Updated indicative estimated 90 VWAP inclusive of 5% discount based on data to date
Conversion notice must be received by the registry by 5.00 p.m. 30 August 2018.
Conversion is based on 5% discount to 90 day VWAP in the 90 days leading up to conversion, i.e. 1 July to 30 September trading.
I brought up the chart since 1 July and looked at volume and prices traded since 1 July.
1 July to 31 July. Stock traded down commencing the month at $3.20 and ending at $3.10. Low volume most of the month but big volume days (for TRA) were noted during the month as 430K at $3.20 and 200K at $3.15.
August has seen the SP open at $3.10 and trade down to $2.94 with big volume days for this lightly traded share noted as 400K at $3.05 and $800K at $3.03.
I don't have access to the full detail that the independent party appointed by Turners will have but based on what I can see the weighted average price to date taking into account the 5% discount, my best updated estimate is $2.945. Obviously so far the 5% discount is useless as it closed at $2.94 with more stock offered at that price and best bid $2.91 from memory.
Price and volume traded between now and 30 September relative to price and volume traded 1 July to date will be what determines the final price, unknown.
Allowing a safe 3 days for snail mail delivery to the registry, (4 if you live in some parts of rural N.Z.) most investors need to decide by 27 August or courier or hand deliver to the registry on 30 August. If there is significant volume, (obviously the major factor) I will update my estimated VWAP price based on ongoing data to 27 August to help bondholders get as much visibility as possible.
Asking for the cash back is looking like the best option at this stage especially given the clear dowmward SP momentum over the last month and a half and clear breech of the 100 day MA and $3.00 resistance level more recently.
TA as mentioned looks awful but keeping an open mind this could well be due to the fact that many bondholders are also shareholders and some like me have sold down their shares in anticipation of the conversion.
Another look at the FA. Based on the mid point of their forecast $35m NPBT, less their average corporate tax rate last year 25% gives $26.25m NPAT.
Assuming half bondholders covert to shares it would appear weighted average number of shares for FY19 is going to be approx. 87m which gives 30.2 cps up from 28.87 cps based on a much lower weighted average number of shares on issue last year. Forecast FY19 EPS growth is thus by my estimate 4.6%.
At $2.945, the estimated conversion rate based on data to date and estimated earnings of 30.2 cps TRA are on a forward PE of 9.75.
How does this compare with the only other listed vehicle retailer, Colonial Motors ?
Due to report this coming week and I am estimating approx. 80 cps up from 72 cps last year. I have them on a (historical, not forward) PE of 10.
Colonial motors celebrate their 100th year in business this year. I will leave you to decide for yourself if TRA is cheap or not on a FA basis relative to Colonial Motors taking into account their respective business models are in many ways quite different.
Hope the above helps bondholders decide for themselves.
Why are Colonial Motors and Turners so cheap on a fundamental basis ?
One possible explanation is that Millennials often see smartphone's as more valuable than cars from a social connectivity point of view and ownership patterns of vehicles could be changing with widespread electric vehicle sharing scheme's not that far away...some are here already https://www.yoogoshare.co.nz/business-use-new/