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

[percy]

Page 53 shows finance assets 276,356 and taking away liabilities of 216,996 leaves 59,360 which is what finance division is in their a/cs or close to the $60 mil we all thought finance was in their books at.So back to page 33 we now know the finance division is nett $59.360.So should a sale of the division go through at $100 mil we have to find a home for $40.64mil, a bit more than the $40 mil I stated.As far as I am concerned it goes straight to the bottom line,as per my previous post.
I would also point out I think the existing equity ratio at 34.6% is adequate,considering how quickly Turners manage to turn over their stock.
Whether or not a sale happens does not really concern me,however I can see the board's point that the recycled capital can be put to more profitable use.

It would also make the business easier for our "Brain" to understand...lol.

[winner69]

That’s amazing ...sell finance arm and it’s likely shareholder equity increases and will be even mor3 above market cap.

Sort of says that market currently thinks the car selling division is not worth anything

Or have I misread percy and snoopy posts

[percy]

Just go on facts you/we know about Turners selling cars.
Your Wellington Pop-Up site holds approx 55 cars.Sold 47 cars in July.
New New Plymouth site holds approx 155 cars.With out any advertising sold 135 cars in July.
We also know Whangarei relocated site is going gang busters.
Joshuatree advises us Tauranga site is too small.
Tomorrow we should hear how well relocated North Shore site is trading.
All the time remember in the next two years Turners are looking to open a further 8 new sites.[was 9 however North Shore site is now trading].

[winner69]

The market valuing the car selling division as almost worthless just highlights why one Turners is a great investment going forward

Look forward to watching tomorrow’s meeting

[sb9]

Not sure if there's a webcast for tomorrow's ASM, couldn't find details from their announcement.

https://www.nzx.com/announcements/341081

Here are webcast details...

Turners Automotive Group Limited (NZX/ASX: TRA) is pleased to advise that the Company’s 2019 annual meeting of shareholders to be held tomorrow commencing at 10.30am will be webcast.
The link to the webcast is as follows: https://www.youtube.com/watch?v=OUplB-b8yK8

[Snoopy]

However should Oxford Finance sell for $100mil plus there would be a further $40mil to be added to shareholders equity.

Page 53 shows finance assets 276,356 and taking away liabilities of 216,996 leaves 59,360 which is what finance division is in their a/cs or close to the $60 mil we all thought finance was in their books at.So back to page 33 we now know the finance division is nett $59.360.So should a sale of the division go through at $100 mil we have to find a home for $40.64mil, a bit more than the $40 mil I stated.As far as I am concerned it goes straight to the bottom line,as per my previous post.

If you are calculating an equity ratio it is not incorrect to say that the extra $40.640m (which you and I both rounded to $40m) 'goes straight to the bottom line'. But it also goes 'straight to the top line' because the extra $40m is both new incremental shareholder equity AND a new incremental asset.

Shareholder Equity Ratio = (Shareholder Equity) / (Total Assets)

SNOOPY

[percy]

Very nice top or bottom,up or down or just sideways.I would just accept it anyway I could, and be very happy.
$40mil extra wealth,realised should they sell finance for $100mil.More if they received more.W69's $159 mil would be extremely well received.Nice.[$59 mil extra on top of my $40mil to be accounted for].lol.

[Snoopy]

That’s amazing ...sell finance arm and it’s likely shareholder equity increases and will be even more above market cap.

Sort of says that market currently thinks the car selling division is not worth anything

Or have I misread percy and snoopy posts?

Your brain might be moving too fast for this ol' dog to follow Winner.

But the way I see things......

1/ The shareholder equity of (Turners - Oxford) will have increased due to the cash payment received from the Oxford Finance buyer (let's say they paid $60m to Turners) BUT....
2/ As a result of the sale, a net: $276.356m - $216.996m = $59.360 (Let's call it $60m) of shareholder equity has been lost by (Turners-Oxford).

That means there is effectively 'no change' in the equity held by (Turners-Oxford) .as a result of selling Oxford Finance for $60m.

NOW, IF Oxford Finance is sold for $100m THEN there is a net $40m gain to (Turners - Oxford). THEN a $40m equity gain will make the net asset backing of (Turners - Oxford) go up. But the reason for this increase is because someone thinks the finance division is worth more than 'book value'. Now what does this say about the car division? I would have thought 'nothing'. (Note that doesn't mean the car division is worth nothing, just that the sale of the finance division says nothing about the value of the car division). So your point Winner has gone way over my head , I am afraid :-(

The market valuing the car selling division as almost worthless just highlights why one Turners is a great investment going forward

????

SNOOPY

[winner69]

Snoops - I’m just bamboozled by your and percy’s big numbers

However what I think I was saying that in round numbers finance might be worth $100m to $150m and if you put a value on the insurance and credit businesses you possibly get $200m in total for the non-car businesses

Turners market cap is about $200m .......so what value is the market putting on the car selling business?

Maybe you’ve both over bamboozled me and I’ve got over excited and the finance business is really only worth $60m

[Snoopy]

The market valuing the car selling division as almost worthless just highlights why one Turners is a great investment going forward

You guys might be interested in the divisional profitability for FY2019 as served up by my own spreadsheet. Note that Turners call 'Earnings Before Tax (EBT)' 'Operating Profit'

	EBT As Declared	EBT A.R Finance Adjusted	EBT C&O Apportioned
Automotive Retail	$18.274m	$14.451m	$4.815m
Finance	$11.112m	$14.935m	$12.635m
Credit Management	$6.321m	$6.321m	$5.525m
Insurance	$8.227m	$8.227m	$6.024m
Corporate & Other	($14.885m)	($14.885m)
Total EBT	$20.048m	$20.048m	$20.048m

1/ Turners retain a finance book inside the Automotive business. To truly see divisional profitability, I believe this should be removed and transplanted into the Finance division. This is what I have done in the second column.
2/ I have allocated 'Corporate and Other ' expenses amongst the divisions in proportion to their divisional revenue. I use 'divisional revenue' as an allocation tool, because I believe the more dollars that are involved in any particular deal, the more attention is required from management. This adjustment has produced the third column.

This is what concerns me about the plan to sell the 'finance division'. Looked at this way it is -by far- the most profitable division of Turners. But what this table does not show are any 'transfer pricing ' effects.

When Turners own both the finance company and the car sales company, it must be very tempting to 'knock a few dollars' of the retail price and gain them all back again with a finance deal with interest set at a suitably high rate. With the finance company sold, this tactic won't work for Turners. So I wouldn't be surprised to see Turners firmer on their prices while turning the screws on the new owners of Oxford finance to help 'seal the deal'. Thus the divisional profitability that I have worked out above may not be indicative of what is to come.

If / When a sale of Oxford Finance is announced, equally important as the price will be the 'referral fee' terms on each deal that is due to Turners, and the structure of those 'referral fee' kick back payments going forwards.

SNOOPY