TRA - Turners Automotive Group [previously TNR - Turners Limited]

[percy]

So what was it that happened 51 years ago (1973)?

SNOOPY

I do not know..

[Snoopy]

I do not know..

I remembered. It was this.....



SNOOPY

[bull....]

new car sales have fallen of a cliff recently , A leading economic indicator along with many other depressing indicators reflecting tough times.
Will be interesting to see how turners are navigating these tough times

[Rawz]

new car sales have fallen of a cliff recently , A leading economic indicator along with many other depressing indicators reflecting tough times.
Will be interesting to see how turners are navigating these tough times

This is their outlook:

There is no doubt that trading conditions got harder in the final quarter of the FY24 year. Looking ahead, we anticipate a further deterioration in economic conditions during the first half of our financial year (HY25) but expect to see the economy start to recover in the second half. Our near-term focus remains on exceeding the $50M NPBT goal in FY25, despite the economic backdrop, however there remains some obvious risks with the level of interest rates impacting the overall economy and consumer demand

[Ggcc]

new car sales have fallen of a cliff recently , A leading economic indicator along with many other depressing indicators reflecting tough times.
Will be interesting to see how turners are navigating these tough times

You will find that cars over $20,000 will struggle to sell and cars under that keep selling as normal. I feel this has been discussed multiple times that even in a recession the Turners total business model does ok. Sure the finance side may increase with the number of people behind in payments, but overall the company still does well. I am a happy holder for years now and have no intention of selling any shares and will accumulate if people panic

[percy]

You will find that cars over $20,000 will struggle to sell and cars under that keep selling as normal. I feel this has been discussed multiple times that even in a recession the Turners total business model does ok. Sure the finance side may increase with the number of people behind in payments, but overall the company still does well. I am a happy holder for years now and have no intention of selling any shares and will accumulate if people panic

I agree Turners are concentrating on the "sweet spot" in the market ie under $15,000.
There is a lot of excellent parts to Turners to like.
Car Sales,including auctions.
Car Insurance
Car mechanical insurance.
Car finance.
End of life car disposals.
Property dealing,including grabbing development margins on new sites.
Debt collection business.

Car sales slow down in winter.
It is OK to be down on a poor month,but the real profits come from being up on the good months.

[Jonette]

Some details on Turners stock - shared because I can.
Turners is fine, they do not sell new cars. 2nd hand sales are down in June, but at this time of year sales are variable Quarterly data shows the year is pretty good. Turners say they have almost 10% of this; https://datawrapper.dwcdn.net/vGSi4/2/

I suspect they are responding to demand. Their total stock is about 4% of national inventory, but as they state, they sell about 9-10%, ie they take on average about 2 weeks to sell a car.
Other factors; Our govt appears to be talking the economy down - I guess so they can take the credit for improvements/ My truckometer is now fully focussed on Auckland motorway because Waka Kotahi don't take publishing stats seriously, The truckometer (Daily number of trucks passing Drury on the southern motorway) suggests the market is still rumbling along ( i use this to understand Mainfreight - MFT ) https://datawrapper.dwcdn.net/Dugrc/20/

Share of inventory by price range. Second hand cars are still selling well while Turners temporarily focussed on cheaper cars but have reversed that a little recently; https://datawrapper.dwcdn.net/dp3a0/2/

2nd hand Traders share of market, notice the change from prior to 2021 to post 2022. A change worth discussing; https://datawrapper.dwcdn.net/RuTDR/5/

Turners inventory, this year is a bit lower than other years, but management have been testing theories of using Trademe or not. BTW, 2CC have almost ceased using Trademe, I doubt that works for them, their sales staff immediately swamped their 2CC site listings with sold cars, no doubt to massage their egos. https://datawrapper.dwcdn.net/3FAuw/4/

[dln]

Another nice dividend on the way.

[DarkHorse]

I remembered. It was this.....



SNOOPY

Wow!!! That song could surely knock "We Built this City on Rock and Roll" off its perch!
(On the 'worst song of all time' list)

[percy]

Turners Automotive Group Ltd
No Need to Shift Gears, Growth on Track


link

OUTPERFORM



We initiate full coverage of Turners Automotive Group (TRA) with an OUTPERFORM rating and a 12-month target price of NZ$5.30. TRA is a high quality operator which has gained market share and grown earnings through the interest rate cycle. We see a clear pathway to further earnings growth driven by (1) footprint expansion from new branches, (2) margin recovery and book growth in its Finance segment as the OCR falls and (3) further sales channel optimisation in its Auto Retail segment. While there are risks from a continued deterioration in the consumer environment, we view TRA's 12-month forward PE of ~10x as undemanding, especially in the context of our FY24-FY28 EPS CAGR of ~+10%. Additionally, TRA offers an attractive gross yield of ~8.9% and has been one of the premier dividend growers in the New Zealand market over the last decade.

NZX Code

TRA

Share price

NZ$4.22

Target price

NZ$5.30

Risk rating

Medium

C&ESG rating

n/a

Market cap

NZ$373m

Avg daily turnover

59.5k (NZ$262k)

Financials: Mar/

24A

25E

26E

27E

Rev (NZ$m)

362.1

387.4

414.5

436.6

NPAT* (NZ$m)

33.0

36.6

40.7

45.2

EPS* (NZc)

37.3

41.5

46.1

51.1

DPS (NZc)

25.5

27.0

30.0

34.0

Imputation (%)

100

100

100

100

*Based on normalised profits

Valuation (x)

24A

25E

26E

27E

PE

11.3

10.2

9.2

8.3

EV/EBIT

33.1

52.4

47.4

45.6

EV/EBITDA

21.0

26.3

24.1

23.0

Price / NTA

3.3

2.9

2.6

2.4

Cash div yld (%)

6.0

6.4

7.1

8.1

Gross div yld (%)

8.4

8.9

9.9

11.2

What's changed?
Earnings: We make minor changes to NPAT -1%/-1%/+3%/ over FY25/ FY26/FY27.
Target price: Our 12-month target price is NZ$5.30, representing ~11.5x our FY26 EPS estimate.
Rating: We initiate full coverage with an OUTPERFORM rating.
Strong execution through the cycle
TRA has demonstrated strong execution during the current economic downturn, achieving record earnings in FY24 (on its preferred NPBT measure) despite a challenging consumer backdrop. While profitability in Finance has been constrained by rapidly rising interest rates, this has been more than offset by strong market share gains in Auto Retail and steady growth in Insurance. TRA has a diversified base of annuity and non-annuity earnings streams which have largely insulated it from the cycle.

Clear pathway to earnings growth
We see a clear pathway towards TRA's medium-term NPBT target of >NZ$65m by FY28. The key drivers of earnings growth will be (1) expansion of the Auto Retail network from new sites and upgrades to existing sites, (2) margin recovery and book growth in the Finance division as interest rates fall, and (3) continued Auto Retail optimisation through the transition of stock from the wholesale to retail sale channel. TRA should also benefit from increased Finance and Insurance attachment rates as Auto Retail grows.

Valuation undemanding
TRA is trading on a ~10x 12-month forward PE, in line with its historical average ex-Covid and at a slight discount to its automotive and NZ retail peers. We think a premium valuation is now warranted given its improved business quality, track record of execution through the cycle and leverage to interest rate falls, and earnings growth outlook (we forecast a +10% EPS CAGR from FY24-FY28).



J