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

[BlackPeter]

BP, I made a post in September on this topic, where I highlighted a dichotomy of two views on having 'lots of debts'. I find that I tend to think from the point of view of the consumer as a default position. A lender, like Turners, has an opposite viewpoint.

Since this is a 'Turners' thread, I think I should challenge your line that 'having lots of debt is good'. Certainly having lots of car loans on the Turners books is good. But car loans are 'financial receivables' and therefore 'assets' for Turners. These assets are funded by Turners bonds and bank debt. I would argue that the less of this debt that Turners have the better.

If you imagine an extreme case of Turners having no debt, and all Turners car loans funded by shareholders funds, then this is the lowest risk scenario for Turners going forwards. That is because there is zero chance that any debt will go sour in a market downturn if such debt doesn't exist.

If we go to the other extreme where Turners have 'lot's of debt', and a used car market going sour (some would argue that is where Turners is now) and the financial receivables shrink to below the value of the debt used to fund them, THEN the difference is must be made up from shareholders funds. That is bad news for shareholders.

Yet 'flip the coin' and you can argue that having lots of debt means you can have a bigger book of financial receivables (car loans) for which you can provide funding. So it seems having lots of debt being good or bad can come down to a market confidence issue. If the market is going well then having lots of debt could be good.

Having criticised you, I now have to turn the spotlight of criticism back on myself, and the conclusion to my above referenced post that I made back in September. An 'at risk liability' is in all probability a bank loan. So having more of those in proportion to your loan book (risk assets) is most likely a bad thing. And that means the loan book position at Turners was in a more risky state at EOFY2018 than a year previous to that. The opposite conclusion to the conclusion I made at the time!

SNOOPY

Fair enough ... though - isn't this just the typical balancing of risks and rewards for any investment?

If a company only loans money from their existing equity, than yes, the risk of default is low even if the loans go sour, but the likely gains will be low as well given taht the company is only confined to their existing capital to make money (no leverage).

If a company borrows money to lend it to others with a margin than they inevitable increase their risks (they might not get this money back and default on their own loans), but so do they increase their earnings potential.

But, yes, while it is good for a finance company to have leverage - there is obviously such a thing as too much leverage.

Need to work on the fine print for my posts ...

[winner69]

I think $2.00 is the bottom, called it there a while back and sticking with that. No growth eps (oh my goodness that phrase will upset some people) companies worth no more than a PE of 8.5 according to the legendary investor Ben Graham. Consensus eps from the two brokers is lower in FY21 than in FY18 How sad is that !
8.5 x ~ 26 cps, (removing one off's) = $2.21...but these things often overshoot and there is so much negative sentiment both specifically for this company and on a macro level internationally I would be at all surprised to see $2.00 tested. I might be interested in a few more at that level but wouldn't pay the current price for any more.

Now before we get any replies to this post I'll just put some popcorn on lol

That analyst from the well respected broking house starting with a C forecasts eps of 22 cents

Jeez ....22 X 8.5 = $1.87

[Beagle]

That analyst from the well respected broking house starting with a C forecasts eps of 22 cents

Jeez ....22 X 8.5 = $1.87

Isn't that the broking house one of the biggest enthusiasts for Turners uses ? You can't post that yet...I haven't finished cooking the popcorn yet...this could be quite "the show" today after us posting that. MIght cook up a double batch

[winner69]

You can't post that yet...I haven't finished cooking the popcorn yet...this could be quite "the show" today after us posting that. MIght cook up a double batch

No worries mate ......perversely the share price will go up today

Great defensive stock

[BlackPeter]

That analyst from the well respected broking house starting with a C forecasts eps of 22 cents

Jeez ....22 X 8.5 = $1.87

Hmm - that's obviously assuming that 22 cent (if it comes true ...) is the new normal - and no growth anymore from here. Forever.

You think that's it?

Just try to use your formula for some other of our listed companies (SP = 8.5 times forecasted EPS) than Ryman would be worth $5.78, MFT $11.65 and FPH $3.06!

Sounds like the big sell out is coming and TRA is already pretty close to the bottom (well, comparatively). This must be good ...

[Beagle]

No worries mate ......perversely the share price will go up today

Great defensive stock

Is it ? Most of the vehicle manufactures and retailers got beaten down really severely during the GFC. I believe when times are really tough people simply service and fix what they have as absolutely necessary rather than upgrading. https://www.marketscreener.com/TURNE...14/financials/
No two ways about it, these eps numbers are tough and have all the signs of a no growth eps company. Average eps over the next 3 years is 26.5 cps. PE of 8.5 is what I am sticking with and my updated fair value is thus $2.25. I would need to see it 10-15% below that to get interested in any more.
Just as well FCNZ have a much higher valuation as otherwise if they were similar to Craigs this could have been even uglier. I think my popcorn is ready now

[couta1]

169k bought back at $2.41 yesterday, need more today.

[couta1]

That analyst from the well respected broking house starting with a C forecasts eps of 22 cents

Jeez ....22 X 8.5 = $1.87

No worries, just had a quick check of the stock pick contest, C in 34th place and Couta in 9th place, C need to up their game if they are to be believed.

[Beagle]

No worries, just had a quick check of the stock pick contest, C in 34th place and Couta in 9th place, C need to up their game if they are to be believed.

Congrats on being in the top ten mate. The worry is that FCNZ who's price target is still over $3.00 is in 132nd place Both Criags and FCNZ well behind us mate
Why would you pay them money for their research when old dogs simply follow their own noses to find the best feed bowls

[Beagle]

Fishing no good today...popcorn gone cold now. Maybe the optimists have been shell shocked by the lack of eps growth the brokers are forecasting and don't know how to possibly put a positive spin on that ?...but I am pretty sure they'll find a way to do exactly that at some stage soon lol