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

[Beagle]

Snoops - I’m just bamboozled by your and percy’s big numbers...
...Maybe you’ve both over bamboozled me and I’ve got over excited and the finance business is really only worth $60m

Its been in play and on the market now for many, many months. Could it just be that nobody will pay a normal valuation because its riddled with problematic delinquent debtors at ratio's, (using thorough due diligence and independent detailed sampling of loans) far in excess of Turners management's estimates ?
You'd think with funding costs at 100 year lows and those lovely big juicy interest rates Oxford Finance charge their punters the loan book would be a goldmine and banks or other finance companies would be desperate to take it off their hands and a frenzied bidding war would erupt. But as the months tick bye reality bites that one assumes when there's up to 14% delinquency ratio in some parts of the book and rapidly deteriorating even further, that really sucks the wind out of their sails.

[Baa_Baa]

It’s not just selling the profitability, for a one time sugar hit, it’s selling a big ongoing revenue stream as well. One wonders what TRA are doing trying to sell the silver and how that plays out for shareholders accustomed to above average returns. No surprise the SP is weak only propped up by the buy-back scheme, for as long as that lasts.

[RTM]

Its been in play and on the market now for many, many months. Could it just be that nobody will pay a normal valuation because its riddled with problematic delinquent debtors at ratio's, (using thorough due diligence and independent detailed sampling of loans) far in excess of Turners management's estimates ?
You'd think with funding costs at 100 year lows and those lovely big juicy interest rates Oxford Finance charge their punters the loan book would be a goldmine and banks or other finance companies would be desperate to take it off their hands and a frenzied bidding war would erupt. But as the months tick bye reality bites that one assumes when there's up to 14% delinquency ratio in some parts of the book and rapidly deteriorating even further, that really sucks the wind out of their sails.

So are you still holding Beagle and will I see you there tomorrow to ask the cutting questions ?
RTM

[Snoopy]

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

I am still haunted by the dismal face of despair put on by the late great Sir John Anderson , the second greatest banker that New Zealand has ever produced (*). As the PGW Chair, he fronted up to PGW shareholders and told us that the well capitalised and well supported by investors PGW finance division (the PGW golden goose) was only worth its 'asset backing' and was to be sold to Heartland.

(*) The greatest banker NZ has ever produced was of course on the other side of that deal, Heartland's soon to be knighted Sir Jeffrey Greenslade!

I understand Todd talking up the $100m valuation for Oxford. It is a negotiating tactic. But I reckon the wisdom of Sir John from beyond the grave might yet carry some kudos here!

SNOOPY

[percy]

It is simple :
If someone wants to buy the finance side at the price Turners want they will sell it.
If not they will hang onto it.

[Beagle]

So are you still holding Beagle and will I see you there tomorrow to ask the cutting questions ?
RTM

I barked up such a storm last year I went "horse" lol.
Not planning on attending tomorrow.

Turners directors think the shares are worth north of $3.20, per last year's annual meeting. The market says otherwise and I am sure the gulf between what they want for Oxford and what its really worth is just as wide so they'll keep owning it and delinquent loans will keep rising this year just like they did last year.

[Snoopy]

You'd think with funding costs at 100 year lows and those lovely big juicy interest rates Oxford Finance charge their punters the loan book would be a goldmine and banks or other finance companies would be desperate to take it off their hands and a frenzied bidding war would erupt. But as the months tick bye reality bites that one assumes when there's up to 14% delinquency ratio in some parts of the book and rapidly deteriorating even further, that really sucks the wind out of their sails.

The banks have taken up some of those Oxford loans Beagle! Isn't that what rolling up 'like loans' and flogging them off to the banks as 'securitized loans ' was all about? IIRC from last years road show, this was how Turners were getting around their shortages of capital, recycling their capital for what is a capital intensive business (doing the loans). So why has the focus this year changed to selling off the whole finance division? Why can't we just roll up those securitized loans for capital efficiency like we did last year? There is a curly question for someone to ask tomorrow at the AGM!

SNOOPY

[Snoopy]

I think this definition insurance companies use will help:

The Difference Between Actual and Assumed Experience — Experience profits/(losses) are realized where actual experience differs from best estimate assumptions. Instances giving rise to experience profits/(losses) include variations in claims, expenses, mortality, discontinuance and investment returns. For example, an experienced profit will emerge when the expenses of maintaining all in-force business in a year are lower than the best estimate assumption in respect of those expenses"

It more or less recognized premiums that were factored into claims, but not claimed and could be recognized as profits. Seems every insurance company uses this way of reporting both in NZ and internationally.

That latter sentence is not my experience. The PGW company owned pension plan was topped up by $10.274m over FY2019

Lump sum contributions to defined benefit plans: $10.274m. (from cashflow statement)
Effect of top up on Annual Profit:: $0

Somehow the insurance scheme there was completely ring fenced away from the underlying company profit.

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

(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.

So how do you explain the table on p86 in Turners AR2019 titled "Surplus after taxation from insurance activities arose from"?
In that table is says that out of a total surplus after tax of $6.990m, only $1.022m is in excess of insurance contract and investment contract liabilities. I read that as shareholders are only allowed to book $1.022m of those insurance profits for themselves.

SNOOPY

[BlackPeter]

It’s not just selling the profitability, for a one time sugar hit, it’s selling a big ongoing revenue stream as well. One wonders what TRA are doing trying to sell the silver and how that plays out for shareholders accustomed to above average returns. No surprise the SP is weak only propped up by the buy-back scheme, for as long as that lasts.

Exactly. Either the finance division is the big golden egg laying goose the books try to tell us, or it just looks that way and the board knows more than what the books say.

If it is the healthy golden egg laying goose option, than Turners board would be stupid in trying to sell it.

Do we think the Turners board is stupid? Some of them might appear arrogant and lazy, but stupid - no, I don't think so.

So, I guess the question is - why do they try to flog of the golden goose? Is it really just because it is too hard for them to focus their mind in between of all these exciting car racing events and car shows on something that boring as finance? I guess - they took the pay rise to monitor this complicated division, didn't they?

[winner69]

Good news ....a really good F20 earnings guidance (upgrade) today

Some will say we knew all along ...others will shake their heads in disbelief and ask themselves ‘what did I not see’


...all while share price surges up