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08-12-2018, 07:04 PM
#3861
”When investors are euphoric, they are incapable of recognising euphoria itself “
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09-12-2018, 10:57 PM
#3862
Originally Posted by 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?
Originally Posted by percy
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
Last edited by Snoopy; 10-12-2018 at 07:44 AM.
Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7
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10-12-2018, 03:32 AM
#3863
Snoops - good work
Phew, what a relief to know it’s all honky dory in Turnerland
”When investors are euphoric, they are incapable of recognising euphoria itself “
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10-12-2018, 07:49 AM
#3864
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.
Last edited by percy; 10-12-2018 at 07:51 AM.
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10-12-2018, 07:53 AM
#3865
Bank Covenants FY2016- FY2018
Originally Posted by winner69
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 |
FY2018 |
1/2 x (($230.459m - $133m) + ($191.708m - $69m)) |
$51.103m |
2.15 |
2.0 |
FY2017 |
1/2 x (($191.708m - $69m) + ($109.327m - $0m)) |
$38.844m |
2.99 |
2.0 |
FY2016 |
1/2 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
Last edited by Snoopy; 10-12-2018 at 09:00 AM.
Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7
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10-12-2018, 08:33 AM
#3866
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
”When investors are euphoric, they are incapable of recognising euphoria itself “
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10-12-2018, 08:51 AM
#3867
Originally Posted by 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
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.
Last edited by percy; 10-12-2018 at 09:11 AM.
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10-12-2018, 08:58 AM
#3868
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.
Last edited by Beagle; 10-12-2018 at 09:04 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
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10-12-2018, 09:17 AM
#3869
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. .
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10-12-2018, 09:57 AM
#3870
Originally Posted by percy
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
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