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

[Cyclical]

They've come up with a novel solution in Florida to deal with the excess of rental cars...

https://edition.cnn.com/2020/04/05/u...rnd/index.html

[BlackPeter]

... so true, beagle. There is nothing in this picture which would encourage me to consider this stock:

TRAchart.JPG

Sure - the company will either survive (and than it might bounce at some stage) or it might crash. I don't see however any indication that the bottom might be in.

What are the odds for TRA surviving? I don't know, but a lot of debt on the balance sheet are not normally a positive sign.

And sure, while trading of cars might be essential ... there is nothing special about Turners (anymore). They are not a one stop shop, but just another used car dealer. The barriers for market entry into this market are probably the lowest for any industry in NZ - anybody can set up a used car business in their backyard, neither qualifications nor special premises required. It is much tougher to open a fish & chips outlet than a used car business.

Add to that that we can expect now for some time a huge surplus (lots of unused rental cars and company fleet cars which loose value every month) on the supply side coupled with weak demand (no job, no car) will make the months to come really tough for any dealer. It is a buyers market.

Ah yes, and the quality of their loans won't improve from a large number of Kiwis loosing their jobs ...

Lots of risks and not that many potential rewards.

[winner69]

So much for TA .... I think our perfect inverse bell curve pattern is a bit munted.

[Beagle]

... so true, beagle. There is nothing in this picture which would encourage me to consider this stock:

TRAchart.JPG

Sure - the company will either survive (and than it might bounce at some stage) or it might crash. I don't see however any indication that the bottom might be in.

What are the odds for TRA surviving? I don't know, but a lot of debt on the balance sheet are not normally a positive sign.

And sure, while trading of cars might be essential ... there is nothing special about Turners (anymore). They are not a one stop shop, but just another used car dealer. The barriers for market entry into this market are probably the lowest for any industry in NZ - anybody can set up a used car business in their backyard, neither qualifications nor special premises required. It is much tougher to open a fish & chips outlet than a used car business.

Add to that that we can expect now for some time a huge surplus (lots of unused rental cars and company fleet cars which loose value every month) on the supply side coupled with weak demand (no job, no car) will make the months to come really tough for any dealer. It is a buyers market.

Ah yes, and the quality of their loans won't improve from a large number of Kiwis loosing their jobs ...

Lots of risks and not that many potential rewards.

Good summary mate and you're quite right that people can import and sell up to 6 cars per annum from their own home without any overheads whatsoever and many do.

[Snoopy]

I think some people really don't get it that the used vehicle market is, and always has been, and probably always will be, an extremely tough low margin business with no moat to entry with its market share being steadily eroded by private sellers and buyers on Trade Me.

The receivables ledger was going from bad to worse in boom times before this virus with bad and doubtful debts steadily heading up indicating systemic issues with their approvals and collections process. I believe that's the reason they couldn't sell it.

I think what many have forgotten here is that, despite the name, Turners is actually a finance company. It is the old Dorchester with a car retailing add on to provide a steady stream of customers to sign up to finance deals. We know from 'competitor' Sir Jeffrey's presentation at the Heartland AGM that motor loans are a high margin part of the finance sector. It isn't true to say that Turners couldn't sell Oxford finance. There were bidders. It is just that Turners management decided there was more value in holding than selling at the price offered.

Turners had certainly tightened their lending criteria well before the Covid crisis. I don't doubt there will be more bad loans than expected now. But maybe not as many as you think?

The alternative of Turners selling Oxford would IMO have been much worse. The new owner might have run scared or gone possum in the headlights still, with no new funding available! A bit like when PGW sold their finance division to Heartland and new loan approval proved difficult because Heartland did not know their PGW loan customers. At least as it is now, Turners has a finance company that will back their car sales with loans.

Oh, and all these cars that Turners are selling below cost. That doesn't mean an overall loss for the company. Because the real money is to be made in the accompanying finance deals.

Now we're in a severe recession, (possible global depression), they are going to get smashed with bad debtors in their finance division, as sure as night follows day.

And EC Credit gets the job of recovering what they can from the loan (ticket clipped). And the repossessed car gets sold on through Turners Auctions (ticket clipped).

SNOOPY

[Beagle]

Shake those rose coloured glasses off your snout and have a look at how bad and doubtful debt provisioning was steadily climbing during strong economic times leading up to the Corona virus, then think if they were not under control and increasing at a bad rate previously, how are they going to go in a very deep recession ? I haven't forgotten they're a finance company, (others probably have), and I haven't forgotten that finance companies do really badly in a global financial crisis. Remember all the finance company failures in the GFC ?

Anyway...I can't be bothered with any sort of new campaign...if you and others want to look on the bright side, good luck.

[macduffy]

Anyway...I can't be bothered with any sort of new campaign...if you and others want to look on the bright side, good luck.

That's a shame. I was looking forward to a stimulating exchange to brighten this dreary lockdown!

[percy]

That's a shame. I was looking forward to a stimulating exchange to brighten this dreary lockdown!

The field is wide open for you to take up the mantle macduffy.
Another 150 pages of the same old .?.I can't be bothered.
Perhaps you could start by stating neither Marac or MTF had large motor impairements during GFC.
Marac lost their shirt on property development lending.

[macduffy]

I'm a keen observer of TRA, percy, rather than a current or potential investor in the company. I exited a small holding several years ago and counted myself lucky at the time to emerge, capital intact. It's been a fascinating read since, the sole listing with a finance co. flavour left on the lists now that UDC are no longer there. Mind you, there are some who would mutter that HGH is really one - I couldn't possibly comment!

Cheers

[percy]

I'm a keen observer of TRA, percy, rather than a current or potential investor in the company. I exited a small holding several years ago and counted myself lucky at the time to emerge, capital intact. It's been a fascinating read since, the sole listing with a finance co. flavour left on the lists now that UDC are no longer there. Mind you, there are some who would mutter that HGH is really one - I couldn't possibly comment!

Cheers

Now that you mention UDC. I seem to remember they sailed through GFC.
HGH a finance company.? I couldn't possibly comment either..lol.