Selfie of me howling about the Turners share price lol https://www.youtube.com/watch?v=esjec0JWEXU
Selfie of me howling about the Turners share price lol https://www.youtube.com/watch?v=esjec0JWEXU
Today is Fibonacci Day (on other side of world anyway as yesterday here) and as I love Fibonacci things and all things natural I had a quick look at the TRA chart
Yes, my target of $3.23 (soon) is indeed a Fibonacci Retracement level (a 50% one as well)
Looks like the ones are on my side ...$3.23 here we come ...+25%
Spooky eh ...but nature really is a reliable indicator
Hello everyone,
I started investing in TRA last year shortly after the Hugh Green sell out in late June 2017, as I thought it provided a good entry point into what looks like a fundamentally very sound business.
Since then, the share price has been in a gradual downtrend, despite the company posting what appear to be very solid financial results. In particular the FY2018 result in May. +33% net profit, +15% EPS growth. Positive commentary from board and management across all divisions. Positive outlook and increasing dividends. The FY2018 result seemed like the turning point and gave reprieve to the share price as it rose from under $3 to $3.20... alas that was short lived and we're now down even further to 2.63 and trading on a low PE of around 9.
The past few months I've been really scratching my head over why TRA has significantly underperformed the NZX (even before the market recent correction).
After doing a bit of research, I believe this could largely to related to a number of potential headwinds and disruptions to the traditional car dealership business model.
The fundamental way in which people buy and own cars is going to change over the long term.
- The average punter can now go and directly import a second-hand car from sites such as www.beforward.jp and save on the average 25% mark-up that dealers slap on the imported cars. The only reason you would go to a second-hand car dealer would be if you didn't have the finance and you need to pay it off in installments.
- If we take a queue from overseas, we notice a new trend in car ownership happening. Most brands in the US now offer a 'subscription' based service, where you pay a monthly fee and take any car of your choosing from the yard. The traditional burden of buying, owning, maintaining, insuring etc is taken away from the millennials. This could catch on eventually to the rest of the world.
Mercedes for example:
(http://www.autonews.com/article/2018...il-dealerships)
- We can also see this in full swing with the first-hand dealers as well. Some car manufacturers are slowly moving towards the Tesla model. You can only buy a Tesla from the Tesla stores. The next big manufacturer that is going in that direction is Toyota. Starting middle of this year, they have revamped the traditional commission-based dealerships.
(https://www.stuff.co.nz/business/102...-sales-methods)
- The most important disruption of all, is the electric car revolution. At the moment the electric vehicle penetration is less than 1%, but this is set to change rapidly as fuel prices go up. Environmental sentiment echoes louder. More people are becoming more aware of global warming and want to do their bit to reduce greenhouse gas emissions. In some countries, up to 30-40% of the EV's cost is subsidised. The Greens are wanting to bring this to NZ as well to encourage more people to buy first hand EVs:
(https://www.greens.org.nz/news/press...ment-low-power).
Adding to that, a large number of car manufacturers have indicated they are all committed to having a majority electric fleet only by 2025.
(https://www.vox.com/energy-and-envir.../ev-revolution)
- The key issues with buying second hand EVs is around the battery. The more an EV is used, the more the battery diminishes over time. The battery in EVs is the most important component.
(https://www.edmunds.com/car-technolo...and-range.html)
It is currently far more ideal to buy EVs first hand from the manufacturer, in order to get a fresh battery + the 8 year battery warranty.
There doesn't seem to be much point in buying a second hand EV when it costs almost the same first hand if you take the Greens subsidy into account along with the additional risk of a diminished battery and possible lack of the original manufacturer warranty for the battery.
I'm thinking that all these headwinds and disruptions are potentially causing uncertainties around the traditional car dealership model and hence weighing down on the TRA share price. All the tailwinds that used to be with car dealers appear to be slowly fading in a similar way to fossil fuel companies (like Z Energy). For sure the car dealers still have their place today and tomorrow. But it's the day after tomorrow that concerns me.
What you guys think?
Would be great to hear from Turners themselves to see how or if they plan to adapt their business models around each of the points above.
disc: still holding TRA
After reading your carefully thought out post JayRiggs my question would be who are the sellers that have carefully thought out the future about the future of turners and come to the conclusion to sell based on one or more of your points above. My view is that 99% of investors are not that analytic nor that bright - posters on sharetrader are the exception of course and no disrespect is intended. Turners SP depreciation in my view is just general market pessimism and scepticism. In the absence of really good news share prices will continue to drop because the pundits are saying NZ shares are over priced and besides that the sky is going to fall in. At some point the attitude will change and it may change very quickly and TA cannot be relied on to predict it. I am not selling. I am relying on the board and management doing the right thing and after all that’s what they are paid to do.
Great post +1;
Looking into the trends you indicated I would however think that they are at this stage no threat to TRA - and might well turn into opportunities.
Subscription based service - basically the entitlement for a permanent but swapable rental: Looking at the examples you cited this service seems to be at this stage both unprofitable as well as very expensive (i.e. unaffordable to TRA customers). Just imagine a standard TRA customer coughing up between $1500 and $4500 per month for the entitlement to drive one (admittedly rather new, upper class and serviced and insured) vehicle. However - if this subscription becomes standard and profitable, than I'd say that Turners woud be ideally equipped to adopt and benefit from offering such a service. Pay $750 per month for a swapable maintained and insured middle of the road vehicle? Something I could imagine - and Turners should be an ideal company to offer this service. Lots of choice, and they have already insurance and workshops in their network.
EVs: Yes, I believe as well they might come faster than we think, unless they turn out to be a similar environmental flop than the biofuel disaster (nothing destroyed more tropical rainforest than the braindead idea of using biofuel. Huge parts of Sumatra, Bornea, Malaysia and Indonesia have been deforested to plant oil palms instead) - time will tell. I believe however that - if the EV idea gains momentum battery prices will drop fast, and than there is no reason why Turners couldn't offer e.g. 8 year old EV's with new or reconditioned batteries. No reason for them to go out of business ...
But yes - there is uncertainty, and markets don't like that. Could be a threat or could be an opportunity.
Nice post Jayriggs and nice to see someone take the bit between their teeth and try and understand TRA's woeful underperformance.
Add into the mix long term autonomous self driving cars and overseas survey's are showing many young people would rather own a smartphone than own a car. Good public transport in some overseas cities, uber, self driving cars and now people getting around en masse in cities on electric scooters. The world is slowly changing.
I keep an eye on AHG the largest vehicle retailer in Australasia. Its interesting to compare the two graph's and it would appear these long term developing trends are having a meaningful effect on both companies, with AHG in yellow getting based even harder with the ugly stick over the last two years, see attached comparison graph Attachment 10171
I think there's more too it with TRA. As Winner has correctly pointed out their ROIC is not great and eps growth this year will be minimal, if any. Then there's the fear of a recession in FY19 or FY20 and car companies have traditionally faired very poorly in a deep recession. The lack of liquidity is also off-putting for many and the chairman did himself and the company a tremendous disservice by not attending the annual meeting.
Interesting gap between bidders and sellers in relation to the last noted price ... but at least market appears to be optimistic
Attachment 10174
Please provide a sample of your hair for verification :p;
But yes, you are right - the volume (the standoff settled at $2.70) is not overwhelming. I guess most punters obviously wait for tomorrow.
On the other hand - I prefer anytime a small volume of up-bidders to a large number of down-sellers :);
My opinion is the challenges refereed to by JayRiggs are in the future and have only a slight influence on the current situation.
There is a world wide glut of cars with the situation worsened by Presidents Xi and Trump standing on the wharf demanding large payments for foreign manufactured cars. I know a country which will allow auto manufacturers to import as many cars as they like without tariffs. Those Kiwis who have observed the large number of new car advertisements on TV can probably guess which country I am referring to.
I would not be surprised if the head offices of car manufacturers have not rung their assembly plants and told them to quickly put the steering wheel on the other side and ship to New Zealand.
The affect of this diverts a segment of second hand car buyers to the new market and transforms the second hand car market from a cascading market to a clearance market.
Neither of these changes are necessarily of advantage to Turners.
Boop boop de do
Marilyn
I agree. Young people these days would rather buy a good smart phone and uber around than own a car.
Good point about autonomous self driving cars. Something Elon Musk and Tesla are working hard on.
Oh my goodness, AHG on the ASX. I was not aware of them. That chart really does look dreadful!