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- TRA - Turners Automotive Group [previously TNR - Turners Limited]
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02-12-2018, 10:20 PM
#3691
Banned
"A share buyback changes the underlying mathematics of how earnings are distributed. The same profit distributed over less shares means higher earnings per share..."
Minus the cost of repayment of the capital (plus interest charges) incurred in buying these shares. Or is it magic money that comes from nowhere?
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02-12-2018, 10:52 PM
#3692
Banned
In my mind, there's almost no excuse for buying back stock using borrowed money. (And I consider using cash on hand to buy back shares while borrowing money for other corporate purposes as the same thing.)
"This is just a horrible practice, and I can't think of a single valid argument for doing it. A stock might get a short-term bounce that satisfies short-term shareholders, but that comes at the expense of long-term investors....."
https://realmoney.thestreet.com/arti...stock-buybacks
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03-12-2018, 08:19 AM
#3693
Originally Posted by percy
Buying back 4,474,000 shares at $2.57 would require $11.498 mil.
Cost of funding at 5% would be $574,909 which would be deductable.
Savings on dividends, which are paid from after tax profit would be $738,210.
BlackCross.
The buyback makes real sense to me.
The brought back shares will be cancelled.
I actually think we will see a stronger balance sheet rather than a weaker as a result of the buy back.
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03-12-2018, 08:23 AM
#3694
Originally Posted by BlackCross
In my mind, there's almost no excuse for buying back stock using borrowed money. (And I consider using cash on hand to buy back shares while borrowing money for other corporate purposes as the same thing.)
"This is just a horrible practice, and I can't think of a single valid argument for doing it. A stock might get a short-term bounce that satisfies short-term shareholders, but that comes at the expense of long-term investors....."
https://realmoney.thestreet.com/arti...stock-buybacks
Looks like you forgot to copy one essential paragraph:
Your citation above is proceeded by:
I also ran a few tests recently and found that one of my favorite theories holds water: Companies that borrow money to buy back shares at high multiples to earnings lag the market over time.
Now - you can call TRA a lot of things, but it is certainly not a company "at high mulitples to earnings".
The author talks about companies with PE above 25 (which is equivalent to a 4% return on shareholder capital) - and he well might have a point!
TRA has however a longterm backward PE of 14.1 and a forward PE of 8.4 (which equates nearly 12% return on shareholder capital).
Spot the difference?
Borrowing monney for say 5% to make 12% does make a lot of sense ...
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"Prediction is very difficult, especially about the future" (Niels Bohr)
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03-12-2018, 08:30 AM
#3695
Originally Posted by BlackPeter
Looks like you forgot to copy one essential paragraph:
Your citation above is proceeded by:
Now - you can call TRA a lot of things, but it is certainly not a company "at high mulitples to earnings".
The author talks about companies with PE above 25 (which is equivalent to a 4% return on shareholder capital) - and he well might have a point!
TRA has however a longterm backward PE of 14.1 and a forward PE of 8.4 (which equates nearly 12% return on shareholder capital).
Spot the difference?
Borrowing monney for say 5% to make 12% does make a lot of sense ...
Well said BP. That was my initial thoughts too. if TRA are making a return close to 10% and can borrow at close to 5, then a buy back makes huge sense and this will benefit the shareholders in 2 ways. It will increase EPS for those remaining on the register and the cost of the cancelled shares is very low.
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03-12-2018, 08:37 AM
#3696
Originally Posted by blackcap
Well said BP. That was my initial thoughts too. if TRA are making a return close to 10% and can borrow at close to 5, then a buy back makes huge sense and this will benefit the shareholders in 2 ways. It will increase EPS for those remaining on the register and the cost of the cancelled shares is very low.
.....but will it turn Turners from a unloved market pariah to a stock punters will love?
”When investors are euphoric, they are incapable of recognising euphoria itself “
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03-12-2018, 08:40 AM
#3697
Originally Posted by winner69
.....but will it turn Turners from a unloved market pariah to a stock punters will love?
Haha the million dollar question. I have my doubts having seen the trading activity lately and relentless selling. If TRA can have an ok year and not have the 10% slippage that will re-rate the stock. But till such time the market may be wary what is in stock for FY 19!
That is a short term prediction. Long term I will be holding these for some time for the quarterly dividend and (hopefully) increasing capital gains too.
Last edited by blackcap; 03-12-2018 at 08:44 AM.
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03-12-2018, 08:42 AM
#3698
Originally Posted by blackcap
Well said BP. That was my initial thoughts too. if TRA are making a return close to 10% and can borrow at close to 5, then a buy back makes huge sense and this will benefit the shareholders in 2 ways. It will increase EPS for those remaining on the register and the cost of the cancelled shares is very low.
Agreed............................................ .......
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03-12-2018, 08:45 AM
#3699
Originally Posted by winner69
.....but will it turn Turners from a unloved market pariah to a stock punters will love?
Shortterm maybe not - but does this matter for longterm investors?
As long as earnings are healthy and EPS go up ... SP will follow at some stage.
Isn't it you reminding us regularly of this fact?
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"Prediction is very difficult, especially about the future" (Niels Bohr)
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03-12-2018, 08:48 AM
#3700
Originally Posted by blackcap
Haha the million dollar question. I have my doubts having seen the trading activity lately and relentless selling. If TRA can have an ok year and not have the 10% slippage that will re-rate the stock. But till such time the market may be wary what is in stock for FY 19!
I often think of all the mistakes Mainfreight made on their very successful journey.
Yet their business strategy stayed in place.
I see Turners business strategy is on course,and with further proof it is working,the market will then rerate the stock.
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