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  1. #2531
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    Quote Originally Posted by percy View Post
    Hopefully we will see TRA extend their Buy Right Cars footprint Nationally.
    As we heard at today's presentation, this is not going to happen. 'Buy Right' may extend down to Hamilton. But it is seen as a 'top of the North Island' brand.

    Slide 12 of the presentation highlighted 'Satisfaction' and 'Likelihood to repurchase' (I have added some more info).

    Turners Buy Right Cars
    Satisfaction 87% 88%
    Likelihood to Repurchase 71% 77%
    Stock Turnover 35-45 days 60-90 days
    Price Sweet Spot $10k-$15k $15k-$25k

    These figures are quite good although Todd wants the customer feedback figures to be even higher. Questioned on the relative out performance of 'Buy Right', Todd said that at 'Buy Right', salespeople would spend 3-4 hours with each customer getting a better feel for their needs. With Turners cars at a lower price point, there isn't the staff buyer interaction time required to generate the same depth of mutual understanding of the deal. The 'Turners' brand is more of a self service model. Todd also told us previous management at 'Buy Right'; had done a sub optimal job on stock turn, with some vehicles still on the yard after more than a year. As a result some $2.5m of the $6m earn out payments due by August 2018 (two years after the business purchase ) to the former 'Buy Right' owners will not be paid.

    We also learned that Turners had looked at taking on a new car franchise. The problem here was car makers often dictated what sort of show room (usually a capital intensive design) is required to represent that manufacturer. Further, with new car sales at a peak, the price to be paid for acquiring a new car franchise would be high. So this idea has been shelved, but serves to highlight the value of being a 'brand agnostic' seller.

    Aaron Saunders also chipped in with his experience of 'market resilience', what happened in the NZ car market during the GFC. New car sales dropped by up to 50%. But the fall in used car sales was a more modest 15%. There is less buyer discretion in the used car market! When you need wheels to get to work, you have to buy something!

    SNOOPY
    Last edited by Snoopy; 14-07-2018 at 05:21 PM.
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  2. #2532
    always learning ... BlackPeter's Avatar
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    Great stuff Snoopy & Percy, saves me writing up some points .

    Just one small thing (Snoopy) - the name of the CFO is Aaron (not Alan) Saunders, unless he changed next to removing his facial hair as well his first name ;

    Given that percy and snoopy took already all the thunder - here are in no particular order some remaining snippets I found worthwhile to note:

    Average stock turnover for Turners Auctions: 30 to 45 days, for Buy Right cars 45 to 60 days (and some of the down writes at BRC, now resolved, >365 days). This reduced my concerns that they might (when electric cars come) end up with a huge pile of obsoleted stock. Todd emphasized however anyway that the number of electric cars in NZ is still minute and replacement of the whole stock will in his view take more than 2 decades (given current number of new cars sold ...);

    Todd considered the takeover of BRC as one of the more difficult acquisitions (well, his most difficult one ...), but he is confident the issues are now resolved.

    The business allows high flexibility to grow (and shrink) sites as per demand - their sell out of a container strategy obviously makes that still easier

    A question re the risk of credit defaults (we discuss this from time to time on this thread): Average default rate for car loans is 2%, at the peak of the GFC it was 4% - i.e. quite manageable, particularly considering that it is quite easy to repossess a car (i.e. default is not equal to total loss).

    Credit Management: good business, but not really their core business. Still - they first plan to grow it before they consider selling ...

    Somebody asked about expansion into Australia: They thought about it and might do at some stage (but credit management - they are already in Australia) , but focus now on growing NZ (which I think, is a good decision);

    Growth potential: current market share 4%; Double that in 5 years?

    Oh yes - and here is a bonus: the profs say that winter (i.e. now) is the best time to buy a new used car, given that for some reason most ex lease cars as well as Japanese cars come in our autumn - i.e. stock levels are high, prices therefore lower ... just visit a friendly TRA site close to your home ;

    Discl: holding & feeling confident my money is in good hands.
    ----
    "Prediction is very difficult, especially about the future" (Niels Bohr)

  3. #2533
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    Quote Originally Posted by BlackPeter View Post
    Just one small thing (Snoopy) - the name of the CFO is Aaron (not Alan) Saunders, unless he changed next to removing his facial hair as well his first name ;
    Typo now corrected - thanks.

    Credit Management: good business, but not really their core business. Still - they first plan to grow it before they consider selling ...
    I was surprised and disappointed to hear that EC Credit may eventually be 'on the block'. As Aaron Saunders put it: People efficient, low CAPEX, spins off cash. Exactly the sort of business you want, I would have thought. Granted I see that it doesn't quite fit with the integrated model that is pervasive between the other branches of the business (with the sole exception of referring bads debts to ECC, fortunately a rare event.)

    The ECC business model is to take on the recovery overdue accounts from the likes of ACC, Government Departments, the Big Banks and Electricity Retailers (without buying the associated debt ledgers). Other target customers are SMEs, where debt collection can help terms of trade. Instead of 'buying' the debt ledger, the business model is to earn a 5 to 20% commission on the loans ECC do manage to collect. Turners are passionate users of the IODM software that automates the debt collection process.

    http://www.iodm.com.au/about-iodm/

    The 'big opportunity' is to extend the successful business relationship that ECC have with the NZ banks to their Australian parents. If that were to happen then the whole business would scale. At that point ECC might be worth more outside the Turners tent than inside it.

    Somebody asked about expansion into Australia: They thought about it and might do at some stage (but credit management - they are already in Australia) , but focus now on growing NZ (which I think, is a good decision);
    The business that Turners would like to get involved with in Australia is 'Pickles Auctions'.

    https://www.pickles.com.au/

    Pickles is privately owned and earns a NPAT of between $A25m - $35m per year. However, in terms of turnover it is five to six times bigger than Turners. Turners would love to do a JV with these guys. However, the owners are staunch Australians who see no reason to step outside their own market comfort and ownership zone.

    This is the kind of thing that Turners would be looking at in Australia. In the distant past (as TUA) they apparently made a medium sized investment in some smaller auction businesses and turned a medium wad of cash into something smaller.

    SNOOPY
    Last edited by Snoopy; 14-07-2018 at 09:15 PM.
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  4. #2534
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    Quote Originally Posted by BlackPeter View Post
    A question re the risk of credit defaults (we discuss this from time to time on this thread): Average default rate for car loans is 2%, at the peak of the GFC it was 4% - i.e. quite manageable, particularly considering that it is quite easy to repossess a car (i.e. default is not equal to total loss).
    A bit more on the finance side. Aaron said of the Turners loans that had gone bad, many had been written through Motor Trade Finance (MTF). Motor Trade Finance had its beginnings in Dunedin as a co-operative more than 40 years ago. The ownership rules state that no one shareholder may own more than 10% of MTF (Turners are the largest shareholder and own 8%). Other significant shareholdings of 3-4% are owned by each by Honda Cars and Colonial Motors. 75% of all stakeholders must vote to change the ownership cap. Heartland had a go at taking over MTF a few years ago. But they couldn't get the 75% of existing stakeholders to agree. Turners are looking to improve the quality of their loans through Motor Trade Finance. Turners originally bought into MTF at a share price of $1.15. While increasing their stake towards the 10% cap cannot be ruled out, the current MTF market price of over $2 make such a move unattractive. MTF has a participating membership of 200 dealers and 50 independent franchisees. MTF is stronger towards the bottom of the South Island and weakens as you move up the country. MTF is slightly under represented in Auckland.

    As for the Turners owned finance operations, the three regional sales forces of the constituent companies, the old Dorchester (+ add ons) in Auckland, Oxford Finance in Levin and Southern Finance in Christchurch have retained their own regional sales forces. But the processing facilities have been centralized in Levin. These finance companies have on average written higher quality loans than those through MTF. The objective this year will be to fold in all the Turner's Auctions in house finance business into Oxford Finance. 85% of the loan book of the now rebranded 'Oxford Finance' combination are written on motor vehicles. As well as writing finance for Turners, Oxford is affiliated to 800 dealers across the country.

    SNOOPY
    Last edited by Snoopy; 26-07-2018 at 09:14 AM.
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  5. #2535
    ShareTrader Legend Beagle's Avatar
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    Appreciate your posts Snoopy and BP which add to our understanding of Turners operations.
    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

  6. #2536
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    thanks guys, that has been a fantastic help . now have 4% of my portfolio there, so see where we are at Christmas . Certainly looks like we might be moving forward with all the MA lines heading north.

  7. #2537
    Speedy Az winner69's Avatar
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    did Turners ever own that Gracefield Lower Hutt site they occupied for years before moving out

    Peter Jackson going to lease it at $900k a year
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  8. #2538
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    Can we have some down-ramping please, the 90 days prior to the Maturity Date for the bonds has started.

    Then lots of bigly up-ramping starting 1 October.

    Thank you.

  9. #2539
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    Hi winner69 - Todd Hunter here...we have never owned the Seaview site. We do own the new site we have moved to in Porirua. Also it is James Cameron who is looking at leasing the old building in Seaview to make the Avatar sequels. Supposedly a 6 year lease for $800k to $900k per annum.

    https://www.stuff.co.nz/dominion-pos...uttywood-hills

  10. #2540
    Speedy Az winner69's Avatar
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    Thanks Todd for that
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

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