You using Ben Grahams formula to get intrinsic value?
Price to Book Value ratio good way of valuing TRA
The chart shows how the market has valued / seen Turners over the last 5 years
Turners is now seen in better light than pre-Covid times with a higher multiple.
However I do think a P/B of 1.5 to 1.6 is about tops for a compny like Turners - meaning current share price not that far away from a reasonable value (but not cheap as)
Interesting that the P/B has started to fall since inflation started to be a worry for investors.
Price is share price / Book Value is Equity / Earnings are Equity X ROE / PE ratio is Price over Earnings .....play around with those and one will see PE ratios and P/B are linked.
W69 your post got me to thinking. As TRA is for the most part a non bank financial lender and insurer, price to book and price to NTA are truly relevant, not withstanding the whack of money it makes from auto retail and credit collections.
I dabble a bit in financials and the concept of 'warranted price to book' or 'warranted price to NTA' are very common in financial services (eg banks, non banks, insurance) as a primary or secondary valuation methodology. Basically, the concept provides for a multiple of book or nta with the guts of the formula being (ROE less stable growth rate) / ( cost of equity less stable growth rate). You can just multiple that multiple to the current book or NTA figure to derive proxy for what the firms equity value/marketcap should be.
It's a nice cross check although some research analysts will use it for their primary valuation methodology for pure play banks / financial instos.
The concept seems to correlate well to current spot prices for TRA on a NTA basis and less so on a price to book perhaps given the amount of intangibles on the balance sheet.
Warranted Price to NTA:
I can't seem to upload an excel file so if any nerds want the excel file PM me.Quote:
TRA isn't a pure financial services firm so this approach will be of less relevance to say heartland, but still an interesting cross check. It doesn't suggest any upside to current spot prices.
Craigs investment update:
Turners Automotive (TRA) – Has performed very well post-COVID given its leverage
to the economic recovery. Importantly, management have continued to build
credibility through impressive execution of sensible strategies. TRA now has a very
strong brand presence throughout the country, and coupled with its finance and
insurance offering, is able to capture value at each point of the auto retailing
process.
With around four million vehicles in New Zealand, there is plenty of opportunity for
TRA to continue to capture market share. One of the key shifts in strategy has been
the focus on sourcing inventory domestically (capturing more of the private car
transactions market), which has reduced a reliance on imported vehicles. TRA
recently upgraded its profit guidance and reiterated that its annuity income
streams continue to perform well despite the widely publicised negative impact
that the CCCFA regulation has had for some potential borrowers.
We continue to see TRA as well positioned in the market given 1) continued macro
tailwinds supporting the domestic used car market (with TRA sourcing 90%+ of
vehicles domestically), 2) TRA’s expansion of operations into new regions and a
consolidation of registered dealers in New Zealand; and 3) the strength of TRA’s
annuity revenue streams supporting earnings growth through periods of reduced
vehicle trading.
TRA’s dividend pay-out policy of 60%-70% should see dividends increase broadly in
line with earnings. If TRA is able to deliver its earnings path, a ~10% p.a. earnings
growth and gross yield around 6% isn’t a bad proposition.
Car Offer a co in the USA for dealers that want to access inventory that other car dealers want to unload,different cars ,colours etc sell better in other mkts,matched to the highest offer.Car offer take a re $325 fee from both sides.Car offer has 10,000 dealers on its platform.Now planning for customers to be able to put their cars up to the highest bidder. CNBC
Turners could morph into this,may have to,they've shown they are adaptable so far.
From today's newspaper, or should I say from today's women's weekly, or Jacinda's propaganda machine:
Armstrong's puts brakes on share float.
I suspect this will create some positive momentum for Turners.
I'd say there was plenty of interest and even more as the markets tanked, people thinking they can get Armstrong at a discount to FA .. but the promoters are smart enough to pause, this isn't the right time to cash out, unlike only a few weeks or months ago. Armstrong might be the MFB or CBD of the pseudo finance / insurance sector if they screw up their timing on a listing.
TRA is a much better choice. I don't that think diversifying 'within' this sector will achieve much more than putting a handbrake on ones portfolio.