Turners Automotive Group (TNR/TRA) |
|
FY2015 |
FY2016 |
FY2017 |
FY2018 |
FY2019 |
No. Shares on Issue EOFY (TNR/TRA) (*) |
|
63.077m |
63.432m |
74.524m |
84.803m |
86.555m (est) |
Normalised Earnings Per Share {A} |
|
13.6c |
24.2c |
21.8c |
22.5c |
20.1c (est) |
Actual Dividend Paid (cps) {B} (**) |
|
5c + 4c |
6c + 6c |
7c + 3c +3c |
4c + 4.5c +3c +3c |
4.5c + 5c +4c +4c |
Normalised Earnings Retained {A}-(B) (cps) |
|
4.6c |
12.2c |
8.8c |
8.0c |
2.6c (est) |
(*) The number of TNR shares on issue at the end of the financial year has been adjusted retrospectively for the 23rd March 2016 10:1 share consolidation. To see how the number of TRA shares on issue was derived for FY2015, refer to my post 1413 "Buffett Test 2: Increasing 'eps' Trend (FY2016 perspective): Preamble Part 2.
(**) The actual dividends paid by TNR/TRA over FY2015 and FY2016 were unimputed. This was because of prior losses incurred under the DPC/TNR/TRA structure. However, in my modelling the TUA group was already combined with DPC/TNR/TRA. Previous year TUA profits wiped out those previous year equivalent DPC/TNR/TRA losses. Under this modelled scenario, those FY2015 and FY2016 dividends would have been fully imputed. That's because looking at the combined picture, those prior offsetting DPC/TNR/TRA losses never happened.
From the above table the 'five year average' dividend payout was:
(9c + 12c + 13c +14.5c + 17.5c)/ 5 = 13.20c (net)
Average Gross Dividend Yield (based on a 28% tax rate) is therefore:
13.20 / (1-0.28) = 18.33c
Using a capitalized value gross interest rate of 7.5% (see thread An Investment Story - Geneva/Turners/Heartland, post 40), this translates to a fair value share price of:
18.33c/ 0.075 = $2.44
Last year, I stated that I no longer believed this valuation method provided a satisfactory technique for valuing Turners Automotive Group. This was because the retained earnings of TRA are employed in growing the business, and this valuation method ignores that contribution.
With the share price today trading some 10% below this equivalent $2.44 valuation figure -a figure based only on historical dividend payments-, one could interpret this to mean that the 'retained earnings' part of the profit generated has been squandered and for share valuation purposes should be considered worthless.