Winner, I find this ROIC most interesting so please share.
Selfie of me howling about the Turners share price lol https://www.youtube.com/watch?v=esjec0JWEXU
Today is Fibonacci Day (on other side of world anyway as yesterday here) and as I love Fibonacci things and all things natural I had a quick look at the TRA chart
Yes, my target of $3.23 (soon) is indeed a Fibonacci Retracement level (a 50% one as well)
Looks like the ones are on my side ...$3.23 here we come ...+25%
Spooky eh ...but nature really is a reliable indicator
Hello everyone,
I started investing in TRA last year shortly after the Hugh Green sell out in late June 2017, as I thought it provided a good entry point into what looks like a fundamentally very sound business.
Since then, the share price has been in a gradual downtrend, despite the company posting what appear to be very solid financial results. In particular the FY2018 result in May. +33% net profit, +15% EPS growth. Positive commentary from board and management across all divisions. Positive outlook and increasing dividends. The FY2018 result seemed like the turning point and gave reprieve to the share price as it rose from under $3 to $3.20... alas that was short lived and we're now down even further to 2.63 and trading on a low PE of around 9.
The past few months I've been really scratching my head over why TRA has significantly underperformed the NZX (even before the market recent correction).
After doing a bit of research, I believe this could largely to related to a number of potential headwinds and disruptions to the traditional car dealership business model.
The fundamental way in which people buy and own cars is going to change over the long term.
- The average punter can now go and directly import a second-hand car from sites such as www.beforward.jp and save on the average 25% mark-up that dealers slap on the imported cars. The only reason you would go to a second-hand car dealer would be if you didn't have the finance and you need to pay it off in installments.
- If we take a queue from overseas, we notice a new trend in car ownership happening. Most brands in the US now offer a 'subscription' based service, where you pay a monthly fee and take any car of your choosing from the yard. The traditional burden of buying, owning, maintaining, insuring etc is taken away from the millennials. This could catch on eventually to the rest of the world.
Mercedes for example:
(http://www.autonews.com/article/2018...il-dealerships)
- We can also see this in full swing with the first-hand dealers as well. Some car manufacturers are slowly moving towards the Tesla model. You can only buy a Tesla from the Tesla stores. The next big manufacturer that is going in that direction is Toyota. Starting middle of this year, they have revamped the traditional commission-based dealerships.
(https://www.stuff.co.nz/business/102...-sales-methods)
- The most important disruption of all, is the electric car revolution. At the moment the electric vehicle penetration is less than 1%, but this is set to change rapidly as fuel prices go up. Environmental sentiment echoes louder. More people are becoming more aware of global warming and want to do their bit to reduce greenhouse gas emissions. In some countries, up to 30-40% of the EV's cost is subsidised. The Greens are wanting to bring this to NZ as well to encourage more people to buy first hand EVs:
(https://www.greens.org.nz/news/press...ment-low-power).
Adding to that, a large number of car manufacturers have indicated they are all committed to having a majority electric fleet only by 2025.
(https://www.vox.com/energy-and-envir.../ev-revolution)
- The key issues with buying second hand EVs is around the battery. The more an EV is used, the more the battery diminishes over time. The battery in EVs is the most important component.
(https://www.edmunds.com/car-technolo...and-range.html)
It is currently far more ideal to buy EVs first hand from the manufacturer, in order to get a fresh battery + the 8 year battery warranty.
There doesn't seem to be much point in buying a second hand EV when it costs almost the same first hand if you take the Greens subsidy into account along with the additional risk of a diminished battery and possible lack of the original manufacturer warranty for the battery.
I'm thinking that all these headwinds and disruptions are potentially causing uncertainties around the traditional car dealership model and hence weighing down on the TRA share price. All the tailwinds that used to be with car dealers appear to be slowly fading in a similar way to fossil fuel companies (like Z Energy). For sure the car dealers still have their place today and tomorrow. But it's the day after tomorrow that concerns me.
What you guys think?
Would be great to hear from Turners themselves to see how or if they plan to adapt their business models around each of the points above.
disc: still holding TRA
After reading your carefully thought out post JayRiggs my question would be who are the sellers that have carefully thought out the future about the future of turners and come to the conclusion to sell based on one or more of your points above. My view is that 99% of investors are not that analytic nor that bright - posters on sharetrader are the exception of course and no disrespect is intended. Turners SP depreciation in my view is just general market pessimism and scepticism. In the absence of really good news share prices will continue to drop because the pundits are saying NZ shares are over priced and besides that the sky is going to fall in. At some point the attitude will change and it may change very quickly and TA cannot be relied on to predict it. I am not selling. I am relying on the board and management doing the right thing and after all that’s what they are paid to do.
Great post +1;
Looking into the trends you indicated I would however think that they are at this stage no threat to TRA - and might well turn into opportunities.
Subscription based service - basically the entitlement for a permanent but swapable rental: Looking at the examples you cited this service seems to be at this stage both unprofitable as well as very expensive (i.e. unaffordable to TRA customers). Just imagine a standard TRA customer coughing up between $1500 and $4500 per month for the entitlement to drive one (admittedly rather new, upper class and serviced and insured) vehicle. However - if this subscription becomes standard and profitable, than I'd say that Turners woud be ideally equipped to adopt and benefit from offering such a service. Pay $750 per month for a swapable maintained and insured middle of the road vehicle? Something I could imagine - and Turners should be an ideal company to offer this service. Lots of choice, and they have already insurance and workshops in their network.
EVs: Yes, I believe as well they might come faster than we think, unless they turn out to be a similar environmental flop than the biofuel disaster (nothing destroyed more tropical rainforest than the braindead idea of using biofuel. Huge parts of Sumatra, Bornea, Malaysia and Indonesia have been deforested to plant oil palms instead) - time will tell. I believe however that - if the EV idea gains momentum battery prices will drop fast, and than there is no reason why Turners couldn't offer e.g. 8 year old EV's with new or reconditioned batteries. No reason for them to go out of business ...
But yes - there is uncertainty, and markets don't like that. Could be a threat or could be an opportunity.
Nice post Jayriggs and nice to see someone take the bit between their teeth and try and understand TRA's woeful underperformance.
Add into the mix long term autonomous self driving cars and overseas survey's are showing many young people would rather own a smartphone than own a car. Good public transport in some overseas cities, uber, self driving cars and now people getting around en masse in cities on electric scooters. The world is slowly changing.
I keep an eye on AHG the largest vehicle retailer in Australasia. Its interesting to compare the two graph's and it would appear these long term developing trends are having a meaningful effect on both companies, with AHG in yellow getting based even harder with the ugly stick over the last two years, see attached comparison graph Attachment 10171
I think there's more too it with TRA. As Winner has correctly pointed out their ROIC is not great and eps growth this year will be minimal, if any. Then there's the fear of a recession in FY19 or FY20 and car companies have traditionally faired very poorly in a deep recession. The lack of liquidity is also off-putting for many and the chairman did himself and the company a tremendous disservice by not attending the annual meeting.
Interesting gap between bidders and sellers in relation to the last noted price ... but at least market appears to be optimistic
Attachment 10174
Please provide a sample of your hair for verification :p;
But yes, you are right - the volume (the standoff settled at $2.70) is not overwhelming. I guess most punters obviously wait for tomorrow.
On the other hand - I prefer anytime a small volume of up-bidders to a large number of down-sellers :);
My opinion is the challenges refereed to by JayRiggs are in the future and have only a slight influence on the current situation.
There is a world wide glut of cars with the situation worsened by Presidents Xi and Trump standing on the wharf demanding large payments for foreign manufactured cars. I know a country which will allow auto manufacturers to import as many cars as they like without tariffs. Those Kiwis who have observed the large number of new car advertisements on TV can probably guess which country I am referring to.
I would not be surprised if the head offices of car manufacturers have not rung their assembly plants and told them to quickly put the steering wheel on the other side and ship to New Zealand.
The affect of this diverts a segment of second hand car buyers to the new market and transforms the second hand car market from a cascading market to a clearance market.
Neither of these changes are necessarily of advantage to Turners.
Boop boop de do
Marilyn
I agree. Young people these days would rather buy a good smart phone and uber around than own a car.
Good point about autonomous self driving cars. Something Elon Musk and Tesla are working hard on.
Oh my goodness, AHG on the ASX. I was not aware of them. That chart really does look dreadful!
Plenty to chew on for the TRA HY2019 result tomorrow.
Looking forward to it. All the best fellas. :t_up:
o 28% increase in net profit after tax with strong outperformance from the insurance business offsetting a country-wide slowdown in the automotive retail sector
o Further quarterly dividend of 4cps declared taking total half year dividends to 8cps
o Continued focus on optimising real estate assets delivers $3.4m gain from the sale of Wiri holding
o Industry-wide headwinds emerging in the automotive retail sector with a potential downside impact of 5 - 10% to forecasted FY19 pre-tax profits if current market conditions persist
o On-Market Share Buyback of up to 5% of issued shares announced with current share price considered undervalued by Directors
OMG ....A PROFIT DOWNGRADE
Industry-wide headwinds emerging in the automotive retail sector with a potential downside impact of 5 - 10% to forecasted FY19 pre-tax profits if current market conditions persist
No wonder Todd didn’t want to answer Beagles question about how things were going
Hope punters gloss over that bit ....it’s only a possibilityeh
Good they doing a share back to support the share price
Helps Total Shareholder Return calculation as well .....is this one measure bonuses are calculated on?
Factor in too the regional planning with Auckland council now allowing very dense housing developments around public transport and we'll probably continue to see the weak demand Turners alluded too in the Auckland market continue.
First impressions. Result has been enhanced by the $3.4m gain on the sale of Wiri property. If it were not for that profit would be down. One could argue both ways as to whether this is an extraordinary item and should have been included below the profit reporting line or whether these sort of gains are an integral part of their business. I continue to believe these sort of gains due to their spasmodic nature are not part of their core business activities and reporting as an extraordinary item is more appropriate...but what would a tired old bean counter with decades of experience know...I am sure others will have their own "expert" opinions on this.
We have seen the same factors that are impacting AHG impacting Turners. Will the very recent lower fuel prices, (down a fair bit from early October high's) spur demand in the remaining 5 months of the second half ?...that as they say is the $64,000 question. Buy back is a good idea. Net profit from Autosure is extremely impressive, up 144%, just as well they bought that !
Overall my sense is the shares are about fair value all things considered at the current price and management are doing a pretty good job in a more difficult trading environment. I don't see the compelling growth opportunities that one or two others constantly remind us of and the opportunities that are there are probably equally balanced by the risks. Probably just plod along and do okay on an eps basis unless we get a major exogenous economic shock or some major international geopolitical event.
Disc: Holding a very modest stake for dividend yield.
Well, yes - a possible profit downgrade ... but than - its really nicely wrapped - isn't it?
Increased HY earnings, good dividend, share buyback (which actually might reduce the impact of any profit downgrade ;) - and than, all these big payrises still need to find their way through to the car market - don't they?
Beagles ......property gains probably should be treated as ‘normal’ (more so because it’s a investment return on the insurance float eh)
Just leads to lumpy performance ....and it’s helped out this time in what has been a pretty poor half ...even though Todd still raves on about this integrated model
LOL - Yes I am sure the usual suspect will wax lyrical about the stunning profit growth of 28% and assure us that these sort of gains are a normal part of their business and we can expect them on a really regular basis...oh hang on a minute...what about that inconvenient truth of a profit downgrade :ohmy:
Today is the day, that yesterday we worried about, and all is well.!
Looking forward to owning an even lager slice of the cake.
5 - 10% is really the 10 - 20% as it flows thru there whole business model
Can't wait for the buyback to start then the Couta1 relativity theory will come into play and these will be $3.80 again :D
Suppose it is a profit downgrade and 10% is the number
Means full year npbt likely to be less than F18
And H2 npbt will be 20% less than prior year
Not headwinds ...a southerly blast
Don’t think I’ll be getting my $3.23 now
BlackPeter, to me it looks like the wrapping Grant Baker was using also for Trilogy, he recommended the share holders a capital raising at a share price above what the company later was taken over for. Without his special nice wrapping that would have been unlikely to have happened. I would be very wary of Grant Bakers wrapping.
I did tell you you're 25% quick buck was the stuff of some fantasy fiction novel ! That said, a certain hound did get quite grumpy in early October when fuel prices went berserk and now they're back to a somewhat less painful zone I am more optimistic about consumer spending in the Christmas holiday season. Maybe Turners October sales were the result of shell shocked motorists simply going into their shell and things will normalize a bit going forward ?
I see “Net cash inflow/(outflow) from operating activities before changes in operating assets” was negative
Don’t know what really means but payments to suppliers and employees was a lot higher than receipts from customers
Just wondering where they will get the cash for the share buy back from. 2018 they had $25m on hand ($69m in 2017). Of this $4.9m belongs to Marque Warehouse trust 1 leaving $20.1m. Then they have to have enough cash on hand to meet solvency standards for the insurance business.
4.4m shares at $2.72 = $12m in cash
Winner and minimoke, sadly I do not think Grant Baker want you to unwrap these result or the next.
I note a thing called “impairment provision expense” is up 72% on last year
Suppose that’s code for bad debts
Sold out today. I think one of the main drivers on lower second hand vehicle outlook this is often overlooked is a decrease in net migration. To me it makes sense that most migrants would purchase a second hand car (especially the "low quality" migrants the newspapers tell us we are getting), less migrants equals less demand. I don't see this migration trend reversing for a little bit.
I did not expect such a violent share price reaction downward... given TRA had already been trending downward post FY results... The HF results were not good, nor bad
Should have converted my bonds back to cash and invested in ARV
I'm not a migrant but we've been car shopping lately. Unfortunately Turners did not stock any Subaru so one buy went to another yard and one went to a private sale. Talking to another guy the other who is proud as punch having bought his first car (a new found independence!). Didn't buy from Turners - felt too much just like a number. So went to a yard down the road.
Neighbour came over to have a coffee but really wanting to know what a share buy back was
I just said that’s when a company buys shares from the likes of you and your mates because they think they are too cheap and should be worth more. If you wait long enough they might even buy yours back at $3.20 (what he and his mates paid for them)
That’s good they keen to buy them he said because nobody else wants to buy them ....and he/they might hang in there a bit longer. I didn’t bother answer his question ‘Do they use our money to buy these shares back? ...that was all too hard. They still worried they still under water with Oceania and feel that’s a dud as well.
You can reassure your neighbor that oceans of money will flow from owning Oceania long term...tailwinds for Africa...can't go wrong.
Every dog has its day...just got to be patient to wait for TRA to bark. The usual suspect tells us everything is fine and dandy...what could possibly go wrong lol
HaHa love the panic merchants work, advantage of having an XXXOS holding is you know you can't sell unless you want to settle for $2 a share.Lol
be a steady grind down in share price , slowing sales next year filter thru there whole business
Hey Beagle - was this the answer to the question you asked atbthe AGM that they deftly avoided answering (ie subtly told you to go away)
• Impairments on higher risk lending categories has been worse than expected.
A few points in the presentation seem to be at odds at what was said at road show and AGM presentations
sounds a bit liek a Briscoes add where you can spend $60 to save $40 on a $100 frypan.
There is a line missing though
Buying back 4,474,000 shares at $2.57 would require $11.498 mil.
Cost of funding at 5% would be $574,909 which would be deductable.
Expenses go up, profit goes down. Dividend reduces
Savings on dividends, which are paid from after tax profit would be $yet to be calculated
in 1967/69 I was working for ChCh Ford dealer Hutchinson Motors.
I think it was 1968 we had a drought in Canterbury.The four tractor salesmen sold one tractor between them.!
In 1974 The Labour Govt tightened Credit conditions.No finance company had funds for car loans.Dealers formed MTF.
So good years/bad years are the norm in the car sales market.Yet I know of a lot of extremely wealthy car dealers.
Having shares in the only fully veterically intergrated business in this sector;ie property,vehicle sales,finance,insurance,service and end of life means Turners are "well positioned" to weather any slow down in vehicle sales,and take advantage of any opportunities.I note further increase in their national footprint of vehicle sales sites,as well as an additional 120 new dealers added to Oxford Finance's dealer network.
Theres always that period of doubt when ones stop loss is hit and you sell out at a loss at $2.59. With todays SP action and a dry-up of willing buyers (only 3 at the moment looking for 11,000 shares in total) Im not so worried about the decision I made on the 20th.
Just bought in at 255.
This stock is priced for 0 growth.
I never really liked TRA previously but it looks cheap and pays a divi + buybacks incoming so thought I'd give it a go.
if the markets really against the stock then being a buyer of last resort might be a bit of a thankless task in the short term.
I think of it in terms of say the Bank of England vs Soros , or more recently when the Swiss dropped their peg to the Euro.
Holder at average just under 3
Patient. Possibly consider some more at these prices
Do Turners sell double cabs? I see so many of them here
Beagle - I see on Slide 8 of their presentation they do show a thing called Underlying NPBT (up 3%) which doesn’t into account property sales profits.
Implies they recognise such things as property profits as not entirely normal or at least something that causes lumpiness in earnings
One thing though - this time next year they can do the Underlying NPBT trick and show growth from there (assuming they won’t have a $3.5m property windfall). Sneaky eh
The tWHO'S TELLING PORKIES ABOUT CAR SALES?
http://www.sharechat.co.nz/article/4...car-sales.html
Interesting October was dreadful month
This picture shows what a disappointing performance looks like
Turners Group made $0.3m more
Buy Right Cars made $0.9m LESS
Finance made $0.1m LESS
Insurance made $0.3m more
Property Profit of $3.5m a bonus
EC Credit made $0.3m LESS
They told Beagle at the AGM these MTF loans weren't a worry any more.
From that picture
Finance result materially impacted by impairment in the MTF non-recourse channel
Not yet .....waiting for the buyback to kick in in earnest (doesn’t start until Friday) ....and hoping like mad I’ll get more than 257
Good gamble though ...just imagine if they had held of with this veiled profit downgrade....which was worse than Metro’s downgrade
You never know in a day or so I might decide to hold forever ...like Metro things have to come right sometime
Correction they tried to tell Beagle ….
Dog's been around the block a few times and knows old non recourse loans hang around and impact for a long time...worse than your mother in law outstaying her welcome over the Christmas holidays. Those loans will keep biting in 2H and 1H FY20 as well....might be down to the tail of the ugly mutts by 2H FY20. You see that 8% of them are overdue :eek2: Arrears in general up significantly this year compared to last year. Thing is this Labour Govt told us their new families package which kicked into effect 1 July 2018 was going to make a huge difference to families living standards...it probably has so they're buying new vehicles instead of second hand and why not with the interest free deals, long new car warranties and excellent fuel efficiency of smaller new cars these days. Sister in law bought a new Suzuki Swift on interest free terms a while back. Laughing all the way to the bank with fuel consumption of only 5.6L per 100 km's. Reckons the fuel savings help pay the car off.
As dodgy as some of their motors
Hi Percy, I do not think you look foolish at all. You have made so many excellent call on companies which were under valued.
One should be able to trust the information a public companies give out.
I think in TRA case it is the body language of the deputy Chair at the AGM and the lack of a Chairman at the AGM which gives away that things are not the way with this company as they are trying to project.
Brian Gaynor had a story about FBU in the weekend and stated that the lack of energy of board members was a problem for FBU.
Sadly TRA chairman not turning up at a number of meetings must be the ultimate of lacking energy for the roll he is paid for.
Weeeeelllllll. They could, sort of. Had the chair raised it, and with their IT skills I am sure they could have got a mike over to the SH'er and projected the laptop screen up to include him in the conversation. We know he was listening (so he could hear) and we heard him speak, so we know the two way coms was working.
I suspect he couldn't face the wrath of the barking Beagle lol
Might as well spend that "well earned" directors fee increase on a decent ski resort eh https://www.zermatt.ch/en/Media/News...in-Switzerland
All good though because now the SP has been beaten savagely with the ugly stick those buyers in now at around $2.50 will be able to enjoy a Swiss holiday themselves in due course...
I think Turner management have been selling us down the river all year .....accentuating all the positives and glossing over any negatives.
Even now they not coming out with a profit downgrade ...just might be a possibility of one ...cool
Any used car salesman jokes anyone?
From the presentation - Reduction in cash balances due to investment of insurance reserves into longer dated term deposits
Prudent move but the insurance guy won’t be able to proudly state at next years agm that his investment return is probably the envy of other insurance companies (all over the world)
What has our friend KW told you about buying stocks in a downtrend but all the time you've been talking up the official company line about growth opportunities !
You are right to feel rather foolish AND show some contrition on this forum about this matter.
All good now though at ~ $2.50...must be a bargain and with a multi million dollar share buy-back coming what could possibly go wrong lol
I seem to be the only one who accepts the Deputy Chairman,Paul Byrnes explanation, the board changed the date of the meeting,not Grant Baker.
I have a great deal of time for Paul Byrnes,and the rest of the board,so it meant very little to me that Baker was not there " in the flesh".
So we have a poor half year,and a slow market for used cars.
Going forward it would appear we are on track.
Issues.
Finance.MTF non-recourse loans.According to MTF result issued yesterday, Turners' Oxford Finance altered their lending citeria in April.So looks as though Turners are working their way through them.Non payers identified,slow payers identified.
Turners now putting $4mil a month of Turners originated loans through Turners Oxford Finance rather than MTF.Better margin.
Buy Right Cars.Old stock discounted and moved.Adjusting to slower market.
Turners/Buy right Cars Stock levels.Stock levels adjusting to match sales.Positive.
Autosure Insurance.Appears to be better matching premiums to cost of repairs.
Staff.Appears up skilling staff is on track.
EC Credit.Acknowledged growth will come from Australia and must be sourced.Work in progress.
End of live vehicles.Trading well.
Liquidity.Plenty of undrawn lines of credit.
Property development.On course.
Share buy back I take as positive.