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

[Rawz]

5 year term… no chance the bank term deposit wins vs TRA

[BlackPeter]

Why would anyone invest in a 5 year term deposit when they can buy TRA? Yield is better and better get it will grow!

The banks must be laughing all the way to the bank

There is clearly a different risk factor attached to these two options. Remember - higher risks equal higher rewards (if everything goes right), but as well higher potential for losses if it doesn't.

I could think about a lot of risk factors which, if they eventuate, might reduce TRA's dividend payments over the coming five years. Can't you?

No doubt - the market currently considers the risks differently than you do. While this is no problem, if you turn out to be right ... it might be if the markets are right :

[BlackPeter]

5 year term… no chance the bank term deposit wins vs TRA

Its not that long ago that the TRA share hoovered slightly above one dollar ($1.13 to be exact). If this happens again (I am not saying it will, but clearly - it might) - the 5 year term bond holders will laugh all the way to the bank.

[Balance]

5 year term… no chance the bank term deposit wins vs TRA

Actually if you are looking for yield and a safer play over a 5 year time frame, try the power companies like CEN & MEL - you will find they have easily outperformed the likes of TRA.

[alokdhir]

Actually if you are looking for yield and a safer play over a 5 year time frame, try the power companies like CEN & MEL - you will find they have easily outperformed the likes of TRA.

And much less risky too ....

[Rawz]

Its not that long ago that the TRA share hoovered slightly above one dollar ($1.13 to be exact). If this happens again (I am not saying it will, but clearly - it might) - the 5 year term bond holders will laugh all the way to the bank.

No point in throwing out the covid low as a 'what if' when looking at the end result of 5 year TRA investment vs term deposit.. statistically whats the odds of a black swan event happening at the end of 5 years?

The reality is TRA brand recognition is growing within households (thank you Tina)
Market share is growing
Finance book is growing
Insurance is growing.

They have a long runway of growth ahead of them with branch expansion throughout NZ.

Basically in my eyes if you think NZ GDP is going to be higher in 5 years time vs today.. its a buy for TRA! Collect the gross dividend of 9.5% which absolutely smokes the term deposit in itself and then take whatever capital gain there is to be had. Im expecting close to 100% after 5 years from today.

Insiders recently buying is the cherry on the cake

[Muse]

And much less risky too ....

yes defo less risky, but with oslow hanging over the markets head are the prospective yields of 3.5% (MEL) and 4.5% (CEN) appropriate in light of something that could have a marked impact on the market structure, especially in light of where interest rates are? Dont get me wrong I'm a long time contact and genesis shareholder, and not convinced onslow will happen, but in terms of deploying new capital there are interest rate products that are looking increasingly attractive and I'm not sure I feel compensated for the onslow risk at current SP's (except for potentially genesis)

[alokdhir]

yes defo less risky, but with oslow hanging over the markets head are the prospective yields of 3.5% (MEL) and 4.5% (CEN) appropriate in light of something that could have a marked impact on the market structure, especially in light of where interest rates are? Dont get me wrong I'm a long time contact and genesis shareholder, and not convinced onslow will happen, but in terms of deploying new capital there are interest rate products that are looking increasingly attractive and I'm not sure I feel compensated for the onslow risk at current SP's (except for potentially genesis)

I fully agree with your thoughts ...did not mention GNE as its different beast then CEN / MEL ...but I was comparing risk profiles of TRA with electric companies . Somehow I feel TRA is a much riskier business for reasons beyond me ...just my perception of used car market and its moat value etc ...just like covid helped FPH /MFT etc ...it helped TRA also ...making its stock rise in value ....opposite can happen if the stock goes obsolete with IC engine cars get closer to being banned for new sales and freight etc gets back to fully normal levels for imports etc ...Car insurance commissions / Car finance commissions are dependent on main business of used car sales doing well ....depending or having enormous faith in long term expansion of used car business / trading is risky ...imo

[BlackPeter]

No point in throwing out the covid low as a 'what if' when looking at the end result of 5 year TRA investment vs term deposit.. statistically whats the odds of a black swan event happening at the end of 5 years?

The reality is TRA brand recognition is growing within households (thank you Tina)
Market share is growing
Finance book is growing
Insurance is growing.

They have a long runway of growth ahead of them with branch expansion throughout NZ.

Basically in my eyes if you think NZ GDP is going to be higher in 5 years time vs today.. its a buy for TRA! Collect the gross dividend of 9.5% which absolutely smokes the term deposit in itself and then take whatever capital gain there is to be had. Im expecting close to 100% after 5 years from today.

Insiders recently buying is the cherry on the cake

Look, I feel your excitement for TRA - and good on you.

I agree as well that TRA is a well managed company, I hold high regards for the CEO and the CFO ... not quite as high on some board members, but this is a different story.

Having said that - TRA is (as we all know) basically a finance company with a used vehicle dealership and some insurance company attached.

Now - NOBODY (and I mean NOBODY) is able to predict how the business for finance companies will develop over the next five years, but - if the past is an indicator, there will be ups and downs ... and it is unlikely the coming recession will help.

I think this is the reason that the market sees the current risks higher than you seem to do.

Will TRA survive the next recession? Likely. They survived a handful of difficult phases before, though sometimes (if you still remember the DPC phase) only "just".

Obviously - I don't know how difficult this year will become, but some retailers clearly will notice that there is less money flushing around in consumers pockets, and I suppose some finance companies will realize that as well.

Anyway - I guess we can argue until the cows come home, but I don't see them currently as cheap. Might be a classical dividend trap, time will tell.

[bull....]

used car prices fell 9% in the latest US CPI report ..... TNR on a 52 week low starting to price in NZ car price falls ?