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

[winner69]

They say Finance and collections services worth a bit over $150m... (before corporate costs are accounted for), still quite a bit given market cap of turners only $211m
TRA continues to trade below NTA ($2.58), below an analysts target price ($2.59), and way below where management reckon its worth ($3 'worst case')
Has to go up eventually one would think?

That $150m ...your guess or some guru analysts?

[Beagle]

They say Finance and collections services worth a bit over $150m... (before corporate costs are accounted for), still quite a bit given market cap of turners only $211m
TRA continues to trade below NTA ($2.58), below an analysts target price ($2.59), and way below where management reckon its worth ($3 'worst case')
Has to go up eventually one would think?

$10m real adjusted earnings and a PE of 7 for a trade sale of a finance company. I say less than half what "they say". Some parts of their loan book are probably unsellable, such as their non recourse MTF loans.

[trader_jackson]

That $150m ...your guess or some guru analysts?

My guess... I took the midpoint of $0 to $300m

[percy]

Yeah, NAH. There's so many other things to worry about in life...I'll leave you to watch the moon cycles.
You know me, I bark whenever I feel like it whatever the state of the moon

Market's given the TRA result the big ho-hum which is not surprising.
I do note despite TRA's regular assurance that they've been targeting better quality new lending their overdue debtors have blown out quite considerably, (especially very badly for non recourse MTF sourced lending as predicted by some hound on here many months ago) which really tells me they don't have as good a credit handle on their operation as they would lead us to believe so probably it is best for shareholders if they do sell it.

I would expect HGH or any other interested parties who might conduct really thorough due diligence in due course will find plenty of fish hooks in their receivables ledger not previously encapsulated by TRA's "robust" provisioning model so real adjusted earnings will probably be considerably lower than what's stated in TRA's most recent financials with consequent effect upon the sale price.

I seem to remember you bagging HGH for Dairy loans.
Share milker loans were going to break HGH.You were joined by other great baggers.
Also you remember you bagging HGH for no deposit lending.Esp Holden.
Turners own loans are not the problem.The problem was/is the MTF non-recourse loans.These loans were stopped over a year ago,so it is the tail which continues to be the problem.
The increase in new loan impairments for both HGH and TRA are mainly new accounting rules.In fact no actual change in impairments,[or very little.]
A lot of bagging.
I guess if you howl enough you may get one right,.!
However remember Oxford Finance is now a very substantial business writting good loans.
Also EC Credit is an excellent business.
Also remember Turners' strategic holding of MTF is the key to unlocking MTF. Worth twice [or more] the price TRA paid.

[winner69]

My guess... I took the midpoint of $0 to $300m

Report says Finance segment assets $271m and liabilities $217m which sort of suggests a book value of $54m

The failed sales of UDC was at 1.6 times book value. Heartland currently trades at 1.5 times book value

Does that suggest Turners Finance might be worth $80m odd?

But some say the quality of the loan book is a bit dodgy ...discount to this figure

In reality I have no idea.

[Beagle]

HGH materially underperformed the market for 2 years over the period I was out and Dairy was problematic so I got that right.

Turners own loans are a bit of a problem, overdue loans, (excluding non recourse MTF) are now 2% up from 1.6% in the pcp which indicates to me that despite their multiple attempts to write better quality loans, the delinquency rate continues to rise. Perhaps they should hand over recovery proceedings to a more experienced credit control company ? Non recourse lending is a real mess with over 14% of loans overdue up from about 9% IIRC at the last period, (recall I predicted this problem would get worse),. so I got that right too.

You have waxed lyrical about their integrated full service business model generating huge growth in the years ahead and now it seems even the directors and management don't see it your way. Your persistent glowing positivity about this company against a recent clear downtrend has cost some people I know, that listened to you, tens of thousands of dollars.

There are plenty of problems in their loan book and it will be reflected in the sale price of their loan book, mark my words.
The used car business in N.Z. is a very very tough industry with few barriers to entry. It always will be a tough industry in my opinion.

[Beagle]

Report says Finance segment assets $271m and liabilities $217m which sort of suggests a book value of $54m

The failed sales of UDC was at 1.6 times book value. Heartland currently trades at 1.5 times book value

Does that suggest Turners Finance might be worth $80m odd?

But some say the quality of the loan book is a bit dodgy ...discount to this figure

In reality I have no idea.

$70m is my estimate as noted above, less if any buyer finds the real adjusted and properly provisioned profitability is less than $10m per annum and less for the non recourse MTF loans which quite probably are unsellable. Maybe book value of $54m isn't far off the real money in this tough market ?

[winner69]

I reckon that they (Baker and his mates) have wanted out (ie get their cash out) for some time.

They touted the total business throughout Australia and Asia and couldn’t find a buyer. Even that new Singapore Director who appeared well connected failed to find a buyer.

So Plan B is to sell it off part by part - starting with finance arm and the collection business. More attractive these bits without having a retail used car yard business attached.

Will the insurance arm be next to go?

That leaves a used car business ....maybe they will have to face up to living with that as that might be impossible to hock off.

Interesting times ahead

[percy]

I reckon that they (Baker and his mates) have wanted out (ie get their cash out) for some time.

They touted the total business throughout Australia and Asia and couldn’t find a buyer. Even that new Singapore Director who appeared well connected failed to find a buyer.

So Plan B is to sell it off part by part - starting with finance arm and the collection business. More attractive these bits without having a retail used car yard business attached.

Will the insurance arm be next to go?

That leaves a used car business ....maybe they will have to face up to living with that as that might be impossible to hock off.

Interesting times ahead

Insurance and end of vehicle life logistics will remain.
Insurance [Autosure] is tracking well, and their "capital reserves" will be used to fund property developments including site relocations.Makes sense and has been very profitable,and with a target of 7 new sites should remain very profitable.
Yes interesting times ahead,and until any sale has happened, we just don't know how interesting.

[Baa_Baa]

If TRA sell off the silver, is not the proceeds trapped within the remaining company, hence what happens to those proceeds given the assets are gone and no future earnings from them will accrue to the company. Surely they will have to distribute the proceeds to shareholders, there's only so much scope to grow the remaining assets? Who stands to make a gain from that, oh of course the cornerstone shareholders.

Anyway, I'm disappointed that the silverware is being sold off. I think Winner might be onto it, this is the next fling at an exit strategy, not the continuation of a growth strategy. The business model looked sound until these results, but now it doesn't and it has unanswered questions hanging over it.

Thank goodness I didn't buy the down trend, and now it's gone from my watchlist as well. What a dog it's been, a capital destruction machine and now a strategy to get smaller rather than better.