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

[LaserEyeKiwi]

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?

They have moved much of their loan book to “premium” loans (high credit scores) - have a read of today’s annual results presentation.

[LaserEyeKiwi]

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.

Curious as to why you have trouble believing in a long term growth story from a company which already has an established long term growth history?

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(And the above is before today’s results - which beat the FY21 guidance on that chart)

[Rawz]

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.

Common there is lots of room for a trusted used car brand to expand throughout NZ. And don't take the word trusted lightly as in the used car world it is a game changer.

Look at it this way, Toyota have 58 dealerships throughout NZ.
Turners have 18 currently.

[Beagle]

Common there is lots of room for a trusted used car brand to expand throughout NZ. And don't take the word trusted lightly as in the used car world it is a game changer.

Look at it this way, Toyota have 58 dealerships throughout NZ.
Turners have 18 currently.

BINGO !!! Those with little faith need to take a brave pill and a coffee, wake up and get with the program !

[winner69]

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

But a worthwhile wait.

Nobody believed us about that inverse bell curve pattern.

Could 'predict' a top ......but we'll leave that for another day eh

[BlackPeter]

Curious as to why you have trouble believing in a long term growth story from a company which already has an established long term growth history?

F0A4AE3E-1DFE-4315-B7B6-97FF4B5C9EC5.jpg

(And the above is before today’s results - which beat the FY21 guidance on that chart)

I guess - its quite easy to demonstrate for a cyclical that they are an amazing growth company (as well as that they are a candidate for doom and gloom) - just pick the timing which best supports your thesis and hope like hell that the other side does not check the background.

I used to hold at some stage their predecessor Dorchester Pacific - trust me, I know what I am talking about have a chat with Paul Byrnes at the next AGM if you are not sure what I mean ...

But anyway - good discussion and I guess we need to keep the SP definitely up until Grant Baker sells out.

All will be fine ... as long as you watch the trend and act fast enough.

[Biscuit]

Common there is lots of room for a trusted used car brand to expand throughout NZ. And don't take the word trusted lightly as in the used car world it is a game changer.

Look at it this way, Toyota have 58 dealerships throughout NZ.
Turners have 18 currently.

Yes, I think they have good short term growth prospects - and as I say, I'm holding. Also, have bought a car through them and I rate them pretty highly in regards to trust - they did a good job.

[Beagle]

Good result and strong outlook. Facts win the day BP and nobody likes sour grapes when there's solid positivity abounding backed by very solid results.
Your cynicism is noted but I think tailwinds in this sector are "much stronger for much longer" and those not on board are the losers

[LaserEyeKiwi]

Also I don’t see how “over production” of new cars is anywhere close to being a threat: most large automakers are forecasting that it will take them until 2022/2023 to make it back to pre-covid levels of production, which is still below where demand is post-covid (and to make things worse they are very supply limited for the transition to EVs due to lack of battery supply until 2025 at the earliest).

[LaserEyeKiwi]

Beagle, we’re you able to listen to the conference call? I was unable to listen and can’t find a replay available yet.