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  1. #3991
    percy
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    Increasing fully imputed divies suit me just fine.

  2. #3992
    Senior Member
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    Without specially targeting TRA, a declining price is usually for a reason, sometime short term irrationally, but if dividend yield is increasing cause price is dropping, as I always say one of two things will happen, the sp will rise again or the dividend will decrease. Question of course is which is it and/or get out until you know??, then re-evaluate.

  3. #3993
    percy
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    Quote Originally Posted by Jay View Post
    Without specially targeting TRA, a declining price is usually for a reason, sometime short term irrationally, but if dividend yield is increasing cause price is dropping, as I always say one of two things will happen, the sp will rise again or the dividend will decrease. Question of course is which is it and/or get out until you know??, then re-evaluate.
    Agreed.
    Therefore you must trust your own research.
    The better your research is, the more likelihood you will make the right decission.
    Last edited by percy; 18-01-2019 at 08:12 AM.

  4. #3994
    On the doghouse
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    Default How I normalise TRA profits

    Quote Originally Posted by Beagle View Post
    Brokers average eps forecast for FY21 is still lower than for FY18. What growth have you manufactured through your convoluted process and are you now in cahoots with Percy lol I stick with a PE of something less than 8.5 due to declining average eps expected over the next 3 years. 8 seems reasonable to me and on 25 cents that makes for an even $2 as fair value.
    No convoluted process here Beagle and, just for you, I have added all my references in my post 3984 so that you can see I have not pulled my figures out of a hat. You can take out some of my numbers if you disagree with me, if you consider some of those profits I have taken out as 'normal'. But what is 'normal'?

    Turners would say that buying a new site, redeveloping it, then signing up to above market rents to book up front an above market capital profit when the site is on sold to a third party is 'normal business'. I say it is clever business. Good management to become their own 'in house property developer', while having the ability to cart away their container buildings on the back of a truck when they are done. A great way to monetize assets to raise capital to bolster the support for their loan book. But sooner or later they will run out of sites to redevelop. And by 'sooner or later I mean within 2-3 years. What happens to this 'branch' of the business then? While I am happy for Turners to continue to develop their sites in this way, I will only count it as 'normal business' when they start developing sites like this for other third parties. I certainly did not invest in Turners as 'property developers' and so do not count returns from this transient branch of the business as 'normal'.

    Now I move to the revaluation of Turners minority shareholding in MTF. Turners do not exercise control over MTF so such equity investments must be 'equity accounted'.. The change in equity value must flow through the profit and loss statement each year, as does the dividend from MTF. I am happy to see the dividend from MTF. I think that the 'dividend income' from the MTF investment is listed under note 7 in the break down of 'Other Income': An amount of $349,000. However the revaluation gain of $612,000 (AR2018 p67) is completely out of the control of TRA. And since their MTF stake is not for sale, I can see little relevance in booking a 'profit' that can never be realised. I realise that it is correct to do so if accounting standards are to be complied with. But I don't think it reflects any change in the earning capacity of the TRA business. So in my assessment this 'capital gain'' should be left out of normalised TRA profits, as should any capital loss if the value of the MTF stake went the other way. Curiously the 'Revaluation Gain on Investments' on p51 of AR2018 is $590,000, not $612,000. I would be interested to hear from anyone who can explain this difference!

    Next stop is the reduction in the 'Buy Right Cars' earn out provision. I think it is fair to say that this is one area where management's grand development plan has stumbled. From p49 of HYR2019 we learn that in the pcp "a release of $0.4m was recognised in Profit and Loss" and in the second six months of FY2018 another release to profit and loss of $2.2m was made. Thus the total released to profit and loss from what would have been earn out payments over FY2018 was $2.6m. Try as I might, when I look over the detailed profit and loss statement under note 7 in AR2018, I cannot find these write backs. We know they were booked as profits because Turners told us so in the half year report six months down the track. But where are they in the report at the time? Please let me know readers if you can locate them. In the meantime I will take Turners own word six months later and take that $2.6m off the declared profits. One thing I think we can all agree on is that this $2.6m was a one off windfall (sic) that is unrepresentative of any Turners earnings going out into the future. So looking into the normalised earnings picture, out it must come.

    Finally I refer to the EC Credit unredeemed voucher release to P&L, amounting to $0.7m. Turners mentioned this as a significant abnormal (HYR2019 p22), as it was $700,000 less than the equivalent squaring up of the book over FY2017 - actual value $400,000 for the year (AR2018 p13). If you regard the FY2017 year as 'normal' and the FY2018 as 'abnormal', then my normalised adjustment looks appropriate. But truth be told I do not really understand what an 'unredeemed voucher release' is. I have figured out it is debt collection industry jargon, and that it contributes to profits at the EC Credit division. But what is it? And why is it different to normal debt collection profits? If anyone can answer that question, once again I am all ears!

    SNOOPY
    Last edited by Snoopy; 18-01-2019 at 05:47 PM.
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  5. #3995
    percy
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    Christchurch and Auckland sites development alone will be very large,and as Turners market share increases, so is the likelihood of further developments.
    Although Turners are NZ's largest second vehicle dealer,their existing market share leaves plenty of room for growth.
    We should note Turners talk of 5 years of property developments.
    I guess it is very hard to predict further ahead.
    Last edited by percy; 18-01-2019 at 10:36 AM.

  6. #3996
    ShareTrader Legend Beagle's Avatar
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    Quote Originally Posted by Snoopy View Post
    No convoluted process here Beagle and, just for you, I have added all my references in my post 3984 so that you can see I have not pulled my figures out of a hat. You can take out some of my numbers if you disagree with me, if you consider some of those profits I have taken out as 'normal'. But what is 'normal'?

    Turners would say that buying a new site, redeveloping it, then signing up to above market rents to book up front an above market capital profit when the site is on sold to a third party is 'normal business'. I say it is clever business. Good management to become their own 'in house property developer', while having the ability to cart away their container buildings on the back of a truck when they are done. A great way to monetize assets to raise capital to bolster the support for their loan book. But sooner or later they will run out of sites to redevelop. And by 'sooner or later I mean within 2-3 years. What happens to this 'branch' of the business then? While I am happy for Turners to continue to develop their sites in this way, I will only count it as 'normal business' when they start developing sites like this for other third parties. I certainly did not invest in Turners as 'property developers' and so do not count returns from this transient branch of the business as 'normal'.

    Now I move to the revaluation of Turners minority shareholding in MTF. Turners do not exercise control over MTF so such equity investments must be 'equity accounted'.. The change in equity value must flow through the profit and loss statement each year, as does the dividend from MTF. I am happy to see the dividend from MTF. I think that is the 'dividend income' in the MTF investment is listed under note 7 in the break down of 'Other Income'. An amount of $349,000. However the revaluation gain of $612,000 (AR2018 p67) is completely out of the control of TRA. And since their MTF stake is not for sale I can see little relevance in booking a 'profit' that can never be realised. I realise that it is correct to do so if accounting standards are to be complied with. But I don't think it reflects any change in the earning capacity of the TRA business. So in my assessment this 'capital gain'' should be left out of normalised TRA profits, as should any capital loss if the value of the MTF stake went the other way. Curiously the 'Revaluation Gain on Investments' on p51 of AR2018 is $590,000, not $612,000. I would be interested to hear from anyone who can explain this difference!
    Good work on #3984. Underlying eps of about 21 cps needs to be viewed in the context of the only other listed motor vehicle retailer Colonial Motors Ltd which has a far longer trading history and a vastly better track record of growing eps consistently over time. I estimate that is on a forward PE of 10 and obviously even if we are generous and apply that same PE to TRA we get $2.10.
    We also need to consider the sunset nature of the industry...plenty of overseas car companies trading on single digit PE's reflecting the overarching nature of where the industry is headed over time.
    I'd be very cautious about using a PE of more than 10 on any vehicle retailer, manufacturer or distributor.
    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

  7. #3997
    Speedy Az winner69's Avatar
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    With a third of Turners profits not being normal is Turners a real abnormal company

    Sorry Snoops
    Last edited by winner69; 18-01-2019 at 11:02 AM.
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  8. #3998
    percy
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    [QUOTE=winner69;744362]With a third of Turners profits not being normal is Turners a real abnormal company

    Classic...!!!..lol

  9. #3999
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    Quote Originally Posted by Snoopy View Post
    Truth be told I do not really understand what an 'unredeemed voucher release' is. I have figured out it is debt collection industry jargon, and that it contributes to profits at the EC Credit division. But what is it? And why is it different to normal debt collection profits? If anyone can answer that question, once again I am all ears!
    Got off my doghouse and went to the EC Credit website:

    --------

    Easy Debt Collection Process

    EC Credit control uses a quick voucher system to lodge a debt that you need to be recovered. It’s a simple process to fill out the voucher and send it in, or you can even do it online. EC Credit control has 24×7 access to its lodging system so you can lodge it immediately at a time that’s convenient to you.

    Up Front Costs

    Loading a voucher will only be a single set fee to start the process. So no matter how often we contact your client you won’t be charged any additional fees. If EC Credit control can’t collect your debt then there will be no commission fee charged.

    --------

    It looks like these 'vouchers' are one off debts sent in by customers, as opposed to a 'debt collection book' that EC Credit works through. So if:

    1/ you want a debt repaid, and send in a voucher to EC Credit to that effect AND
    2/ EC Credit collects that debt for you BUT
    3/ you forget that you asked EC credit to collect that debt in the first place so the voucher is not redeemed.
    4/ Does this mean that EC Credit can simply keep your money as a unredeemed voucher?

    It seems hard to believe that EC Credit could be that unethical as to just keep the money of the customer who initiated the request, or that there are enough EC Credit clients about that are so forgetful.

    But what other explanation might there be? Are we just talking about a EC Credit banking that set up fee without collecting the debt and any associated commission?

    SNOOPY
    Last edited by Snoopy; 18-01-2019 at 05:49 PM.
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  10. #4000
    always learning ... BlackPeter's Avatar
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    Interesting to see how the markets perception of "the right" PE is changing. Its not that long ago that the market thought a PE of 15.8 is highly appropriate for TRA (24 cents EPS in FY2017 - SP $3.80). Today Mr Market thinks that a PE of 8.3 is just right (29 cts EPS in FY2018 at $2.40). And - as we all know, Mr. Market is always right and always will be. However - Mr Market likes to change his mind without notice and sometimes he is euphoric and sometimes gloomy.

    I think your (beagle's) view is absolutely legitimate - and sure, if TRA's strategy doesn't work out and they always stay a boring old used car dealer without any noticable additional income from insurance, finance, maintenance, end-of-life business and property development than, yes - longterm an average PE of around 10 might be quite appropriate. But isn't their income from all these other "branches" growing?

    So - assuming for a moment their strategy does work out and their market share and margin is growing - than maybe the downside risks at the current share price are lower than the potential upside rewards ...

    Unless we think TRA will be biting the dust or continuously shrink ... market is normally cycling between euphoria and gloom ... and given that we are currently in gloom mode - what would be next? More gloom?
    Last edited by BlackPeter; 18-01-2019 at 11:22 AM.
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