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

[Beagle]

LOL no offence taken Winner. I was certainly pretty cross at Grant Baker not turning up to the annual meeting one year when I wanted to do some serious barking.
You've got to respect a CEO who has the gonads to come on here and engage with shareholders and who has obviously been working really hard to build the various divisions into a cohesive business with excellent growth prospects. Share price fully deserves a $4 handle and will grow nicely from there in my opinion.

[Rawz]

Attachment 12536

Interesting that their $5 share price forecast seems to be based on a 13 P/E. They do say "Whilst PE multiples are assumed to expand they remain very conservative" Yes they do indeed.

And I am guessing their forecast of $45m NPBT in FY24 is going to be their conservative number. Because everyone likes to exceed targets. Much like earlier this March they say they will report $35m NPBT but then produce a beautiful $37.4m NPBT today.

Maybe they hit $50m FY24.. Maybe market gives them say 15 P/E.. Could be road to $6.30 based on those numbers..
Wow shareholder returns are looking exceedingly juicy over the coming 3 years. Oops I forgot the dividend. Capital growth + tasty dividend. Awesome.

Happy holder.

[LaserEyeKiwi]

$4.00!

[Beagle]

What's the right PE ? Using my tried and proven Ben Graham model for finding value I take a no growth PE of 8.5 (when 10 year Govt stock is 4%) adjust that for current 10 year Govt stock rate of 2% gives low interest rate adjusted PE for a no growth stock of 10.5. Ben Grahame used 2 x g where g is the expected rate of eps growth of the stock for the next 7-10 years but my method to find real value is to use 1g.

Hang in there, this is where its gets interesting. If Turners can continue to grow their brand and expansion beyond this 3 year period in which they project 9.5% compound average growth rate we could apply a PE of 10.5 + 9.5 = potentially as high as 20.

Highlight this bit for Todd and the team. The market absolutely adores companies that can grow earnings per share at a sustainable pace over the long term and if Turners in due course can show they can do that beyond FY24 this company has an outstanding future and the market will accord them a PE of much higher than 13, (Briscoes on a PE of 17 is a good example of what I am talking about).

[Snow Leopard]

$4 as predicted by the faithful inverse bell curve pattern been a long time coming.

But a worthwhile wait.

[Biscuit]

What's the right PE ? Using my tried and proven Ben Graham model for finding value I take a no growth PE of 8.5 (when 10 year Govt stock is 4%) adjust that for current 10 year Govt stock rate of 2% gives low interest rate adjusted PE for a no growth stock of 10.5. Ben Grahame used 2 x g where g is the expected rate of eps growth of the stock for the next 7-10 years but my method to find real value is to use 1g.

Hang in there, this is where its gets interesting. If Turners can continue to grow their brand and expansion beyond this 3 year period in which they project 9.5% compound average growth rate we could apply a PE of 10.5 + 9.5 = potentially as high as 20.

Highlight this bit for Todd and the team. The market absolutely adores companies that can grow earnings per share at a sustainable pace over the long term and if Turners in due course can show they can do that beyond FY24 this company has an outstanding future and the market will accord them a PE of much higher than 13, (Briscoes on a PE of 17 is a good example of what I am talking about).

Could be pretty difficult for a domestic secondhand car dealership that has been around for a long time to achieve high sustainable long term growth rate?

[Beagle]

Could be pretty difficult for a domestic secondhand car dealership that has been around for a long time to achieve high sustainable long term growth rate?

Fragmented market with many small players, some of whom must be struggling with stock procurement. Aiming for steady market share gains will do it like they're presently doing with opening branches in Nelson and Rotorua.

[LaserEyeKiwi]

Could be pretty difficult for a domestic secondhand car dealership that has been around for a long time to achieve high sustainable long term growth rate?

Only a third of TRA profits come from “Automotive retail” - The other two thirds come from its financial operations: finance, insurance & credit management, which combined are increasing in profitability faster than the auto retail operations.

3548BDC9-933B-4FE0-947F-D5AFE235C07C.jpg

[BlackPeter]

Great result - congratulations to Todd and his team!

So, lets look at the share price:

Forward PE (at SP $4) is based on (now potentially too conservative) analyst forecasts 12.6, forward earnings CAGR is 8. If things continue the coming years as they started a year or so ago, than this stock looks still really really cheap, doesn't it?

I guess the only question is - will things continue to improve with this velocity or are we already in the exuberance phase? What helped Turners to achieve such an amazing result?

Well, it is hard to get these days new cars given the Covid related production issues all car manufacturers seem to have. Logistic is currently screwed up and semiconductor manufacturers didn't anticipate the swift post Covid ramp up (but a post Covid drop). Question is just - how long will semiconductor manufacturers and car companies need to catch up and swamp the market with new cars. Months? Quarters? Years? Decades? My guess is it will take less than a year ... and I am holding semiconductor manufacturers as well as car manufacturers ... they talk about quarters to resolve the current production issues.

Such problems typically end up in overproduction issues - how long will it take that car manufacturers dump their new surplus cars in our backyard and what will that mean for Turners business?

Another plus for Turner was last FY that many people are not able to hold on to their money - it keeps burning holes into their pockets and so they just can't fight the urge to spend it as soon as it comes in. Given that Covid took their chances to spend their money travelling overseas, they happily used more of it to boost the margins of the car salesmen. How long will this phenomena continue when borders start to open again - or will it be in future less money available to buy the next banger?

I have no doubt that the team at Turners will adapt ... but the question is - does it make sense to assume that the company will keep growing? Selling used cars is still no rocket science, the barriers to enter the industry are (very) low and the pressure from new car sales will increase. Even offering car loans is not rocket science, and there is plenty of competition around.

How much better will it get for Turners - and why?

I still see Turners as a cyclical finance company with attached car sales business ... not more and not less. If I look at the SP, it looks SP is currently clearly in its upper quartile. Might stay there as long as the QE funded buying spree continues, but will it really keep rising like phoenix out of the ashes? What happens with all these car loans when (not if) the QE bubble pops?

[Biscuit]

Great result - congratulations to Todd and his team!

So, lets look at the share price:

Forward PE (at SP $4) is based on (now potentially too conservative) analyst forecasts 12.6, forward earnings CAGR is 8. If things continue the coming years as they started a year or so ago, than this stock looks still really really cheap, doesn't it?

I guess the only question is - will things continue to improve with this velocity or are we already in the exuberance phase? What helped Turners to achieve such an amazing result?

Well, it is hard to get these days new cars given the Covid related production issues all car manufacturers seem to have. Logistic is currently screwed up and semiconductor manufacturers didn't anticipate the swift post Covid ramp up (but a post Covid drop). Question is just - how long will semiconductor manufacturers and car companies need to catch up and swamp the market with new cars. Months? Quarters? Years? Decades? My guess is it will take less than a year ... and I am holding semiconductor manufacturers as well as car manufacturers ... they talk about quarters to resolve the current production issues.

Such problems typically end up in overproduction issues - how long will it take that car manufacturers dump their new surplus cars in our backyard and what will that mean for Turners business?

Another plus for Turner was last FY that many people are not able to hold on money - they just can't fight the urge to spend it as soon as it comes in. Given that Covid took their chances to spend it travelling overseas, they happily spent more money for the next car. How long will this phenomena continue when borders start to open again - or will it be less money available to buy the next banger?

I have no doubt that the team at Turners will adapt ... but the question is - does it make sense to assume that the company will keep growing? Selling used cars is still no rocket science, the barriers to enter the industry are (very) low and the pressure from new car sales will increase.

How much better will it get - and why?

I still see Turners as a cyclical finance company with attached car sales business ... not more and not less. If I look at the SP, it looks SP is currently clearly in its upper quartile. Might stay there as long as the QE funded buying spree continues, but will it really keep rising like phoenix out of the ashes? What happens with all these car loans when (not if) the QE bubble pops?

Ha, similar thoughts to me but maybe a bit more negative! I hold and think it has further to run, but have trouble believing a long term growth story.