milford or Salt by taking some offered at $2.40.

Disc: Happy that Milford and Salt are taking a bath on their TRA investment (unfortunately this is other people's money), as neither stepped up to oppose the Director fee increase (Even after Gaynor questioned it in his Herald article)

Edit: A few more traded while writing post

[McGinty]

Seems there has been a flurry of buying at $2.40 after my post......See all Grant needed was a bit of a call to action. :D

[minimoke]

Seems there has been a flurry of buying at $2.40 after my post......See all Grant needed was a bit of a call to action. :DTotal silence yesterday (not a single trade) and $250k worth today already. Weird.

[Beagle]

One of the rules of the buyback as I understand it is that that a buyback transaction can't be the first of the day so if nobody else wants to transact business...

[percy]

Hi all Todd Hunter here....I think it is worth just clarifying the safeguard guidelines that we adhere to in regard to the Buyback...there are no "tricks" going on.



Turners will only buy back Shares through NZX’s trading/order matching system and during normal trading hours (i.e. there will be no off-market transactions).
Shares will not be purchased at a price which is more than 10% above the average closing price for Shares on the NZSX over the previous five trading days.
Turners will not take part in the opening transaction on a trading day.
it is intended that the purchases by Turners over a one week period will not exceed 30% of the volume of Shares traded over that one week period.


The Management and Directors believe this is a good use of our capital at present, and based on the investor meetings I have had this week everyone agrees. You may also have noticed that our Chairman Grant Baker purchased 100,000 shares himself yesterday.

As an aside I am happy to arrange a conference call or meeting with Grant and myself for anyone who is interested in talking through the business or to answer any specific questions. todd.hunter@turners.co.nz

Thanks
Todd

Above is very clear.

[peat]

Above is very clear.


4/ It is intended that the purchases by Turners over a one week period will not exceed 30% of the volume of Shares traded over that one week period.


Number 4 is a little murky especially as its expressed as an intention. :p

But yeh quite clear on the other 3 , good rules as far as I can tell , so as to limit the market impact (sort of). Obviously any buying or selling ultimately has an effect but they're trying not to 'push' the market around is the way I see it. Just a sponge I guess.

[percy]

4/ It is intended that the purchases by Turners over a one week period will not exceed 30% of the volume of Shares traded over that one week period.


Number 4 is a little murky especially as its expressed as an intention. :p

But yeh quite clear on the other 3 , good rules as far as I can tell , so as to limit the market impact (sort of). Obviously any buying or selling ultimately has an effect but they're trying not to 'push' the market around is the way I see it. Just a sponge I guess.

I have noticed they have been buying just under 30% of the daily volume so far,so may be they intend to do as they said intended to do.? which should come as no surprise....lol.
.

[percy]

I note Interest.co.nz report a record year from UDC.Year ended 30th September NPAT of $65.3mil.Impairements still low,but up to reflect increased lending.
Heartland also had increased vehicle lending.
So still plenty of life left in this sector.

Wonder if Grant has asked Jeff if he would like to takeover TRA.Would be eps accrective and would open up MTF for HGH.????????????.....lol.
ps.I would be happy to receive HGH script for my TRA holding.

[Beagle]

I note Interest.co.nz report a record year from UDC.Year ended 30th September NPAT of $65.3mil.Impairements still low,but up to reflect increased lending.
Heartland also had increased vehicle lending.
So still plenty of life left in this sector.

Wonder if Grant has asked Jeff if he would like to takeover TRA.Would be eps accrective and would open up MTF for HGH.????????????.....lol.
ps.I would be happy to receive HGH script for my TRA holding.

LOL I bet you would but it might be on a 1:1 basis the way this is going !

[percy]

Yes I agree such an announcement would see HGH sp hit over $2.50,perhaps $2.95.?............lol.

[Beagle]

Yes I agree such an announcement would see HGH sp hit over $2.50,perhaps $2.95.?............lol.

LOL touché !

[winner69]

I think Grant (and that new Singapore based guy) have done a lot of asking around about buying Turners ....and maybe nobody’s interested in becoming a used car salesman

Must be frustrating as owning something you think is zillions but nobody thinks it worth buying

[percy]

I think Grant (and that new Singapore based guy) have done a lot of asking around about buying Turners ....and maybe nobody’s interested in becoming a used car salesman

Must be frustrating as owning something you think is zillions but nobody thinks it worth buying

Often happens with a business.
I seem to remember no one wanted Briscoes..The owners had to sell it cheap to the guy who they had trying to sell it...lol.

[winner69]

Yippee ....finally an UP day

Chart looking a bit better

[percy]

Yippee ....finally an UP day

Chart looking a bit better

Really? Chart looking better with 100 shares traded.??

[winner69]

Agh ...didn’t look at the volume

Still unwanted eh

[Beagle]

Agh ...didn’t look at the volume

Still unwanted eh

No you've got to get with the program mate. Over the last year this has been a strong outperformer in this sector against Australasia's biggest vehicle retailer listed in Australia AHG. This is down from a similar level to Turners a year ago of about $3.80 to be just $1.48 at the close today so Turners has shown a very strong sector outperformance !
I think many of the institutions would have more or less shut up shop for the year now so just the minnows left for Turners to mop up in the buy-back until mid-late January.
(Best we don't compare it to CMO though)

[winner69]

No you've got to get with the program mate. Over the last year this has been a strong outperformer in this sector against Australasia's biggest vehicle retailer listed in Australia AHG. This is down from a similar level to Turners a year ago of about $3.80 to be just $1.48 at the close today so Turners has shown a very strong sector outperformance !
I think many of the institutions would have more or less shut up shop for the year now so just the minnows left for Turners to mop up in the buy-back until mid-late January.
(Best we don't compare it to CMO though)

Grant should spread the word amongst Aussie instos that Turners is the best bet in this sector ....outperforming is good news

They can buy on the ASX eh

[winner69]

If you believe yahoo there has been 1500 shares transacted on the ASX and that was October 17th for $3.00.....good price

ASX listing a waste of time (and money) .....another initiative by a delusional Board

[percy]

If you believe yahoo there has been 1500 shares transacted on the ASX and that was October 17th for $3.00.....good price

ASX listing a waste of time (and money) .....another initiative by a delusional Board

If you do not know the reason /reasons for the Australian listing you may think it is a waste of time.
If you know the reasons,then you may think it is money well spent.
I know the reason/reasons and think it money well spent.
HGH's ASX listing was for basically the same reason/reasons.

[Baa_Baa]

What's the volume on ASX then? Is it significant?

[percy]

What's the volume on ASX then? Is it significant?

No.
Most probably never will be.
Never expected to be.

[Baa_Baa]

No.
Most probably never will be.
Never expected to be.

Why list there then?

[percy]

1/Some Australian Intos are only allowed to invest in shares that are listed on the ASX.With TRA and HGH those intos buy on NZX because of liquidity.No ASX listing no buying on NZX.
2/Turners EC Credit deals with Australian Banks and intos.To expand in Aussie they need to have an ASX listed parent.
3/Both TRA and HGH do securitization with Aussie intos.Tidies that up,,and leads to the possibity of expanding it further in Aussie.
4/I expect HGH will soon do a reasonanly sized bond issue,in Aussie,which again will be easier to get away with them being listed on ASX.
5/Turners may want to do a bond issue in Aussie at some stage.
6/HGH is expanding their REL business very quickly in Aussie,and it may give clients peace of mind they are dealing with a company whose parent is an ASX listed .
7/Both TRA and HGH have large lines of credit with Australian Banks,so being listed there is helpful.
There fore you can see why both companies are not concerned if their shares never trade in Aussie.


ps.Ever noticed in Aussie you see Mainfreight trucks with an Australian flag on their side.Mainfreight Australia.
I guess a lot of Aussies don't realise Mainfreight is a NZ company.

[McGinty]

Why list there then?

Percy has detailed a good list of reasons, most of which relate to Heartland though.

I can't understand it either (from a small reefie point of view), over $200k to list there with no trading....why bother?

I haven't seen any Aussie instos come in and take a chunk of equity (although I'm told that they buy through their NZ subsidiaries anyway). Seems to be more of a fade that NZX listed companies are going through at the moment rather than reasons that benefit the shareholders (why enter another market, only for there to not be a market).

Percy: If EC Credit secure a Aussie bank or insto deal in the next 12 months, I will shout you a drink the next time we meet :D

[janner]

No you've got to get with the program mate. Over the last year this has been a strong outperformer in this sector against Australasia's biggest vehicle retailer listed in Australia AHG. This is down from a similar level to Turners a year ago of about $3.80 to be just $1.48 at the close today so Turners has shown a very strong sector outperformance !
I think many of the institutions would have more or less shut up shop for the year now so just the minnows left for Turners to mop up in the buy-back until mid-late January.
(Best we don't compare it to CMO though)

Really cunning...Aye ?

Disc. Out at the $3.00's at a lose..

[winner69]

Percy has detailed a good list of reasons, most of which relate to Heartland though.

I can't understand it either (from a small reefie point of view), over $200k to list there with no trading....why bother?

I haven't seen any Aussie instos come in and take a chunk of equity (although I'm told that they buy through their NZ subsidiaries anyway). Seems to be more of a fade that NZX listed companies are going through at the moment rather than reasons that benefit the shareholders (why enter another market, only for there to not be a market).

Percy: If EC Credit secure a Aussie bank or insto deal in the next 12 months, I will shout you a drink the next time we meet :D

Not a fad in Turners case McGinty ....more of an ego trip by a delusional Board

Even if the reasons given were of good intent it’s been an abject failure

Maybe real reason was it was part of Bakers exit strategy .....and that’s not worked either

[winner69]

Is the Turners Board congratulating themselves that they have managed to stem the collapse in the share price by having a buyback?

Wonder if they have any New Years resolutions beside hope hope and more hope that 2019 will be better

[minimoke]

Is the Turners Board congratulating themselves that they have managed to stem the collapse in the share price by having a buyback?

Wonder if they have any New Years resolutions beside hope hope and more hope that 2019 will be betterat $2.39 it doesn't seem to have stopped falling yet. At least the brokers are winners.doing well out of the buy back

[McGinty]

Is the Turners Board congratulating themselves that they have managed to stem the collapse in the share price by having a buyback?

Wonder if they have any New Years resolutions beside hope hope and more hope that 2019 will be better

2019 Resolutions:

- Announce the success of the buyback program
- Reinstate the 2pm wrap up of future board meetings. :t_up:
- Grant to attend next AGM (prefer without a fresh tan)
- Confirm FY19 downgrade and blame external factors
- Rejustify why the boards troughing is good even if no future shareholder value is added
- Announce management/directors takeover at discounted price

I wonder if the board has worked out yet that the 'buyback' is just providing a market for either Milford or Salt to exit/reduce.

Looking forward to 2019 as it will be an interesting year

[Snoopy]

at $2.39 it doesn't seem to have stopped falling yet. At least the brokers are winners.doing well out of the buy back


I joined the queue for the exit the other day. And was there to pick up this ball that others were tossing away.

My cheeky bid I put in some days ago for a few more shares at $2.38 was hit. Very happy to buy more TRA at these gross yield levels. Particularly with that next divie coming up in just over a month or something!

Average holding price now down to $2.73.

SNOOPY

[winner69]

2019 Resolutions:

- Announce the success of the buyback program
- Reinstate the 2pm wrap up of future board meetings. :t_up:
- Grant to attend next AGM (prefer without a fresh tan)
- Confirm FY19 downgrade and blame external factors
- Rejustify why the boards troughing is good even if no future shareholder value is added
- Announce management/directors takeover at discounted price

I wonder if the board has worked out yet that the 'buyback' is just providing a market for either Milford or Salt to exit/reduce.

Looking forward to 2019 as it will be an interesting year

I’m told Turners are experts at ‘fixing’ things and doing what they say they will do so no doubt all those things you mentioned Mcginty will happen

[Beagle]

Maybe they'll have a video link next year so we can see Grant Baker via satellite from his luxury chalet in Zermatt Switzerland ?

[percy]

Maybe,just maybe they will revert to having their agm in the usual week they have historically held it.

ps.I admit I did miss an EBO agm some years ago, as they held it a week earlier than usual,and I was out of town.
pps.I did attend a PAZ meeting in Dunedin a few years ago,as they held it couple of weeks later than usual, and I happened to be there selling books to schools that week.

[winner69]

Buyback total now 535,892 shares or 0.6% of total as at start

Slowly getting there ...three months to go unless they change the duration.

[rainey]

Some months ago, when they announced the next 3 quarterly divs, what they were really saying is don't expect anything exciting or dynamic in financials over the next 12 months I invariably seem to get my timing wrong. However, in 60 years of playing with the Stockmarket, I have managed to keep my head above water. Have or had friends {some have died) who lost everything 1987

[winner69]

Turners market cap $30.8m less than what it was before buyback announcement

That’s 12.6% less ....quite a lot of shareholder wealth gone in last month

[percy]

Positive the share buy back is buying shares 12.6% cheaper.................lol.

[iceman]

Haha. Love the last 2 posts. Great example of glass half empty or glass half full :-)

[winner69]

Haha. Love the last 2 posts. Great example of glass half empty or glass half full :-)

ha ha

one statement is fact

one statement is subjective ....said in context of hoping like hell its 'factual'

[percy]

ha ha

one statement is fact

one statement is subjective ....said in context of hoping like hell its 'factual'

As always I choose to see both as factual.
No surprises there.!...lol.

[Beagle]

Is the glass half full, or half empty...or perish the thought, simply half a glass no matter how you look at it ! (i.e. just an average company with average prospects)
Cheap, or cheap for a reason ?

[percy]

Bit like EBO,RYM,MFT,FRE,SCL,RBD,and POT.
I expect you would have said the same about them,as they too were cheap once.

PS.They did/do what they said they would/will do.

[winner69]

At least TRA share price didn’t go down today like a lot of stocks

[percy]

At least TRA share price didn’t go down today like a lot of stocks

Correct.Including EBO,RYM,MFT,FRE,SCL,RBD,and POT.All down.?

[minimoke]

Headline from todays interim report
"Turners delivered a 28% increase in profit in the first half of the 2019 financial year, despite some challenges in the automotive retail sector. The result was driven by a consistent performance across all sectors, and the benefit of a $3.4m gain on a property sale.”

Now to delve into the detail.

[minimoke]

Outlook (look for the clue that shows Percy must be on a retainer for helping them write their reports)

“The investments we are making into training and development, fintech, product innovation and the customer experience will deliver further benefits in the second half.

We are expecting to see a continued positive performance from insurance and an improving performance from finance as we reposition our lending profile.

However, we are cognisant of the current challenges in the automotive retail market which have carried through into the second half of the financial year. If these continue, they could impact our NPBT guidance of $34m to $36m by up to 10%.

We remain confident in our strategy and long term prospects. New Zealand’s aging fleet will see hundreds of thousands of cars needing replacement over the next decade and we are well positioned to meet this need.

In addition, the challenging conditions will inevitably lead to consolidation in the dealer market which will provide Turners with further opportunity in the medium term, as we focus on building market share.

There will always be a need for a trusted business like Turners which can provide multiple channels for customers to buy and sell vehicles. We are able to offer all the add-ons that customers are looking for – finance, insurance and auto care services.”

[bull....]

i mentioned i believed sales would fall 10 - 20% end of the year last looked weak

[BlackPeter]

Hmm - did anybody notice anything new in this report (but the more detailled financials)? It just seems to reiterate the exact statements made at the time of the HY results in November 2018.

A bit sad that they don't even seem to make a comment on the performance of Q3 (at least I didn't find any). Come on guys, we are now in Q4 and even if they haven't yet completed the numbers for Q3 they for sure would know which direction the sales and margins went ...

[minimoke]

A bit sad that they don't even seem to make a comment on the performance of Q3 (at least I didn't find any). Come on guys, we are now in Q4 and even if they haven't yet completed the numbers for Q3 they for sure would know which direction the sales and margins went ...They kind of did when they said the current automotive challenges have carried through to the second half of the year. So that addresses Q3 and we await Q4

[percy]

All old news.
An update on current trading would be welcomed.

[winner69]

All old news.
An update on current trading would be welcomed.

Not known for giving too many updates between the half and full year announcements

No news is good news I reckon ....things are not as bad as some think.

If there is an update it’ll probably be for bad news

[Beagle]

All old news.
An update on current trading would be welcomed.

Give them a call Percy, you're the company spokesman on here :D

[forest]

Hmm - did anybody notice anything new in this report (but the more detailled financials)? It just seems to reiterate the exact statements made at the time of the HY results in November 2018.

A bit sad that they don't even seem to make a comment on the performance of Q3 (at least I didn't find any). Come on guys, we are now in Q4 and even if they haven't yet completed the numbers for Q3 they for sure would know which direction the sales and margins went ...

I noticed, but this is not new, that TRA operational cashflow is negative. I also noticed that the companies equity per share is reducing. Than I notice that the company is likely to earn less PBT than expected previously. The other thing I noticed is the company expects to pay 17 cents per share dividend.
Than I noticed that this does not make sense to me, something will change, maybe not this year.
The most likely change I think will be a reduced future dividend.

[BlackPeter]

I noticed, but this is not new, that TRA operational cashflow is negative. I also noticed that the companies equity per share is reducing. Than I notice that the company is likely to earn less PBT than expected previously. The other thing I noticed is the company expects to pay 17 cents per share dividend.
Than I noticed that this does not make sense to me, something will change, maybe not this year.
The most likely change I think will be a reduced future dividend.

I think I wanted to point to the lack of an updated big picture statement and explicitly excluded the detailled financeials ... but fair enough.

The way you "color" it sounds however quite negative. So, yes - they are $1m cash negative. However - they invested nearly $6m this year in fixed assets and intangibles. Do you assume they need to do this every year? If this was a one off, they have next time plenty of cash to play with.

As well - if we assume their cashburn is constant, than they still would have more than a decade to go before they run out. If they need that long to implement their strategy, than I certainly would worry.

Looking at EPS - it went up from 13.2 cps in 1 HY18 to 15.4 cps in 1HY19 (admittedly - I took these numbers out of the report and didn't check on which basis they calculated the numbers of issued shares) - but even if they creatively worked with averages ... and even if NPAT drops by 10% or so ... not quite sure where the problem would be to pay per HY a 8 (or 8.5) cts dividend.

[percy]

Cash flow.
If you considered TRA were a car sales company,or shoe retailer you could be right to worry about negative cash flow.
If you consider TRA to be a financial/insurance services company you could be wrong to worry about negative cash flow.
Seem to remember posters needlessly getting worked up about HGH being cash flow negative some time ago.

[forest]

I think I wanted to point to the lack of an updated big picture statement and explicitly excluded the detailled financeials ... but fair enough.

The way you "color" it sounds however quite negative. So, yes - they are $1m cash negative. However - they invested nearly $6m this year in fixed assets and intangibles. Do you assume they need to do this every year? If this was a one off, they have next time plenty of cash to play with.

As well - if we assume their cashburn is constant, than they still would have more than a decade to go before they run out. If they need that long to implement their strategy, than I certainly would worry.

Looking at EPS - it went up from 13.2 cps in 1 HY18 to 15.4 cps in 1HY19 (admittedly - I took these numbers out of the report and didn't check on which basis they calculated the numbers of issued shares) - but even if they creatively worked with averages ... and even if NPAT drops by 10% or so ... not quite sure where the problem would be to pay per HY a 8 (or 8.5) cts dividend.


Yes as you say $1m cash negative, add to that $16m extra bank loan and nearly $9m proceeds of property etc and it adds up to $26mil in 6 months.

Now it is not looking so pretty.

[forest]

Cash flow.
If you considered TRA were a car sales company,or shoe retailer you could be right to worry about negative cash flow.
If you consider TRA to be a financial/insurance services company you could be wrong to worry about negative cash flow.
Seem to remember posters needlessly getting worked up about HGH being cash flow negative some time ago.

I would agree with you Percy if the equity per share went up, like we had with HBL the last 4 years.

In TRA case this metrics is not going in share holders favour.

Maybe TRA should be given more time to proof itself but the trend is not that encouraging to me.

[percy]

Shareholders equity has improved in the past year from 32.25% to 33.02%.
Total assets have increased to $658,193 from $622,372.while shareholders' equity has increased from $200,736 to $217,347.
All the time assets such as the "new" Wiri site has most probably doubled in value since TRA brought the site.
The Turners and BuyRight sites have expanded,while the insurance business has bulked up.The finance business has added 120 or more originators.
The business is in great shape,and the directors wisdom of bulking up all parts of the business is proving to be sound.Vertically intregrated business,with strong brands.

[Beagle]

https://www.marketscreener.com/TURNERS-LTD-20699914/financials/
EPS Actual earnings for the FY2018 28.9 cps
EPS Forecast Analyst average FY19 26.7
EPS Forecast Analyst average FY20 24.8
EPS Forecast Analyst average FY21 27.9

Average analyst forecasts do not suggest the business is in great shape in terms of eps growth...anything but.

Share price has gone nowhere, (actually backwards in the last 4 years) and there's nothing in those broker forecasts that would indicate a dramatic turnaround anytime soon.

I am sure someone will try and put a positive "spin" on those forecasted numbers but investors might like to consider how long said investor has been talking this up and what's actually happened to the share price in recent years and make up their own minds.

Nobody talks about the rise and rise of Trade Me stealing market share off physical stores...

[winner69]

...and forest might point out that net debt has increased from $238m to $306m in same period that Percy used for assets and equity

[percy]

https://www.marketscreener.com/TURNERS-LTD-20699914/financials/
EPS Actual earnings for the FY2018 28.9 cps
EPS Forecast Analyst average FY19 26.7
EPS Forecast Analyst average FY20 24.8
EPS Forecast Analyst average FY21 27.9

Average analyst forecasts do not suggest the business is in great shape in terms of eps growth...anything but.

Share price has gone nowhere, (actually backwards in the last 4 years) and there's nothing in those broker forecasts that would indicate a dramatic turnaround anytime soon.

I am sure someone will try and put a positive "spin" on those forecasted numbers but investors might like to consider how long said investor has been talking this up and what's actually happened to the share price in recent years and make up their own minds.

Nobody talks about the rise and rise of Trade Me stealing market share off physical stores...

I look at Turners like starting a winery.Takes a few years for the grapes to produce,and then time to sell.
Turners have built up the foundations for a great business.
Trade Me is used by Turners and most vehicle sellers,yet Turners find car buyers still like to visit car yards,and that is why Turners are expanding their footprint.

[percy]

...and forest might point out that net debt has increased from $238m to $306m in same period that Percy used for assets and equity

And what has the debt been used for.?
It has been used to expand sites,buy sites,finance and insurance receivables.ie building the business.
All the time gaining Turners market share.

[winner69]

And what has the debt been used for.?
It has been used to expand sites,finance and insurance receivables.ie building the business.

"........and pay exorbitant dividends?

[percy]

"........and pay exorbitant dividends?
Now that statement depends whether you hold TRA or not.!

[percy]

...and forest might point out that net debt has increased from $238m to $306m in same period that Percy used for assets and equity

You know W69 in 1990 you could have brought EBO for under $3mil......
Today debt has blown out to over $2 billion.
Rather a stupid arguement?

[forest]

Shareholders equity has improved in the past year from 32.25% to 33.02%.
Total assets have increased to $658,193 from $622,372.while shareholders' equity has increased from $200,736 to $217,347.
All the time assets such as the "new" Wiri site has most probably doubled in value since TRA brought the site.
The Turners and BuyRight sites have expanded,while the insurance business has bulked up.The finance business has added 120 or more originators.
The business is in great shape,and the directors wisdom of bulking up all parts of the business is proving to be sound.Vertically intregrated business,with strong brands.

Share holders equity has increased but this is because share holders are capitalising the company faster than it is spending. What is important that equity per share increases and what I see is a company that had 80 mil shares at the end of financial year 2018 and close to 89mil at present. By my calculations in the 1H19 equity per share has reduced from app $2.68 to $2.55.

As I said before maybe it needs more time but ..............

[percy]

I hear there are three car carriers trying to get into Port of Auckland.
Can't get in because there is no room to unload the cars.
BuyRight Car's slow down must mean POA is grid locked.!!.....lol.

[percy]

Share holders equity has increased but this is because share holders are capitalising the company faster than it is spending. What is important that equity per share increases and what I see is a company that had 80 mil shares at the end of financial year 2018 and close to 89mil at present. By my calculations in the 1H19 equity per share has reduced from app $2.68 to $2.55.

As I said before maybe it needs more time but ..............

What is really important is the long term structure and value that is being added to each division.
Bit like a vineyard buying more really productive land.It will produce the results in years to come, and will continue to do so.
The right decissions or plantings some times do not produce the goods for a year or two,or in a vineyard 3 to 5 years time.

[couta1]

"........and pay exorbitant dividends? I'm quite happy with them, no need to wait 6 months either. PS-Only downside is that it will take 3 odd yrs worth of them at current SP to get my paperloss back.Lol

[winner69]

What changed in Note 7 that required them to re-submit the Interim Report?

Was it something to do with the vineyard not producing as much wine as they expected

Should have elaborated a bit more than just say corrected

[forest]

What is really important is the long term structure and value that is being added to each division.
Bit like a vineyard buying more really productive land.It will produce the results in years to come, and will continue to do so.
The right decissions or plantings some times do not produce the goods for a year or two,or in a vineyard 3 to 5 years time.

:), Yeah, I fully agree with you there.
The bit what makes me feel uneasy is that while the vineyard is closer to full production, the value of the vineyard rises slower than capital added to the vineyard.

[winner69]

I'm quite happy with them, no need to wait 6 months either.

I get one soon don’t I?

Help offset my smallish loss (as long as the share price doesn’t go down by the same amount)

[Beagle]

I hear there are three car carriers trying to get into Port of Auckland.
Can't get in because there is no room to unload the cars.
BuyRight Car's slow down must mean POA is grid locked.!!.....lol.

What a "surprise" you would put a positive slant on this. Stink bugs are back with a vengeance. Unreported, but I have it on good authority a number of ships have been sent back overseas without being unloaded because stink bugs have been found aboard. I was lucky my new car came with a shipment of other new cars from Europe, (too cold for stink bugs up there at this time of year) but nonetheless the ship was delayed for a week as other ships with second hand cars from Asia ahead of it were searched thoroughly by MPI. I got my car late, in the nick of time for Christmas.

Expect the stink bug issue might be raised as another excuse for the next downgrade....downgrades usually come in three's.

[percy]

Just as well Turners are sourcing more cars from within NZ.!!!

[percy]

:), Yeah, I fully agree with you there.
The bit what makes me feel uneasy is that while the vineyard is closer to full production, the value of the vineyard rises slower than capital added to the vineyard.

Bit safer than vineyards.
No weather or bug problems [other than stink bug].
No worry being played off by three major UK supermarket chains.
No worry about frosts.
No currency concerns as NZ customers realise lower NZ $ means higher car prices.
No worry having to store cars three or four years before you sell them.
No worries about people's tastes changing.ie Will kids drink the same wine as their parents did.

Who would ever invest in a vineyard/ ..LOL.

Golly I am not getting far with "The Break" by Ronnie O'Sullivan.Only up to page 5.!!.

[forest]

Bit safer than vineyards.
No weather or bug problems [other than stink bug].
No worry being played off by three major UK supermarket chains.
No worry about frosts.
No currency concerns as NZ customers realise lower NZ $ means higher car prices.
No worry having to store cars three or four years before you sell them.
No worries about people's tastes changing.ie Will kids drink the same wine as their parents did.

Who would ever invest in a vineyard/ ..LOL.

Golly I am not getting far with "The Break" by Ronnie O'Sullivan.Only up to page 5.!!.

Ok, last thought from me tonight on this subject.
Maybe, just maybe if the company produced a good wine it could entice the directors to show up and attend the board meetings.

[Beagle]

Ok, last thought from me tonight on this subject.
Maybe, just maybe if the company produced a good wine it could entice the directors to show up and attend the board meetings.
:lol: :lol: :lol:

[percy]

Ok, last thought from me tonight on this subject.
Maybe, just maybe if the company produced a good wine it could entice the directors to show up and attend the board meetings.
Back to that again.
I accepted the chairman of the meeting's explanation.
Made good sense to me.
Seemed I was the only one who did...lol

PS.The Oyster Bay agm I attended The Chairman only half filled the glasses.Very tight I thought,[as did all other shareholders.!].
pps.Not good,only up to page 15 of my book, and I have not had time to watch Cleetus McFarland on youtube tonight.lol.

[Beagle]

http://www.sharechat.co.nz/article/c789d2b9/turners-says-used-car-demand-strong-despite-december-downturn.html?utm_medium=email&utm_campaign=Turners%20says%20used%20car%20demand% 20strong%20despite%20December%20downturn&utm_content=Turners%20says%20used%20car%20demand%2 0strong%20despite%20December%20downturn+CID_089c5d de894648933ea0128c7b03bcdb&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticlec789d2b9turner s-says-used-car-demand-strong-despite-december-downturnhtml

Company spokesman will put a positive spin on this somehow.

[couta1]

http://www.sharechat.co.nz/article/c789d2b9/turners-says-used-car-demand-strong-despite-december-downturn.html?utm_medium=email&utm_campaign=Turners%20says%20used%20car%20demand% 20strong%20despite%20December%20downturn&utm_content=Turners%20says%20used%20car%20demand%2 0strong%20despite%20December%20downturn+CID_089c5d de894648933ea0128c7b03bcdb&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticlec789d2b9turner s-says-used-car-demand-strong-despite-december-downturnhtml

Company spokesman will put a positive spin on this somehow. Not too negative overall, let the battle between Beagletron and the Percynator commence.

[Beagle]

Not too negative overall, let the battle between Beagletron and the Percynator commence.

I think we've gone the full 12 rounds already lol

[percy]

http://www.sharechat.co.nz/article/c789d2b9/turners-says-used-car-demand-strong-despite-december-downturn.html?utm_medium=email&utm_campaign=Turners%20says%20used%20car%20demand% 20strong%20despite%20December%20downturn&utm_content=Turners%20says%20used%20car%20demand%2 0strong%20despite%20December%20downturn+CID_089c5d de894648933ea0128c7b03bcdb&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticlec789d2b9turner s-says-used-car-demand-strong-despite-december-downturnhtml

Company spokesman will put a positive spin on this somehow.

Thanks for the link.
Makes the doomsayers look ridiculous.

[Beagle]

Not at all. Makes the supporters saying things are going great look like they have rose coloured glasses.
6% sales decline on how many more vehicle sales sites and based on what percentage increase in shares on issue ? When you look at the sales decline on an objective basis things are bad.
The only numbers that are growing strongly are directors fees lol

[winner69]

I think we've gone the full 12 rounds already lol

Good news really — USED CAR DEMAND STRONG

[Beagle]

To be clear we are talking about a same stores sales decline of well over 10%. If KMD, HLG or any other retailer had of reported "strong" demand like that their SP would have been smashed. Just as well TRA have a share buy-back program going isn't it !
Bit like SUM telling us demand for units is strong eh...but because of "insert their very latest excuse" actual sales didn't happen. See a pattern here Winner ?

[percy]

1.13 million used cars sold in 2018,down only 0.76% on the previous year.ie under 1%.
"The start of 2019 is looking like it will be positive for the industry."
Agreed.!

[winner69]

Industry down 6% .....Turners growing share could mean they are ahead.

[Beagle]

1.13 million used cars sold in 2018,down only 0.76% on the previous year.ie under 1%.
"The start of 2019 is looking like it will be positive for the industry."
Agreed.!

Yesterday you told us the ports of Auckland was log- jammed and overloaded with new stock coming in from Asia and couldn't keep up with demand lol
How can 2019 be positive for the industry if they can't get stock ?

Winner, maybe, but maybe not. Maybe TRA's sales are worse than industry average as more and more people buy through Trade Me ?

[percy]

Check out POA gridlock for yourself.
I just heard about it from a ship's officer trying to get his car carrier ship into POA.
Turners have been quiet clear they are sourcing more stock within NZ.
New and better located sites will mean more market share gain,together with the 120 additional finance originators added in the past 6 months, TRA finance and insurance should be "well postioned."

[winner69]

This strong demand for cars helping Turners share price today

A close at 240 would be a ytd high.

[Beagle]

Percy I know you're incredibly busy with your spokesman roles at TRA and HGH but...that Xavior Simonet guy at KMD really needs your help. Crikey just a 1% sales decline on same store sales and their share price has been absolutely pummelled. The thread desperately needs some of your very special "Percy Perception" and that could be another paid role to supplement your retirement income :p

[percy]

Xavior is beyond my help.
Seasonal product.Basically only two seasons.Cars are for all seasons.
KMD do not own any of their properties they operate from.Beholden to landlords.TRA have the capacity to develope their own,which they can book the developement margin.I guess the newish site a Wiri has more than doubled in value.[say over $7mil,although I doubt they will sell it]
KMD do not have a finance company,which has grown by 120 new originators over the past 6 months alone.So even if sales are down at KMD they could earn extra from other retailers,as TRA do for another 2 or 3 years,on each sale..
KMD do not offer insurance.Again another ticket TRA clip,for 2 or 3 years,again not only on their own sales,but other retailers' sales.
KMD do not offer service on goods they sell.Yet another ticket TRA clip.Ongoing.
KMD do not clip the ticket on end of life gear.Big business with NZ's old fleet and crashed cars for TRA.
KMD are trying to take on the world.TRA have more modest aspirations.

ps.Never ever have anything to do with a business that sells shoes.

[Yoda]

And going X dividend on the 21st:t_up:

[Joshuatree]

All said and done, for this day? Good. I will leave you with my grassy knoll brokers research note out with a t/p of $2.70 and 2019 Div forecast of 9.9%. Nitey nite ,sleep tight, dont let the stinkbugs bite!

[percy]

Well with the holiday season proving to be yet another season of share madness and carnage on our roads,I expect Turners will be flat out managing the logistics and sales of vehicles written off by insurance companies.
Another profitable "ticket" Turners clip.

[minimoke]

Well with the holiday season proving to be yet another season of share madness and carnage on our roads,I expect Turners will be flat out managing the logistics and sales of vehicles written off by insurance companies.
Another profitable "ticket" Turners clip.And hopefully providing an option for replacement cars.

[percy]

And hopefully providing an option for replacement cars.

You're onto it.!!!.{a lot of people miss this}
Then option for finance,
option for autosure insurance,
option for service.
And at each option Turners manage to clip the "ticket".
"Big ticket" clippers...Turners never miss a "ticket" to clip....lol.

[winner69]

You're onto it.!!!.{a lot of people miss this}
Then option for finance,
option for autosure insurance,
option for service.
And at each option Turners manage to clip the "ticket".
"Big ticket" clippers...Turners never miss a "ticket" to clip....lol.

Good this ticket clipping stuff eh

But the latest announcement suggests they are clipping fewer tickets than previously

[percy]

Good this ticket clipping stuff eh

But the latest announcement suggests they are clipping fewer tickets than previously

Maybe,maybe not.
Second hand car sales will most probably be lower in the Auckland area,which will affect Turners sales,and the chance to add on all their options,however with an additional 120 originators added in the first half alone,finance,insurance and service revenue may not be affected,[could possibly increase?]while end of life logistics and sales looks as though their revenue will increase.
Therefore to make an informed judgement we should wait for a further update from TRA.

[Snoopy]

I see in the HY2019 accounts that 'Impairment provision expense' was (3,951) up from (2,276) in the previous year. However to check out the actual 'impairment expense' for the period we have to look at the what has happened to the total provision over HY2019 . And that part of the accounts has not yet been released.

There is also something on the change of treatment of impairments in HY2019 result notes, referring to NZIFRS 9 and 15. An extra (2.160m) impairment charge seems to have arisen from that. But is this just in relation to debt collection services? Or does in apply to all loan contracts? Anyone care to offer an opinion?



Snoops ....that 2.160m you mention is part of the 1.839m adjustment to March 18 Retained Earnings (see the Changes in Equity part of the accounts)

Effectively reduced Shareholder Equity with no impact on the Income Statement (ie profit) this financial year

The new standards do mean they need at what’s provided for differently than in the past - probably more detail in the full half year report and then you can work out if there is a real impact or not.

My copy of the HY2019 report has finally arrived and I am pleased to see that it was bound properly this time. The 'cheap staple in the corner' used to hold the FY2018 report together ended up being 'not so cheap' for shareholders who took the route of getting the report professionally rebound within leather covers!

From p33 in relation to IFRS15 'Revenue from Contracts with Customers'. The core principle behind this reform is to "recognise revenue to depict the transfer of goods and services to customers in amounts that reflect the consideration (payment) to which the entity expects it to be entitled in exchange for those goods and services." The effect of this is to split what was a one off transaction into separate 'performance obligations' and only tick off the contact revenue when those obligations are met. Prior to this, the previous policy was to recognise revenue when "it is probable that economic benefits will flow to the group." After reading this, I am none the wiser as to what this change means in terms of booking day to day profits on sales.

Could the difference in a finance contract be a simple as waiting until the money is in the 'Oxford Finance' bank rather than just relying on a customer having signed a contract? Looking at the actual numbers on p34, the ' balance sheet effect' of the changes mean an historic reduction of just $284,000 in net assets. The main changes making up this number come under the headers "Change in collection income" and "Change in collection expense." Does this mean that the changes in IFRS15 only apply to the 'EC Credit' division of Turners? If the answer to this question is 'yes' and EC Credit revenue was $18.667m over FY2018 and 'operating profit' was $6.069m then for FY2018:

$0.284m/$6.069m = 5% of operating profits for this one division: Nothing of great consequence for the whole group.

I see:

"The group elected to apply the cumulative effect method with no restatement of comparative period amounts."

This does make it difficult for shareholders seeking transparency. Do the adjustments relate to just the prior period or is there a cascading effect across many past years? If the latter, then the IFRS15 adjustments are even less significant than I think!

Now moving on to IFRS9, on Impairment of Financial Instruments. The significant changes here relate to impairment of the 'finance receivables' loan book. Interestingly the change is in the opposite direction to IFRS15. The new requirement is to make a forecast on impairments that might happen on the balance of probability at the time a basket of loans is taken out (based on historical default rates), rather than waiting for a loan to actually become impaired before declaring it impaired. The impairment adjustment is taken off the balance sheet assets from the end of the previous full year accounting period. This is a real loss which must be taken to comply with accounting standards. But it is a loss that has never been part of any Turners profit and loss statement. Once again transparency is limited, because Turners have chosen not to restate comparative period amounts.

The extra loss incurred (change in impairment provision) at EOFY2018 was $2.160m, offset by the associated deferred tax gain of $0.605m ( $2.160m x 0.28 = $0.605m ). This gives a net loss of $1.555m.
How significant is an extra impairment provision of $2.160m? At EOFY2018 the total loan impairment provision, before adjustment, was $11.294m.

$2.160m / $11.294 = 19%

A 19% increase in provisioning is very significant. This extra provisioning is not in relation to any particular time period of loans. So IMO this extra provisioning increment must apply not only to the balance, but also the annual loan impairment expense. In the case of FY2018 the 'impairment provision expense' was $6.380m. The adjusted figure becomes $7.592m. And that change ($7.592m-$6.380m = $1.212m) would have made a significant difference to NPAT over the FY2018 financial year. And there would be a similarly significant effect, this time accounted for, in FY2019 half year result.

So to answer the question I posed:

"Did accounting standards kneecap the HY2019 result?"

For NZIFRS 15 the answer is 'no'. But for NZIFRS 9 the answer is 'yes'.

SNOOPY

[Beagle]

You have the other Beagle to thank for that because I barked about the poor binding at the annual meeting. I can't be bothered opining on the change in accounting standard...on holiday and holidays and thinking about accounting standards don't mix as far as I am concerned. If other bean counters enjoy thinking about the effect of accounting standard changes during their holidays then I recommend they seek professional psychological help, urgently lol.

I can't help noticing however the very soft overall tone to retail sales stat's, (its been all over the media this summer) and second hand vehicle stat's and I remain of the view that people are likely to be disappointed with retail and consumer durables stocks in 2019. I am sure the resident company spokesman still holds the opposite view and that's fine.

[percy]

You have the other Beagle to thank for that because I barked about the poor binding at the annual meeting. I can't be bothered opining on the change in accounting standard...on holiday and holidays and thinking about accounting standards don't mix as far as I am concerned. If other bean counters enjoy thinking about the effect of accounting standard changes during their holidays then I recommend they seek professional psychological help, urgently lol.

I can't help noticing however the very soft overall tone to retail sales stat's, (its been all over the media this summer) and second hand vehicle stat's and I remain of the view that people are likely to be disappointed with retail and consumer durables stocks in 2019. I am sure the resident company spokesman still holds the opposite view and that's fine.

Refer to my post # 3980.

[Snoopy]

So to answer the question I posed:

"Did accounting standards kneecap the HY2019 result?"

For NZIFRS 15 the answer is 'no'. But for NZIFRS 9 the answer is 'yes'.




Profit FY2018Profit HY2019Annualized Profit FY2019Reference


As declared$23.360m$12.885m


less Retrospective impairment provision adjustment0.72 x ($1.212)mMy post 3980, this thread


less Property sale gain Wiri($3.400)mHYR2019 p22


less earn Out payment for Autosure to P&L($0.800)mHYR2019 p22


less Revaluation Investment Property gain($0.820)mAR2018 p51


less Gain on Sale of Property, Plant and Equipment($1.000)mAR2018 p51


less EC Credit unredeemed voucher release to P&L0.72 x ($0.700)mAR2018 p13, HYR2019 p22



less MTF Shareholding revaluation($0.612)mAR2018 p67



less reduction in 'Buy Right Cars' earn out provision to P&L($2.600)mHYR2019 p49



less Life Insurance Contract Adjustments($2.664)mAR2018 p51 and p76



equals$14.287m$8.685m$17.370m




Shares on Issue FY2018Shares on issue HY2019


84,802,81289,480,000


Normalised Annualised Business eps16.9c (FY2018)19.4c (FY2019f)



At the current share price of $2.40, I have TRA on a forecast normalized PE ratio of 12.4 for FY2019. Underlying eps growth for the year should be 15%.

SNOOPY

[winner69]

Snoops ...when you say kneecap I presume you mean something made the H119 result worse than what was reported ....yes?

Try hard enough and I trckon you’ll end up showing an outstanding H119 result (v pcp) ....but won’t it all be smoke and mirrors?

Posted when Post 3984 was incomplete.

[Beagle]

Hey Snoopy. Average broker forecast for FY19 is here https://www.marketscreener.com/TURNERS-LTD-20699914/financials/ eps of just 26.7 cps. Some guy called Ben Graham reckons the right PE for a no growth company is 8.5...not sure how he values companies with declining eps, are you ?

[Snoopy]

Snoops ...when you say kneecap I presume you mean something made the H119 result worse than what was reported ....yes?


What I meant was that because the impairment provisioning is now higher, thanks to IFRS15, then the declared profit for HY2019 is lower than it otherwise would have been under the old rules. It that sense the HY2019 result is worse than the punters might have expected 'all things being equal'. However, because we are now in the IFRS15 era, the declared result for FY2019 will be 'correct' according to the new impairment rules definition. To make a fair comparison, we have to look at what would have happened had IFRS15 been in place over FY2018.



Try hard enough and I trckon you’ll end up showing an outstanding H119 result (v pcp) ....but won’t it all be smoke and mirrors?


1/ Yes
2/ All those adjustments are meant to take away the 'smoke and mirrors'.



Posted when Post 3984 was incomplete.


Nah. You were just too quick out of the blocks to answer it Winner. Too much 'on the ball' for your own good!

SNOOPY

[Snoopy]

Hey Snoopy. Average broker forecast for FY19 is here https://www.marketscreener.com/TURNERS-LTD-20699914/financials/ eps of just 26.7 cps.


My forecast is lower than that!



Some guy called Ben Graham reckons the right PE for a no growth company is 8.5...not sure how he values companies with declining eps, are you ?


But I reckon underlying earnings are going to grow by 15%. That mean my estimated forecast PE of 12.4 is probably justified.

SNOOPY

[percy]

Oh dear me what will I do with the increasing fully imputated divies paid quarterly.? 4 cents per share in a couple of weeks will cover the Xmas Visa bill nicely.
2019...... 17cents per share............7.08% net yield...Golly is that 9.4% gross yield?
2020.......17.5 cents per share.........7.29% net yield
2021.......18.5 cents per share.........7.71% net yield.
With those sort of yields I could be tempted to buy more TRA shares?!
I note NZ's leading broker expects the divies as follows
2019,.......17cps
2020.........18 cps...........................gross yield 10%
2021..........19cps............................gro ss yield 10.5%.Nice .

[Baa_Baa]

Is "imputated" something like amputated, like where the company amputates the tax and pays a gross dividend. If the dividend is fully imputed, is the yield the same as full imputated or amputated?

[Beagle]

My forecast is lower than that!
But I reckon underlying earnings are going to grow by 20%. That mean my estimated forecast PE of 11.3 is probably justified.

Brokers average eps forecast for FY21 is still lower than for FY18. What growth have you manufactured through your convoluted process and are you now in cahoots with Percy lol I stick with a PE of something less than 8.5 due to declining average eps expected over the next 3 years. 8 seems reasonable to me and on 25 cents that makes for an even $2 as fair value.


Oh dear me what will I do with the increasing fully imputated divies paid quarterly.? .
Imputed Percy....Oh I don't know, its such a dilemma but let me help you out... you could try offsetting the next 8-9 years of dividends against the whopping $1.50 in capital loss the shares have suffered in the last year or so lol. When is a dividend not a dividend ? When its paid by raising debt and massively overtaken by capital losses !

[percy]

Increasing fully imputed divies suit me just fine.

[Jay]

Without specially targeting TRA, a declining price is usually for a reason, sometime short term irrationally, but if dividend yield is increasing cause price is dropping, as I always say one of two things will happen, the sp will rise again or the dividend will decrease. Question of course is which is it and/or get out until you know??, then re-evaluate.

[percy]

Without specially targeting TRA, a declining price is usually for a reason, sometime short term irrationally, but if dividend yield is increasing cause price is dropping, as I always say one of two things will happen, the sp will rise again or the dividend will decrease. Question of course is which is it and/or get out until you know??, then re-evaluate.

Agreed.
Therefore you must trust your own research.
The better your research is, the more likelihood you will make the right decission.

[Snoopy]

Brokers average eps forecast for FY21 is still lower than for FY18. What growth have you manufactured through your convoluted process and are you now in cahoots with Percy lol I stick with a PE of something less than 8.5 due to declining average eps expected over the next 3 years. 8 seems reasonable to me and on 25 cents that makes for an even $2 as fair value.


No convoluted process here Beagle and, just for you, I have added all my references in my post 3984 so that you can see I have not pulled my figures out of a hat. You can take out some of my numbers if you disagree with me, if you consider some of those profits I have taken out as 'normal'. But what is 'normal'?

Turners would say that buying a new site, redeveloping it, then signing up to above market rents to book up front an above market capital profit when the site is on sold to a third party is 'normal business'. I say it is clever business. Good management to become their own 'in house property developer', while having the ability to cart away their container buildings on the back of a truck when they are done. A great way to monetize assets to raise capital to bolster the support for their loan book. But sooner or later they will run out of sites to redevelop. And by 'sooner or later I mean within 2-3 years. What happens to this 'branch' of the business then? While I am happy for Turners to continue to develop their sites in this way, I will only count it as 'normal business' when they start developing sites like this for other third parties. I certainly did not invest in Turners as 'property developers' and so do not count returns from this transient branch of the business as 'normal'.

Now I move to the revaluation of Turners minority shareholding in MTF. Turners do not exercise control over MTF so such equity investments must be 'equity accounted'.. The change in equity value must flow through the profit and loss statement each year, as does the dividend from MTF. I am happy to see the dividend from MTF. I think that the 'dividend income' from the MTF investment is listed under note 7 in the break down of 'Other Income': An amount of $349,000. However the revaluation gain of $612,000 (AR2018 p67) is completely out of the control of TRA. And since their MTF stake is not for sale, I can see little relevance in booking a 'profit' that can never be realised. I realise that it is correct to do so if accounting standards are to be complied with. But I don't think it reflects any change in the earning capacity of the TRA business. So in my assessment this 'capital gain'' should be left out of normalised TRA profits, as should any capital loss if the value of the MTF stake went the other way. Curiously the 'Revaluation Gain on Investments' on p51 of AR2018 is $590,000, not $612,000. I would be interested to hear from anyone who can explain this difference!

Next stop is the reduction in the 'Buy Right Cars' earn out provision. I think it is fair to say that this is one area where management's grand development plan has stumbled. From p49 of HYR2019 we learn that in the pcp "a release of $0.4m was recognised in Profit and Loss" and in the second six months of FY2018 another release to profit and loss of $2.2m was made. Thus the total released to profit and loss from what would have been earn out payments over FY2018 was $2.6m. Try as I might, when I look over the detailed profit and loss statement under note 7 in AR2018, I cannot find these write backs. We know they were booked as profits because Turners told us so in the half year report six months down the track. But where are they in the report at the time? Please let me know readers if you can locate them. In the meantime I will take Turners own word six months later and take that $2.6m off the declared profits. One thing I think we can all agree on is that this $2.6m was a one off windfall (sic) that is unrepresentative of any Turners earnings going out into the future. So looking into the normalised earnings picture, out it must come.

Finally I refer to the EC Credit unredeemed voucher release to P&L, amounting to $0.7m. Turners mentioned this as a significant abnormal (HYR2019 p22), as it was $700,000 less than the equivalent squaring up of the book over FY2017 - actual value $400,000 for the year (AR2018 p13). If you regard the FY2017 year as 'normal' and the FY2018 as 'abnormal', then my normalised adjustment looks appropriate. But truth be told I do not really understand what an 'unredeemed voucher release' is. I have figured out it is debt collection industry jargon, and that it contributes to profits at the EC Credit division. But what is it? And why is it different to normal debt collection profits? If anyone can answer that question, once again I am all ears!

SNOOPY

[percy]

Christchurch and Auckland sites development alone will be very large,and as Turners market share increases, so is the likelihood of further developments.
Although Turners are NZ's largest second vehicle dealer,their existing market share leaves plenty of room for growth.
We should note Turners talk of 5 years of property developments.
I guess it is very hard to predict further ahead.

[Beagle]

No convoluted process here Beagle and, just for you, I have added all my references in my post 3984 so that you can see I have not pulled my figures out of a hat. You can take out some of my numbers if you disagree with me, if you consider some of those profits I have taken out as 'normal'. But what is 'normal'?

Turners would say that buying a new site, redeveloping it, then signing up to above market rents to book up front an above market capital profit when the site is on sold to a third party is 'normal business'. I say it is clever business. Good management to become their own 'in house property developer', while having the ability to cart away their container buildings on the back of a truck when they are done. A great way to monetize assets to raise capital to bolster the support for their loan book. But sooner or later they will run out of sites to redevelop. And by 'sooner or later I mean within 2-3 years. What happens to this 'branch' of the business then? While I am happy for Turners to continue to develop their sites in this way, I will only count it as 'normal business' when they start developing sites like this for other third parties. I certainly did not invest in Turners as 'property developers' and so do not count returns from this transient branch of the business as 'normal'.

Now I move to the revaluation of Turners minority shareholding in MTF. Turners do not exercise control over MTF so such equity investments must be 'equity accounted'.. The change in equity value must flow through the profit and loss statement each year, as does the dividend from MTF. I am happy to see the dividend from MTF. I think that is the 'dividend income' in the MTF investment is listed under note 7 in the break down of 'Other Income'. An amount of $349,000. However the revaluation gain of $612,000 (AR2018 p67) is completely out of the control of TRA. And since their MTF stake is not for sale I can see little relevance in booking a 'profit' that can never be realised. I realise that it is correct to do so if accounting standards are to be complied with. But I don't think it reflects any change in the earning capacity of the TRA business. So in my assessment this 'capital gain'' should be left out of normalised TRA profits, as should any capital loss if the value of the MTF stake went the other way. Curiously the 'Revaluation Gain on Investments' on p51 of AR2018 is $590,000, not $612,000. I would be interested to hear from anyone who can explain this difference!

Good work on #3984. Underlying eps of about 21 cps needs to be viewed in the context of the only other listed motor vehicle retailer Colonial Motors Ltd which has a far longer trading history and a vastly better track record of growing eps consistently over time. I estimate that is on a forward PE of 10 and obviously even if we are generous and apply that same PE to TRA we get $2.10.
We also need to consider the sunset nature of the industry...plenty of overseas car companies trading on single digit PE's reflecting the overarching nature of where the industry is headed over time.
I'd be very cautious about using a PE of more than 10 on any vehicle retailer, manufacturer or distributor.

[winner69]

With a third of Turners profits not being normal is Turners a real abnormal company

Sorry Snoops

[percy]

[QUOTE=winner69;744362]With a third of Turners profits not being normal is Turners a real abnormal company

Classic...!!!..lol

[Snoopy]

Truth be told I do not really understand what an 'unredeemed voucher release' is. I have figured out it is debt collection industry jargon, and that it contributes to profits at the EC Credit division. But what is it? And why is it different to normal debt collection profits? If anyone can answer that question, once again I am all ears!


Got off my doghouse and went to the EC Credit website:

--------

Easy Debt Collection Process

EC Credit control uses a quick voucher system to lodge a debt that you need to be recovered. It’s a simple process to fill out the voucher and send it in, or you can even do it online. EC Credit control has 24×7 access to its lodging system so you can lodge it immediately at a time that’s convenient to you.

Up Front Costs

Loading a voucher will only be a single set fee to start the process. So no matter how often we contact your client you won’t be charged any additional fees. If EC Credit control can’t collect your debt then there will be no commission fee charged.

--------

It looks like these 'vouchers' are one off debts sent in by customers, as opposed to a 'debt collection book' that EC Credit works through. So if:

1/ you want a debt repaid, and send in a voucher to EC Credit to that effect AND
2/ EC Credit collects that debt for you BUT
3/ you forget that you asked EC credit to collect that debt in the first place so the voucher is not redeemed.
4/ Does this mean that EC Credit can simply keep your money as a unredeemed voucher?

It seems hard to believe that EC Credit could be that unethical as to just keep the money of the customer who initiated the request, or that there are enough EC Credit clients about that are so forgetful.

But what other explanation might there be? Are we just talking about a EC Credit banking that set up fee without collecting the debt and any associated commission?

SNOOPY

[BlackPeter]

Interesting to see how the markets perception of "the right" PE is changing. Its not that long ago that the market thought a PE of 15.8 is highly appropriate for TRA (24 cents EPS in FY2017 - SP $3.80). Today Mr Market thinks that a PE of 8.3 is just right (29 cts EPS in FY2018 at $2.40). And - as we all know, Mr. Market is always right and always will be. However - Mr Market likes to change his mind without notice and sometimes he is euphoric and sometimes gloomy.

I think your (beagle's) view is absolutely legitimate - and sure, if TRA's strategy doesn't work out and they always stay a boring old used car dealer without any noticable additional income from insurance, finance, maintenance, end-of-life business and property development than, yes - longterm an average PE of around 10 might be quite appropriate. But isn't their income from all these other "branches" growing?

So - assuming for a moment their strategy does work out and their market share and margin is growing - than maybe the downside risks at the current share price are lower than the potential upside rewards ...

Unless we think TRA will be biting the dust or continuously shrink ... market is normally cycling between euphoria and gloom ... and given that we are currently in gloom mode - what would be next? More gloom?