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

[percy]

On a high end European car (e.g. JLR, BMW or Mercedes) your friend might well end up having the last laugh. Obviously if it's a Toyota Camry Turners have clipped a good one.

As a side note, during the last recession ('09 or '10?), I seem to recall many zero mile late model cars being cleared by auction at reduced prices. There was no "cash for clunkers" in New Zealand to keep inventory moving I suppose.

Autosure charge lot higher premiums for European cars, which cost between 3 and 6 times the cost of a Japanese car to fix.

[Snoopy]

The company does cite "IMPROVED INSURANCE LOSS RATIOS: Insurance claims loss ratios have improved from 78% to 72%."

Yes I see that in AR2019 p9.

(A loss ratio is a ratio of losses to gains, used normally in a financial context. It is the opposite of the gross profit ratio. For insurance, the loss ratio is the ratio of total losses incurred in claims plus adjustment expenses divided by the total premiums earned.)


Less losses more money able to be recognised as profits, seems simple enough.

Since the rest of the legacy insurance business seems to be winding down, I think it is a fairly accurate guess that all the incremental activity in insurance is due to 'Autosure'. The insurance revenue increase over FY2018 (the period after which 'Autosure was acquired) was (ref AR2018 p48):

$46.923m - $12.255m = $34.668m

This implies a loss in payout from dollar premiums, using the quoted loss ratio of 0.78, of:

0.78 x $34.668m = $27.041m

Accordingly the premium that remains on the books:

$34.668m - $27.041m = $7.627m

might be expected to go towards TRA profits over FY2018.

--------

A further increase in insurance revenue over FY2019 was generated (AR2019 p52).

$49.206m - $46.923m = $2.283m

So total 'Autosure' revenue over FY2019 was probably close to:

$34.668m + $2.283m = $36.951m

This implies a loss in payout from dollar premiums, using the quoted loss ratio of 0.72, of:

0.72 x $36.951m = $26.604m

Accordingly the premium that remains on the books:

$36.951m - $26.604m = $10.347m

Might be expected to go towards TRA profits over FY2019.

--------

Neither of the two contributions towards profits that I have calculated for FY2018 and FY2019 take into account the overheads of the Autosure insurance business. But if the administration costs at Autosure are roughly unchanged year on year, that means that any increase in 'retained premiums' should flow through to incremental profits over FY2019. The increase in 'retained premiums' between FY2019 and FY2018 is as follows:

$10.347m - $7.627m = $2.720m

Now compare that figure against the incremental increase in the 'Difference between Actual and Measured Experience' (AR2019 p86).

$5.745m - $2.491m = $3.254m

Those two increments are not exactly the same. But they close enough to suggest that 'Difference between Actual and Measured Experience' and 'Retained Insurance Profits' could be one and the same thing. The 'plus adjustment expenses' bit that you mentioned Silverblizzard, and is something I am not sure now to measure, could account for the difference? Yet if that were the case why would the change in adjustment expenses not be reflected in the 'Difference between Actual and Measured Experience' as well?

SNOOPY

[Joshuatree]

On a high end European car (e.g. JLR, BMW or Mercedes) your friend might well end up having the last laugh. Obviously if it's a Toyota Camry Turners have clipped a good one.

As a side note, during the last recession ('09 or '10?), I seem to recall many zero mile late model cars being cleared by auction at reduced prices. There was no "cash for clunkers" in New Zealand to keep inventory moving I suppose.

We are not in a recession now Tomtom.Who knows when the next one arrives.
It was Japanese so a good clip alright.

When i asked Todd what he thought the value of Oxford was he said around $100 million.
Topped up last week.

[silverblizzard888]

Its hard to say what the details are for the expenses since the business is overlapping itself on many areas when it comes to overheads Snoppy. At the end of the day if the numbers look close enough, it should be good enough. Theres either trust that management have it right or they don't and if you don't trust management to get it right then it may not be a business you want to invest in.

We are not in a recession now Tomtom.Who knows when the next one arrives.
It was Japanese so a good clip alright.

When i asked Todd what he thought the value of Oxford was he said around $100 million.
Topped up last week.

If it sells at $100 million then thats amazing, much bigger value than I thought. Worth a top up indeed!

[winner69]

Some more touting $150m minimum for their finance arm.

[percy]

Its hard to say what the details are for the expenses since the business is overlapping itself on many areas when it comes to overheads Snoppy. At the end of the day if the numbers look close enough, it should be good enough. Theres either trust that management have it right or they don't and if you don't trust management to get it right then it may not be a business you want to invest in.




If it sells at $100 million then thats amazing, much bigger value than I thought. Worth a top up indeed!

I have not commented as my memory is letting me down.?
Farmers Finance was sold for something like 60% of receivables.
I think FPF was sold to FXL for similar.
According to Turners annual report pages 15 and 16 Finance receivables were $290.017 mil.
So 35% of receivables would be $101.5 mil.60% would be $174 mil.Take your pick.!..I would be happy with either.lol.
The attraction for a buyer would be access to Turners ongoing origination of loans,including the 419 active dealers selling Turners Finance.
At current sp of $2.39 Turners market cap is $204.475mil,so a good price between $100mil and $175mil would make things very interesting and rewarding for shareholders.
As side from a sale it has been interesting noting Turners equity ratio increased from 32.8% in 2018 to 34.6% in 2019.
With Turners turning over stock very quickly,and trading well I expect to see their equity ratio improving further. The only listed in NZ business I know of that enjoys better stock turns is Ebos,with something like 10 stock turns.

[trader_jackson]

I have not commented as my memory is letting me down.?
Farmers Finance was sold for something like 60% of receivables.
I think FPF was sold to FLX for similar.
According to Turners annual report pages 15 and 16 Finance receivables were $290.017 mil.
So 35% of receivables would be $101.5 mil.60% would be $174 mil.I would be happy with either.lol.
The attraction for a buyer would be access to Turners ongoing origination of loans,including the 419 active dealers selling Turners Finance..

All very Interesting... FXL receivables as at FY19 was $2.64 billion... market cap $777m (was alot less this time last month actually, but share price risen dramatically recently from $1.40's to nearly $2)
= 29.4%
So using the FXL ratio, TRA's finance division (with receivables of $290m) would be worth $85.3m - like FXL, I feel this number undervalues TRA's finance division, but, like FXL, maybe this is all the market is willing to pay at this point in time... I suppose $85m is still a good chunk more than $60m, and I think wtih the way TRA is currently being (under)valued, Mr Market isn't even thinking TRA's finance division is worth $60m.

[winner69]

I have not commented as my memory is letting me down.?
Farmers Finance was sold for something like 60% of receivables.
I think FPF was sold to FXL for similar.
According to Turners annual report pages 15 and 16 Finance receivables were $290.017 mil.
So 35% of receivables would be $101.5 mil.60% would be $174 mil.Take your pick.!..I would be happy with either.lol.
The attraction for a buyer would be access to Turners ongoing origination of loans,including the 419 active dealers selling Turners Finance.
At current sp of $2.39 Turners market cap is $204.475mil,so a good price between $100mil and $175mil would make things very interesting and rewarding for shareholders.
As side from a sale it has been interesting noting Turners equity ratio increased from 32.8% in 2018 to 34.6% in 2019.
With Turners turning over stock very quickly,and trading well I expect to see their equity ratio improving further. The only listed in NZ business I know of that enjoys better stock turns is Ebos,with something like 10 stock turns.

You’re onto to it percy re valuation of finance

Book value (net assets)is $60m so bare minimum one would expect on sale is $100m

[percy]

You’re onto to it percy re valuation of finance

Book value (net assets)is $60m so bare minimum one would expect on sale is $100m

W69 my thoughts exactly.!
Turners have asked for expressions of interest.
I am sure Turners board know what price they would accept,and if they do not get that, they will hang onto it..
A sale would mean the Dorchester Pacific/then Turners original [finance business]goodwill [not on balance sheet] would be realised.

PS.Oxford Finance would make a good fit with HGH's Marac.
Taking over Oxford Finance, together with Turners' MTF shares [Turners are MTF largest shareholder] would give HGH the key to MTF's door.MTF originators would be keen on non-recourse lending from HGH,to replace the non recourse lending Turners stopped..So MARAC,Oxford,MTF.all part of HGH, interesting?

[Joshuatree]

Thats what Todd also said (at the Tauranga presentation) the $100 mill figure andno give away price reduction necessary.