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

[Hoop]

At last there is a NZX enquiry...should've happened way back when it was at $1.60 something.

DPC commented there is nothing that the market does not already know. They admit having a divestment of funds but it they have not mentioned the extent of any damage caused...no mention = riding out the storm reasonably well (disclosure rules).

Typical !! NZX tardiness!! Ditched half of my shares a few days ago after a paranoid market finally unrattled me in making me think something more sinister was out there that I didn't know about but the NZX did. Cancelled the rest of my sell order this morning.

http://www.nzherald.co.nz/section/12...ectid=10459341

[thereslifeafter87]

Around half their loan book is in motor vehicles, a segment that has been hit pretty hard over the last 24 months.

They also have $139m of loans due to be repaid before end of Sep.

If there has been little impairment of the due assets they should be OK.

With the current markets view on finance cos it may be prudent to wait till the downslide is over or at least until you get some confidence in quality of the MV assets. If they have bad news in September its likely the SP will tank further.

They have $139m of debentures to repay, but even with large amounts of impairment there is plenty of room in their receivables to cover that amount.

Obviously the lower the SP goes, the greater the margin of safety.

I like management commentary regarding the motor vehicle loans and moving away from them, and that being reflected in a fall in MV loans as a percentage of total loans between the 06-07 years.

One issue is that a large asset on the balance sheet is the investment in St Laurence. I haven't looked into this in detail, but it is a private company is it not? As such I would assume it wouldn't have much freely available information regarding its financial health? This could be one factor that would make it difficult to really get a feel for the strength (or lack thereof) of DPC's underlying asset base.

[hairdresser]

I dont think there in any meaningful risk of default.

But they have been generating good returns from the MV segment.

A lot of loans are due for repayment, which will imapct on profitability unless they are replaced with new loans.

Agressively chasing new loans may mean taking on greater risk.

investment the in St Lawrence IMO is not too risky.


As a standalone I'd wait to see how much of their provisioning they are able to write back, and where there new loans are coming from.

Also St Lawrence may want to make some sort of play for these guys at some stage [amalgamation most likely], the result would be a much stronger company, it may be worth taking a position on that alone.

[POSSUM THE CAT]

Their holding in St Laurence is my worry with Dorchester. As the lack of imformation make me think it is not as good a company as people seem to think it is.

[thereslifeafter87]

Hairdresser, if you check the annual report, they have pretty much no provisioning. They have taken a one-off hit, writing off a pile of bad debts.

Revenue may fall due to not taking on as many new motor vehicle loans (they have said they want to move away from their central focus on the MV market), however one would expect margins to improve due to more disciplined lending practices.

If write offs next year are more in line with '06, we could see a return to operating profitability, and possibly a significan increase in the SP given that NTA is 1.86.

[hairdresser]

St Laurence recognises $26m in interest revenue but only $18m in interest payments were received as cash. ie capitalised interest of $8m for the year. I don't know if 31% capitalised interest is normal for finance companies or not, but it is up from 28% in the 2006 year.

I suppose the risk is that they won't know until the projects are completed and fully repaid.

[p2r]

St Laurence Ltd is on NZX (STL - fixed interest notes) and you can find their annual report to March 2007 there or on the website. Pretty sound and well prepared for a credit crunch - I think STL are better placed than DPC.
I am not sure why they are so close whether STL had to buy into DPC to get their money back from Bridgecorp or whether it is all part of a masterplan. There have been some changes at STL in the last year director left etc so that may be a factor.

[hairdresser]

These guys appear to be pretty cashed up

Note 23
Loans being repaid in current QTR = $119m
Debentures being repaid in current QTR = $57m
Cash at balance date = $53m
If new lending = new debentures
Then they should have around $120m in cash.

Current market cap of DPC = $40m

Hmmmmmm

[SMan]

Well I'm a DPC shareholder as of yesterday. Jumped on once it hit the $1 mark, kind of an arbitrary price but hey . Seems to be a bit more support as of today and with news of forecast $6M target for next year the SP should rally. If as you say hairdresser DPC were to 'cashup' to $120M they would also have ontop of this their stake in STL who have a reported equity of ~$160M. So Dorchester is holding a quarter of this (= ~$40M when market capital for Dorchester alone is <$40M??). STL seems to be profitable but the main earning are unrealised of ~$30M. Dorchesters stake in STL is more of a long-term investment rather than a cash cow. For STL it would be the opposite (Dorchester dividens providing cash for the day-to-day cash flow of STL). Aside from low consumer and investor confidence (which will hold the SP low in the short-med term) DPC looks (on paper at least) to be a real nice long-term investment.

Anyone got any info on STL shareholders?

[hairdresser]

Aha

Selling off the MV loan book valued at $147m. Probably at a significant discount to book maybe 10-30&#37; ... Look forward to seeing their response to the NZX request.

If they're making 7.3% GM [their avearage overall lending margin, MV margins are likely to be higher] on the MV loans it will hit their GM by around $10.7m. Of course this may not be as bad as the write down they take on selling the book.

Selling a few reverse mortgages will not replace this income overnight.

$32m of Equity investments current valuation may be a little lower.

Capital adequacy must be pretty tight.

This would probably explain the recent decline in the SP.

Good luck to holders....