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

[Snoopy]

A very good question. The only intangible value still attached to this purchase is clearly the location of the once "Buy Right" sales outlets.

Though I am sure Turners might argue that "Turners" have a higher brand value than "Buy Right" (otherwise they would not have rebranded) - i.e. the non tangible value of these premises might have even increased miraculously by putting a more respectable brand on it.

Which means the the attached NTA might even have increased through the rebranding (assuming a Turners outlet is more worth than a Buy Right outlet). Turners might have found a new method to generate money out of nothing .... buy a crap brand for too much money and re-brand.

Their future opportunities must be endless ... and maybe I should consider a career in creative accounting ;

There are a couple of flaws I can see in your creative accounting plan BP.

To realise the higher 'brand value of Turners' and book those 'goodwill profits' from someone else acquiring those ex Buy Right now Turners sites, Turners would actually have to sell them. And since Turners core strategy is to build on their core strength which they see as their 'Turners brand value', selling off their own Turners outlets to others who would retain the Turners branding and compete with them doesn't seem likely.

Secondly, however you slice it, the Turners brand will remain an intangible asset, not a tangible one. So even if Turners sites were able to have their rebranding reflected in company asset vales, it would only improve net assets, not net tangible assets (NTA).

SNOOPY

[BlackPeter]

There are a couple of flaws I can see in your creative accounting plan BP.

To realise the higher 'brand value of Turners' and book those 'goodwill profits' from someone else acquiring those ex Buy Right now Turners sites, Turners would actually have to sell them. And since Turners core strategy is to build on their core strength which they see as their 'Turners brand value', selling off their own Turners outlets to others who would retain the Turners branding and compete with them doesn't seem likely.

Secondly, however you slice it, the Turners brand will remain an intangible asset, not a tangible one. So even if Turners sites were able to have their rebranding reflected in company asset vales, it would only improve net assets, not net tangible assets (NTA).

SNOOPY

Oops - I obviously meant intangibles but wrote NTA. Good beagle for immediately detecting that flaw . Probably still too jet-lagged to think straight ...

In that spirit - I better go back to sleep ;

[Joshuatree]

A friend bought a car at the local branch today; man were they busy, very healthy.

[Baa_Baa]

We haven’t had to think much about car sharing until TRA dropped cool A$1.25 mill into an Oz penny share and announce their launch of the online car subscription service in NZ this year. Far from a prescient decision it seems to have ignored or been ignorant of who is making hay in this emerging sector (hint, it’s not Collaborate)

Look how far advanced this sector actually is and the weight behind it, albeit a new concept for us old buggers who actually own cars, then reflect on the wisdom of TRA to drop into the market they have no understanding of, into a penny dreadful share platform that could go bust anytime.

https://www.dbusiness.com/daily-news...line-platform/

[percy]

We haven’t had to think much about car sharing until TRA dropped cool A$1.25 mill into an Oz penny share and announce their launch of the online car subscription service in NZ this year. Far from a prescient decision it seems to have ignored or been ignorant of who is making hay in this emerging sector (hint, it’s not Collaborate)

Look how far advanced this sector actually is and the weight behind it, albeit a new concept for us old buggers who actually own cars, then reflect on the wisdom of TRA to drop into the market they have no understanding of, into a penny dreadful share platform that could go bust anytime.

https://www.dbusiness.com/daily-news...line-platform/

The more you post about car subscription, the more I think Turners are very wise trying it.
Turners have 85,778,678 shares on issue which at $2.32 gives them a market cap of $199,006,533.
They pay 17 cents per share dividend,which amounts to $14,582,375.
"Dropped a cool A $1.25mil"....? Peanuts for what will work or will not work.
I think if they did not try it,we would all be posting they should have.

[winner69]

Don’t forget we are in the digital age - as Turners say of all internet users in NZ 86% use You Tube and 85% use Faceboook. percy uses Facebook?

Turners are in a good place in this space .....like 20 million web searches and 29 million page views a year ....along with zillions of other interactions collecting data.

They have hired social media experts and working with data analytics companies ...wow

This subscription business will take off like a rocket (hope more money in it than buying and selling cars)

The best known and most trusted used car dealer in NZ is indeed well positioned to win in this space.

[winner69]

thl’s venture into digital space hasn’t harmed their share price

[Snoopy]

4/ I leave the most significant part of my 'profit normalisation' until last. Have a look at AR2019, note 34c, part of the insurance activities notes.

	FY2019	FY2018
Change in Discount rate	($0.207m)	($0.120m)
Difference between actual and assumed experience	$5.745m	$2.491m
Life Investments Contracts: Difference between actual and assumed experience	$0.266m	$0.294m
Total	$5.804m	$2.664m

Now go to note 7, p55 in AR2019 and you will see that the $2.664m figure is reported as a 'Fair value gain on Contingent Consideration' for FY2018. Yet the equivalent figure for for FY2019 is missing, no doubt subsumed in the new expanded for this year Insurance divisions wider profits. I consider that $5.804m not repeatable and a figure that should be removed from operational profits, just like in FY2018. I don't know why Turners seem to have changed their policy on this but I am calling them out. Take out that $5.804m gain from the Turners Insurance arm operating profit (declared $8.227m for FY2019) and you will find how profitable the underlying insurance division really was in FY2019.

To answer my own question first:

$8.227m - $5.804m = $2.423m (Underlying Insurance Profit for FY2019)

The equivalent figure for the previous year is:

$3.645m - $2.664m = $0.981m (Underlying Insurance Profit for FY2019)

Turners is the first insurance company I have ever invested in. I didn't set out to invest in insurance. I arrived here when my old 'Turners Auctions' shares morphed into 'Turners Automotive Group' with the attached insurance baggage that new company contained and has now expanded with the addition of 'Autosure'. What I have learned is that insurance is complicated.

A key phrase in my 'normalised profit adjustments' is the one I have emboldened above:

'Difference between actual and assumed experience'

This term is further explained in AR2019 p93 under the heading 'sensitivity analysis'. The conceptual problem I have with this phrase is that it seems to encapsulate both things that are part of normal business practice and those that aren't. Specifically with the five sub-categories this phase apparently encapsulates:

1/ Expense Risk: If your costs go up because of inflation more than you plan for then your profits will decrease - Rather obvious I think
2/Interest rate Risk: Investment income will decrease as interest rates on the underlying fixed interest vehicles decrease. However, this can be offset by the capital value of underlying bonds increasing. - Not rocket science here
3/ Mortality rates: Death triggering the cashing out of life insurance policies means lower profits (less premiums being paid) and reduced shareholder equity. - I question this one because, if I interpret this correctly, the shareholder equity paid out in settlement of a life insurance policy was always going to be paid out eventually. Thus calling it 'shareholder equity' smacks of taking someone's life insurance actuarially based entitlements and calling that 'company money'. Can an insurance company really claim a policy holders entitlement as their own?
4/ Discontinuence: This seems to be used in the sense of people stopping payments towards their life insurance policy. Turners say this is generally negative. That makes sense if you consider that as a result of discontinuence Turners loses an income stream to invest. But how can they lose 'shareholder equity' if the money they were holding to support these life insurance policies was never theirs in the first place?
5/ Market Risk: For fixed future payouts that are supported by market investments, if the market goes down then Turners may have to stump up cash to make up the difference. - That is a fair point. But markets tend to go up and down. So should annual investment volatility be included as a profit ingredient when the underlying profits or losses are accumulated and may not be paid out for years or even decades?

In summary, while some 'Difference between actual and assumed experience' risks are immediate and legitimate to feed into annual profits, some are not. In particular the implied 'mixing of customers entitlement' with 'company money' should not in my view be any reflection of the operational performance of the business.

My position on 'Difference between actual and assumed experience' adjustments has thus far has been to ignore them. But by doing so I could be ignoring genuine gains or losses that should accrue to shareholders.

However, if I include them, then it seems I am including gains that will accrue to policyholders for which shareholders will have no ultimate entitlement. Thus no matter which of these two decision paths I choose to take I will end up with the wrong answer. And there is my dilemma.

SNOOPY

[BlackPeter]

Now you managed to surprise me. I thought the only insurance Turners is offering is Autosure - an insurance covering the cost of car repairs. But you seem to talk life insurance - i.e. people dying and Turners paying, do you?

How do they call this product and how can people subscribe to it?

[BlackPeter]

Now you managed to surprise me. I thought the only insurance Turners is offering is Autosure - an insurance covering the cost of car repairs. But you seem to talk life insurance - i.e. people dying and Turners paying, do you?

How do they call this product and how can people subscribe to it?

Oops found it: https://www.turners.co.nz/Finance/General-Insurance/

Question - I never realised (while I was a shareholder) that Turners is offering general insurance. Is this something new? Sounds frightening to me for a company of that size ... but probably underwritten by somebody else?