Total Equity to asset ratio is at the highest level since start of my recordings in 2016: It is now at 69.5%, up from 67.5 last year.
While I realize that they are in a way similar to a bank ... just wondering though whether higher debts have just benefits in times of rising interest rates?
Probably dont benefit the same way a bank would. Their interest rates might go up but their funding costs go up faster than a banks would (deposits are relatively inelastic) and TRAs finance NIM % compresses more.
Banks also have huge regulatory capital set aside. When interest rates are zero it earns bugger all. When rates rise it actually starts to earn and while not much as a % assets a pretty big jump in dollars.
TRA do it the old fashioned way - building marketshare, getting good sites, building resilient procurement channels. And being in the right place at the right time with the right model with 2nd hand prices went up
TRAs credit collection business will benefit from rising interest rates but a relatively small part of the business
Interesting comment on the call, if it weren't for lockdown's and Omricon we believe we would have done $50m Net profit before tax this year !
WOW !
Somewhat interesting little anecdote.
I have a perfectly good car and in the past I have a habit of updating it too regularly.
I ran the numbers on putting in $100K plus my car to upgrade to a fancy BMW this morning and how it would likely depreciate to about half its value in the next 3 years + extra fuel, maintenance and insurance costs or putting that money into Turners instead, getting an average gross yield of about 9% over the next 3 years and expecting the share price to be $5 in 2025, (i.e. putting the money into an appreciating asset rather than a rapidly depreciating one) and the difference between these two outcomes is that I would be more than $500 per week better off investing in other people dealing cars rather than engaging with my hedonistic desires. What I have learned from past experience is after a few months the thrill of the new toy has worn off (hedonic adaption), and one is left $500+ worse off per week and that is not a good way to build wealth and resiliency in one's personal finances !
The problem with having too much money (And loving it) which your never personally going to use, try losing a good lot or giving it away to a chosen charity, you'll feel so much better about things and life in general once you adapt.
W69 your post got me to thinking. As TRA is for the most part a non bank financial lender and insurer, price to book and price to NTA are truly relevant, not withstanding the whack of money it makes from auto retail and credit collections.
I dabble a bit in financials and the concept of 'warranted price to book' or 'warranted price to NTA' are very common in financial services (eg banks, non banks, insurance) as a primary or secondary valuation methodology. Basically, the concept provides for a multiple of book or nta with the guts of the formula being (ROE less stable growth rate) / ( cost of equity less stable growth rate). You can just multiple that multiple to the current book or NTA figure to derive proxy for what the firms equity value/marketcap should be.
It's a nice cross check although some research analysts will use it for their primary valuation methodology for pure play banks / financial instos.
The concept seems to correlate well to current spot prices for TRA on a NTA basis and less so on a price to book perhaps given the amount of intangibles on the balance sheet.
Warranted Price to NTA:
I can't seem to upload an excel file so if any nerds want the excel file PM me.
The warranted price to NTA approach provides a price of $4.13. The inputs are all laid out methodically and hopefully clearly/objectively in the analysis. I was surprised at my derived cost of equity but the NZ risk free rate has shot through the roof (up 150bps or 100% since August 2021) and my derived equity beta was surprisingly high but I stand by it.
TRA isn't a pure financial services firm so this approach will be of less relevance to say heartland, but still an interesting cross check. It doesn't suggest any upside to current spot prices.
That was a good insight back in March FM ...no upside to $4.13 has been the case
What's your view now?
At the top of every bubble, everyone is convinced it's not yet a bubble.
That was a good insight back in March FM ...no upside to $4.13 has been the case
What's your view now?
By dumb luck i assume
We got a power outage so cant fire up the beast. 10 year treasury higher. But have the new balance sheet as well and new consensus will come out this week. Will update after that
Older dogs like us love the regular fully imputed dividends for life's little treats. Funds thinks like taking my wife and granddaughter out for a fancy meal at a high end beachside restaurant on Sunday.
Really like the roadmap to annual dividends of 26 cps (FY25) in the presentation materials.
Could be a few bumps along the journey but I'm confident over the medium term there's fantastic growth in earnings and dividends ahead.
Noteworthy too is that property valuation increases this year add 5.7 cps that's not recorded in the accounts and despite the very high yield the payout ratio this year is only 63.2% so they're keeping plenty of earnings back to fund future growth.
"Well positioned" definitely springs to mind.
Todd, Tina and the Team are firing on all 12 cylinder's
Last edited by Beagle; 24-05-2022 at 02:13 PM.
Ecclesiastes 11:2: Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
Ecclesiastes 11:2: Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
Originally Posted by BlackPeter
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