dont you want to get filled at 28c ?
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Next interim report will be where it really starts to get rewarding being a shareholder, once a interim dividend is announced or even a share buyback given how undervalued the share price is.
I'm alright wherever the share price goes for the time being, if it comes down below 35 cents I will top up, if it stays above that I'll just twiddle my thumbs.
With the strategy being adopted by 2CC to materially expand gross margin, I’m expecting the Commerce Commission to require the company to change its Cheap branding on the grounds it’s breaching the Fair Trading Act!
A few years ago they had margins of 22%, which declined to 17% for the last financial year. In short I believe it was due to the finance arm and employing a third party to procure the vehicles. Perhaps it resulted in alot of rework. Anyhow the finance arm no longer exists and the procurement is now back to being done in-house. I noted that they brought back the operations guy who left just before the IPO. We have an new CEO that is focused on sales margin. I have nothing against the previous CEO and managing director of the finance arm. Alot of experience and proven track record of building a loan book. Unfortunately covid did affect sales volume, which ultimately affected lending volumes and margin. I looked into it further they have 3 tier of borrowers. But they only provided in-house lending to the middle tier. So a very narrow range. The impact of lending out money put a huge strain on cashflow. You could see it. This threatened their survival so some tough decisions had to be made. They are back to their original operation which was very profitable. Yes regulations are evolving. But think about it for a moment. If the govt makes it too difficult to purchase used vehicles. You will start to see certain parts of the country straining.
They have been guilty of past bad conduct and they paid for it. This hasn't impacted their ability to sell cars. Their share of the total NZ new car registration numbers has consistently been around 6-7% and they looking to grow this. There's alot of qualitative stuff to talk about, but I won't because I could go on forever.
Other similar competitors are valued at 10x.
The market was pricing the company at 10x $1.3m which included the one off restructure charge. Take that out, the company was valued at around 6.5x. So they were already undervalued. They are on track to earn $4m+ which they have been proven to earn in previous years. That earnings multiple just got alot lower.
CMO.The Colonial Motor Company Ltd. are on a PE ratio of 10.20 with a market cap of $300 mil according to ASB,
while ,TRA Turners Automotive Group Ltd.are on a PE of 9.7,with a market cap of $319 mil.
2CC 's PE is currently 13.38 and their market cap at 38 cents is $17.3 mil.
Aussies;
CAR Carsales PE 15.61
APE Eagers PE 11.76