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  1. #2431
    percy
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    Quote Originally Posted by winner69 View Post
    Not like one of those 'asking for a friend' type stories is it Percy

    You should have known better - don't procrastinate just do it as u told me the other day
    Reread it W69.
    I did buy under 20 cents.

  2. #2432
    Speedy Az winner69's Avatar
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    Quote Originally Posted by percy View Post
    Reread it W69.
    I did buy under 20 cents.
    Well done

    Just thought it might have been just asking for a friend yeah right story. Obviously not so sorry
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  3. #2433
    On the doghouse
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    Quote Originally Posted by percy View Post
    Get used to property profits.
    TRA are also property developers.
    A bare site is not worth a great deal.Yet a developed site with a national tenant is .
    Rather than passing the margin onto a developer, TRA clip that ticket too.
    Turners call themselves an 'Integrated Automotive Financial Services Group'. I downloaded the FY2017 annual report, did a search for the word 'property' and it came up 21 pages later, as an item in a larger table with an entry 'Property Plant & Equipment' while going over the balance sheet. Not very forthcoming for a 'property' company, I would have thought.

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

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

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

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

    SNOOPY
    Last edited by Snoopy; 14-06-2018 at 08:55 PM.
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  4. #2434
    Legend minimoke's Avatar
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    All this analysis. 200,000 at $3.05. I'll take that thank you very much!

  5. #2435
    ShareTrader Legend Beagle's Avatar
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    Snoopy - To the age old question, is the glass half full or half empty there is a simple answer, depends whether you're a shareholder or not
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  6. #2436
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    Default Capitalised Dividend Valuation Model (FY2018 Perspective)

    Quote Originally Posted by Snoopy View Post

    Turners Auctions (TUA) + Turners Limited (TNR/TRA) FY2012 FY2013 FY2014 FY2015 FY2016 FY2017
    Modelled Dividend Paid {A} $2.506m $3.285m $2.131m
    No. Shares on Issue (TNR/TRA) {B} (*) 24.057m 27.395m 55.966m 63.077m 63.433m 74.524m
    Modelled Dividend Paid (cps) {A}/{B} 10.42c 12.00c 3.81c
    Actual Dividend Paid (cps) (**) 5c + 4c 6c + 6c 7c + 3c +3c


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

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

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

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

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

    10.04/(1-0.28) = 13.94c

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

    13.94/ 0.075 = $1.86

    That makes for sobering reading, when the last price paid in the market on Friday was $3.75!
    Turners Auctions (TUA) + Turners Limited (TNR/TRA) FY2014 FY2015 FY2016 FY2017 FY2018
    Modelled Dividend Paid {A} $2.131m
    No. Shares on Issue (TNR/TRA) {B} (*) 55.966m 63.077m 63.433m 74.524m 84.803m
    Normalised Earnings Per Share 6.8c 19.4c 24.2c 22.5c 25.6c
    Modelled Dividend Paid (cps) {A}/{B} 3.81c
    Actual Dividend Paid (cps) (**) 5c + 4c 6c + 6c 7c + 3c +3c 4c + 4.5c +3c +3c


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

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

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

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

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

    10.46/(1-0.28) = 14.53c

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

    14.53c/ 0.075 = $1.94

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

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

    $3.05 - $1.94 = $1.11

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

    SNOOPY
    Last edited by Snoopy; 18-06-2018 at 05:04 PM.
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  7. #2437
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    Quote Originally Posted by Snoopy View Post
    Turners Auctions (TUA) + Turners Limited (TNR/TRA) FY2014 FY2015 FY2016 FY2017 FY2018
    Modelled Dividend Paid {A} $2.131m
    No. Shares on Issue (TNR/TRA) {B} (*) 55.966m 63.077m 63.433m 74.524m 84.803m
    Normalised Earnings Per Share 8.2c 17.0c 24.3c 22.1c 25.3c
    Modelled Dividend Paid (cps) {A}/{B} 3.81c
    Actual Dividend Paid (cps) (**) 5c + 4c 6c + 6c 7c + 3c +3c 4c + 4.5c +3c +3c


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

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

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

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

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

    10.46/(1-0.28) = 14.53c

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

    14.53c/ 0.075 = $1.94

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

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

    $3.05 - $1.94 = $1.11

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

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

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

    p.s.s I would postulate that your capitalised divided valuation model probably works best on a mature company with little or no growth prospects where nearly all profit is paid out in dividends. I am sure you are right on the mark in saying that the model does not apply to a company such as TRA.
    Last edited by blackcap; 16-06-2018 at 09:34 AM. Reason: added the p.s

  8. #2438
    ShareTrader Legend Beagle's Avatar
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    Sorry my Beagle friend, I concur with Blackcap and any attempt to value Turners using historical dividends is going to give you very limited visibility on fair value.
    I look at the forward PE and the expected growth rate over the next few years. Brokers use their fancy DCF models and try and NPV future cashflows using a whole bunch of assumptions and guesses followed by a terminal growth guess from the five year out point.

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

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

    Looks like Couta1's now famous reversion theory is bang on the money again. This to be $3.84 next year and OCA $1.50 !
    Last edited by Beagle; 16-06-2018 at 09:14 AM.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  9. #2439
    On the doghouse
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    Quote Originally Posted by blackcap View Post
    Sorry Snoops but you have me confused. So you are using just dividends (averaged over a x year period) and then using some arbitrary discount rate to value the stock? That is just weird especially when you consider that not 100% of divs are paid out but closer to 50-60% of earnings are paid out as divs. To me it seems obvious you are going to get figure that is a lot lower than market. (Your $1.94)
    Have a look at my post again Blackcap. Perhaps I should have highlighted the bit I have requoted below? :

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

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

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

    I think of Turners as:

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

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

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

    SNOOPY
    Last edited by Snoopy; 16-06-2018 at 10:01 AM.
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  10. #2440
    Senior Member Marilyn Munroe's Avatar
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    Quote Originally Posted by Snoopy View Post
    T I downloaded the FY2017 annual report, did a search for the word 'property' and it came up 21 pages later, as an item in a larger table with an entry 'Property Plant & Equipment' while going over the balance sheet. Not very forthcoming for a 'property' company, I would have thought.

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

    Boop boop de do
    Marilyn
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