https://www.sharetrader.co.nz/showth...hare-buy-backs
turners caryards having to close down in level 4 lockdown? , debt wont be serviced in that case . please tell me im wrong
Not a pretty picture comparing TRA (blue line) with the NZX50 (brown line). Market seems to have little confidence that this one might shine. It didn't even properly bounce back on the current dead cat bounce (aka bear market rally)
Attachment 11155
Question is - will they survive?
I remember that high unemployment rates are one of the killers for their finance business, and economists warn now to expect unemployment rates between 15% and 30%. No money, no job, no repayments. Easy as that.
Their balance sheet does not look that healthy either - their liabilities (70% of assets last FY, and I wonder whether their assets are still worth what they used to be at that time - i.e. real ratio might look much worse) go through the roof - maybe the share buyback around $2.50 was at the end of the day not the best idea since the invention of sliced bread ... and now they can't even realize whatever value might be stored in their stock due to the lock down situation.
Wondering why they don't even bother to update the market? Other companies do. Clearly the lack of sales and cash flow during the lock down creates a material change for their business.
Scary ... but then - it might be just a high risk, high reward game, but clearly 2 hot 4 me :scared:.
I prefer to 'zoom out' and look at the bigger picture. Here are some questions to consider:
1/ Will there be a need for second hand vehicles in the NZ market in the future?
2/ If YES, then who in New Zealand is in the second best position to supply them? (I would argue that Toyota New Zealand with their 'Signature' second hand brand is number one).
Now consider what the jobscape is liable to look like in the future. Rural is not going away and even some displaced city workers may need a reliable car for a long commute to the countryside to their new job.
Next think about all those helicopter parents who are ferrying their children back and forth to school. With social space rules being rewritten, suddenly all those four seater cars will become two seaters. A pent up demand for an upgrade? What about those workers who are left in the city. Will they still be keen to cosy up on public transport? Probably 'safer' to buy a little commuter car. And with many workers working from home permanently, they might even get a park in town!
I fully get the idea that we are headed for difficult economic times. But I think the need for replacement vehicles will remain and I think that demand for second hand vehicles will be less affected than demand for new vehicles. I think Turners are in a good position to meet the coming demand for vehicles. The fact they already conduct many of their auctions 'on line' mean they are in a good position to 'go electronic' in the short term if required.
I hear your concern about no COVID-19 Upgrade being issued. No doubt Todd is in discussion with his bankers and maybe negotiations are tough. We may even have a cash issue as a short term fix. That will hurt, but as a shareholder I would certainly support it if it gets the Turners business through this difficult patch.
SNOOPY
discl: holder
Not a bad update from company, seem to be hanging in there and obviously divvy is deferred, sensible decision under current scenario.
Largely agree sb9. Given Turners have promoted themselves as a 'dividend company', with a regular quarterly dividend coming in for those that sought income, I would have preferred to see a 'token dividend', even as low as 0.5cps, with a DRP option to reduce even further the modest cash drain such a dividend would cause. That wouldn't keep the dividends hounds happy, but it would keep them interested. Suspending the dividend completely could create panic selling by pensioners. And that is not good, as it would put downward pressure on the share price in an environment when more shares might need to be issued.
In market disrupting situations like this, I find it informative to look at what companies are doing rather that what they are saying. The fact that the dividend has been suspended indicates that Todd Turner is worried about the future funding of the company. The fact that Todd notes that no debt is due to be refinanced until 2021 should be some relief for shareholders is IMO hogwash. No company that has a choice would let their refinancing go right down to the wire. My take on this is that Turners is in urgent need of sorting out its future funding right now. It is good they are:
".... working proactively with landlords to reduce rent payments over the time of the lock down which has largely been received positively by property owners."
I must say their 'site redevelopment model' looks very good with hindsight.
1/ Buy land at rock bottom price.
2/ Plonk a container on the land and start charging themselves virtual above market rent.
3/ Sell the property to a hapless property investor based on yield, so that the 'virtual above market rent' changes to 'real above market rent' that is instantly capitalised in the Turners balance sheet in the sale from 'property sold at above market value'.
4/ When business suffers a downturn, negotiate to stop paying rent.
A great cash generating exercise for Turners shareholders. Not so much for the hapless landlord who is also faced with the capital loss implied by lower rent payments in the future.
I also find it interesting that suddenly the counter cyclical earning ability of EC Credit is now highlighted when just a few months ago it was effectively 'on the block' as a non core asset. If this crisis results in TRA retaining EC Credit, then I for one would regard that as a good thing.
The continuing income stream from
"...annuity revenues from finance and insurance."
was also mentioned. Way back when Turners Automotive Group was Dorchester, they did have a life insurance business. It has gone so far into the background that I don't recall it being mentioned in the text of last years quite comprehensive annual report. It is there if you look at the accounts section though. Unlike the PGW in house pension plan, the TRA plan is IIRC in surplus. So maybe a revival in this 'behind the curtain' side of the business is in order?
I will leave it there. I don't want to be too tough on Todd and the team in difficult times and I think with the cloud of uncertainty swirling, he is making the right noises and , behind the scenes, probably making the right moves. My previous post on the relative strength of the business (see this thread post 6059) still holds (except for the bit about the imminent dividend payment!) I have no problem continuing to hold my TRA shares in 'suitable portfolio weighted position'.
SNOOPY
Maybe I am the only one underwhelmed with we have $20m cash, (really not a lot), and no debt refinancing until 2021, (not far away really).