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  1. #2461
    ShareTrader Legend Beagle's Avatar
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    Quote Originally Posted by Snoopy View Post
    My 'Capitalised Dividend' valuation for this share was a failure. But after some soul searching, I believe that 'capitalising earnings' is a more realistic way to go.

    Turners Automotive Group Limited (TNR/TRA) FY2015 FY2016 FY2017 FY2018
    Snoopy Normalised Earnings Per Share {A} 19.4c 24.2c 22.5c 25.6c
    Dividend Paid (per share) {B} 9c 12c 13c 14.5c
    Underlying Retained Earnings (per share) {A}-{B} 10.4c 12.2c 9.5c 11.1c

    I favour using at least five years of data when doing an exercise like this. However, when considering a company as fast evolving as Turners Automotive Group there comes a point when historical data used as a proxy for what might happen going forwards becomes positively antiquated. So I have reverted to using just four years of data which covers the period from when TRA was conceived in its current form.

    The valuation is in two parts. Once again I am using an acceptable gross return of 7.5% for the dividend part of it.

    Average dividend received over the last four years

    (9c+12+13c+14.5c) / 4 = 48.5c, divide by four = 12.1c

    Gross Capitalised Dividend Component = 12.1c / (0.075 x 0.72) = $2.24 (1)

    Average Retained Earnings Valuation reinvested over the last four years

    All things going to best plan, retained earnings should be worth more than cash paid as a dividend. But this assumes a largely monotonic increasing profit year in year out, with very few exceptions. I don't believe that the historical underlying profitability data indicates that Turners can achieve this. So I think it wise to assume that a 'dividend in the bank account' is worth more than a 'potential dividend in the bush'. To reflect 'business execution' and 'car market volatility' risks, I am going to increase my required return for 'retained earnings' by two percentage points, out to 9.5%

    (10.4 + 12.2 + 9.5 + 11.1)/4 = 10.8c (average)

    Gross Capitalised Retained Earnings Component = 10.8c / (0.095 x 0.72) = $1.58 (2)

    So my total 'fair valuation' for TRA becomes (1) + (2):

    $2.24 + $1.58 = $3.82

    Thus at a market price of just over $3, it looks like TRA might be worth accumulating!

    SNOOPY
    Eureka ! Interestingly this is very close to where I see fair value using my modified version of Ben Graham's formula ($4) and where the famous Couta1 reversion theory has it at $3.84. Take an average of all our valuations and you get ($4 + $3.82 + $3.84) / 3 = $3.89. So we're all in agreement then...

    The only fly in the ointment is the two analysts covering it don't see it that way.
    Last edited by Beagle; 20-06-2018 at 08:28 AM.
    No butts, hold no mutts, (unless they're the furry variety).

  2. #2462
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    Quote Originally Posted by Snoopy View Post
    I think I can offer some numbers on the earnings potential of the debt collection division. The divisional operating profit is shown as $3,501m for FY2014. Just like the finance division that I have just analysed, I believe you have to take off a share of corporate costs to get a true EBIT picture. For the debt collection division, this works out to be $11,310. so

    EBIT (debt collection) = $3.501m - $0.01131m = $3,490m

    We are told segment assets are $13,615m

    So EBIT / Segment Assets = $3,490m / $13,615m = 25.6%

    That is an astonishing rate of return, three times better than their own well performed finance business when measured with the same measuring stick. Not too far short of that 37% that Percy, perhaps only slightly optimistically, calculated. More evidence that the premium price that DPC trades at with respect to other finance companies is justified?
    There isn't too much discussion on the EC Credit division of Turners on this forum. Perhaps there should be more? There was an article in the June 10th edition of the Sunday Star times 'Business Section' on the debt collection business in NZ in general. A very small part of that article mentions EC Credit. I think a couple of quotes from that article would be of interest to Turners shareholders.

    "Dave Wilson from EC Credit Control, New Zealand's largest debt collection agency, thinks the Australian push to create a debt sales market of scale in New Zealand is doomed to fail. 'A number of companies like Kessler and TDX have decided to push the debt side of things in NZ and it hasn't had an impact' he said."

    <snip>

    "Wilson had met officials who were very interested in the debt collection and repossession industry, and he believed the threat of law reforms would have a chilling effect on debt sales."

    'I would be very nervous about an agency that bought debt and adds 40 to 50 percent to the debt that it's been sold.' Wilson said. He believed that such high additional fees could be deemed 'excessive'.

    "By contrast debt collectors such as EC Credit Control. which is owned by NZ listed market company Turners, were paid a success fee of around 15 to 20 percent by the company that hired them."

    After reading that I started to feel all warm and fuzzy about the comparatively compassionate service we Turners shareholders are offering to those dastardly debtors!

    SNOOPY
    Last edited by Snoopy; 20-06-2018 at 12:09 PM.
    To be free or not to be free. That is the cash-flow question....

  3. #2463
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    Think Baycorp.A jewel in the crown?

  4. #2464
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    The market is just starting to wake up to the value of Turners shares. Good brave move by Todd Hunter to come on here and clarify a few things and then follow that up by engaging with shareholders in their inaugural series of shareholder briefings right around the country. Good stuff and well done !
    No butts, hold no mutts, (unless they're the furry variety).

  5. #2465
    Legend minimoke's Avatar
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    Quote Originally Posted by Beagle View Post
    The market is just starting to wake up to the value of Turners shares. !
    Funny old world. I bought Turners at IPO way back in 2002 for $1.50 and sold in 2006 for $1.69 for a 13% (exc divis) gain over that period.

    I'm back on the horse again and expecting a better ride this time around. So far up 4.7% in 2 weeks - so I have started off well.

  6. #2466
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    Quote Originally Posted by minimoke View Post
    Funny old world. I bought Turners at IPO way back in 2002 for $1.50 and sold in 2006 for $1.69 for a 13% (exc divis) gain over that period.

    I'm back on the horse again and expecting a better ride this time around. So far up 4.7% in 2 weeks - so I have started off well.
    TRA's share price has moved ahead of 10,20,30,60,90,120 and 180 day moving averages,so would appear you brought at the right time to enjoy the upward share price trajectory.

  7. #2467
    ShareTrader Legend Beagle's Avatar
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    Quote Originally Posted by minimoke View Post
    Funny old world. I bought Turners at IPO way back in 2002 for $1.50 and sold in 2006 for $1.69 for a 13% (exc divis) gain over that period.

    I'm back on the horse again and expecting a better ride this time around. So far up 4.7% in 2 weeks - so I have started off well.
    Giddy up
    No butts, hold no mutts, (unless they're the furry variety).

  8. #2468
    Trying to get outta here
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    Quote Originally Posted by minimoke View Post
    Funny old world. I bought Turners at IPO way back in 2002 for $1.50 and sold in 2006 for $1.69 for a 13% (exc divis) gain over that period.

    I'm back on the horse again and expecting a better ride this time around. So far up 4.7% in 2 weeks - so I have started off well.
    I'm up roughly the same and looking forward to my $3.83 target price.

  9. #2469
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    Quote Originally Posted by couta1 View Post
    I'm up roughly the same and looking forward to my $3.83 target price.
    Momentum is a powerful force and it’s sure building with TRA

    We’ll see 320 next week and Couts I reckon we’ll see your 383 even earlier than you envisaged.

    Hard to stop juggernauts ..especially when they are accelerating fast
    “In a roaring bull market, knowledge is superfluous and experience is a handicap.”

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  10. #2470
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    Always good when head honcho buys shares ..all 25,000 of them recently

    I seem to have more faith in the company’s recent performance than he does ha ha (can’t match his previous purchases though)
    Last edited by winner69; 22-06-2018 at 07:51 AM.
    “In a roaring bull market, knowledge is superfluous and experience is a handicap.”

    –Benjamin Graham”

  11. #2471
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    Quote Originally Posted by winner69 View Post
    Always good when head honcho buys shares ..all 25,000 of them recently

    I seem to have more faith in the company’s recent performance than he does ha ha (can’t match his previous purchases though)
    Try............................................... ...........lol.

  12. #2472
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    Quote Originally Posted by winner69 View Post
    Always good when head honcho buys shares ..all 25,000 of them recently

    I seem to have more faith in the company’s recent performance than he does ha ha (can’t match his previous purchases though)
    I agree but am puzzled how he managed to make an on market purchase of 25k shares at $2.93 on 19 June?

  13. #2473
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    Quote Originally Posted by blackcap View Post
    I agree but am puzzled how he managed to make an on market purchase of 25k shares at $2.93 on 19 June?
    Very difficult when Yahoo Finance show the low for that day was $3.03.

  14. #2474
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    Quote Originally Posted by percy View Post
    Very difficult when Yahoo Finance show the low for that day was $3.03.
    Maybe it was a quiet day in the office and Todd filled the day in with a bit of day trading and the $2.9291 is the average cost over the day. Car guys can’t resist a bit of gambling eh.

    Hoping he’s not covering his shorts
    “In a roaring bull market, knowledge is superfluous and experience is a handicap.”

    –Benjamin Graham”

  15. #2475
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    Default Carrot and stick

    Out waddling along in the sun today I had quite an epiphany. Labour's new families package kicks in on 1 July and the head guy from Mangere budgeting service this morning on TV3's breakfast program said that the average family with 2 kids and paying rent, (with substantial long overdue changes to the accommodation supplement) will be substantially better off. He mentioned as much as a couple of hundred dollars per week for larger families paying high rent, (isn't everyone in Auckland who is renting now paying high rent ?) but still a meaningful amount for most modest income families. I think Labour haven't nearly labored (sorry couldn't resist), enough to sell the benefits of this package and it's really going to make a BIG difference. (The Carrot)

    On the other side of the coin much has been made of the extra costs of the regional fuel levy about to be introduced at the same time, (The Stick)

    It occurred to me that this plays directly to Turners target market ! Average man Joe Bloggs getting significantly more weekly income with an aging inefficient car is probably going to be motivated to change to something more fuel efficient and be able to fund the weekly payments from their increased entitlements.

    Tailwinds coming for Turners ! (who will of course clip the ticket on finance and extended warranty as well).
    To be fair this probably benefits Colonial Motors as well so those with a bob each way are quite possibly very well positioned.
    Last edited by Beagle; 27-06-2018 at 01:50 PM.
    No butts, hold no mutts, (unless they're the furry variety).

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