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

[percy]

Finance and insurance are what I will be looking at to be honest, the automotive retail is just too flaky in the coming couple years to make me confident in its growth. If finance and insurance number look dismal then il be out with a substantial capital loss as I was buying from mid 3.50s to 2.14 so I am quite deep in it.

I have just had an update from Craigs of our portfolios as per Friday afternoon.
Surprised to be cruising along nicely.Add the recent divies and it could be said VERY nicely.
At this stage the portfolios do not need any adjusting.
Cash from MVN,and the sale of RBC have let me buy a few more HGH and TRA.
The reasons i invested in TRA remain the same.I like the sector finance/insurance/property.used vehcle sales,and think TRA's sound strategy is on track.Just a few speed woobles.

[Snoopy]

Sold out today. I think one of the main drivers on lower second hand vehicle outlook this is often overlooked is a decrease in net migration. To me it makes sense that most migrants would purchase a second hand car (especially the "low quality" migrants the newspapers tell us we are getting), less migrants equals less demand. I don't see this migration trend reversing for a little bit.

James108 didn't see it coming but it has happened. From a 15th March 2019 article:

https://www.nzherald.co.nz/business/...ectid=12212968

"Based on today's figures the numbers suggest that net immigration inflows are on a strengthening trajectory, while they had earlier signalled a plateauing in net inflows at historically high levels," Smith said.

Positive for Turners?

SNOOPY

[winner69]

With more Turners sites (from the rebranded Autowreck ones) advertising will be heaps more effective = improved bottom line

Might even go on TV nationally

Mind you they need to replace some light bulbs in the Turners sign at Wellington site first

[Snoopy]

Sounds a bit like a Briscoes ad where you can spend $60 to save $40 on a $100 frypan.

There is a line missing though

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 deductible.
Expenses go up, profit goes down. Dividend reduces
Savings on dividends, which are paid from after tax profit would be $yet to be calculated

OK, I am going to have a go a calculating the missing line.

Actual buyback was only for 2.6m shares in the end. I am not going to go through every buyback notice to see how many dollars were spent to do this. But my look at he share price chart complete with spikes of volume traded would suggest an average share purchase price of around $2.35. So money spent on the buyback was approximately:

$2.35 x 2.6m = $6.11m

Annual borrowing cost on that money, assuming a 5% interest rate, would be:

$6.11m x 0.05 = $0.306m

The borrowing costs on that incremental amount would be 'tax deductible'. So the reduction in net profit would be:

$0.306m x 0.7 = $0.214m

Annual dividends for FY2019 are forecast to be 17cps. That dividend will not be paid out on the shares bought back. So FY2019 cashflow from dividends not to be paid as a result of the buyback will be:

2.9m x 0.17 = $0.493m

So: 'Annual Extra Dividends Not Paid' - 'Annual Extra Interest Paid' = $0.279m

This means the buyback has worked well. A real 'cashflow positive' exercise.

SNOOPY

[winner69]

OK, I am going to have a go a calculating the missing line.

Actual buyback was only for 2.6m shares in the end. I am not going to go through every buyback notice to see how many dollars were spent to do this. But my look at he share price chart complete with spikes of volume traded would suggest an average share purchase price of around $2.35. So money spent on the buyback was approximately:

$2.35 x 2.6m = $6.11m

Annual borrowing cost on that money, assuming a 5% interest rate, would be:

$6.11m x 0.05 = $0.306m

The borrowing costs on that incremental amount would be 'tax deductible'. So the reduction in net profit would be:

$0.306m x 0.7 = $0.214m

Annual dividends for FY2019 are forecast to be 17cps. That dividend will not be paid out on the shares bought back. So FY2019 cashflow from dividends not to be paid as a result of the buyback will be:

2.9m x 0.17 = $0.493m

So: 'Annual Extra Dividends Not Paid' - 'Annual Extra Interest Paid' = $0.279m

This means the buyback has worked well. A real 'cashflow positive' exercise.

SNOOPY

That’s so cool

Does that mean they should buy everybody’s shares back except those held by insiders, Percy and yourself?

[percy]

That’s so cool

Does that mean they should buy everybody’s shares back except those held by insiders, Percy and yourself?

You are on to it.
We can't fool you.!...........lol.
The give away is the fact the directors hold so many shares..

[BlackPeter]

You are on to it.
We can't fool you.!...........lol.
The give away is the fact the directors hold so many shares..

As they did with CBL insurance ...

[percy]

No Turners directors held shares in CBL to the best of my knowledge.
As you well remember I did post a warning,that you later quoted, about the dangers of investing in an insurance company.
I took heed of my own warning and never brought any CBL.

[Snoopy]

Percy wrote "The give away is the fact the directors hold so many shares.."

As they did with CBL insurance ...

Fortunately French builders do not buy their utes from Turners (as far as I know). So we Turners shareholders should be in the clear?

SNOOPY

[BlackPeter]

No Turners directors held shares in CBL to the best of my knowledge.
As you well remember I did post a warning,that you later quoted, about the dangers of investing in an insurance company.
I took heed of my own warning and never brought any CBL.

Absolutely. You did, you did, you did and I trust you didn't.

Just saying that while directors holding is typically a positive indicator it is not always a sign that everything is nice and fluffy.

And lets be fair - while Grant Baker seems to be more unpopular when the shares he directors are in a downtrend (which is not that unheard of) ... I have less and less confidence that his interests are well aligned with the interest of retail shareholders. Too many red flags on the way.

Put him on my never again list.