2CC - 2 Cheap Cars Group

[Rawz]

we are seeing the SP drift lower on the back of company commentary that npat of last year will likely not be achieved this year.
The dividend yield (historic) is 14.45% but market doesnt believe that it will hold. Its likely we are going to see a lower christmas divvy, but still a decent one- maybe 4.85- 5cents gross?.....

Is this a dividend trap? no, i dont believe so. Npat maybe lower in FY25 but should be back to growth in FY26

[alokdhir]

we are seeing the SP drift lower on the back of company commentary that npat of last year will likely not be achieved this year.
The dividend yield (historic) is 14.45% but market doesnt believe that it will hold. Its likely we are going to see a lower christmas divvy, but still a decent one- maybe 4.85- 5cents gross?.....

Is this a dividend trap? no, i dont believe so. Npat maybe lower in FY25 but should be back to growth in FY26

All high yield dividend stocks when get into difficult times leads to holders thinking its not a dividend trap but prudence pays ...see what happened to most liquid and safest bond proxy SPK !!

If I was a holder I wud have been out by now . Liquidity is so low that even a decent size holder like Percy decides to quit can bring it back to 60s ...though I am sure he will also think its NOT a dividend trap ...40 Mil capitalisation is micro , easy to decimate or play with ...maybe TRA can look to gooble it if becomes attractive to them ...but promoters hold too much , they will call the shots but that can be dicey also for retail holders ...just my random thoughts as not a holder

[Rawz]

All high yield dividend stocks when get into difficult times leads to holders thinking its not a dividend trap but prudence pays ...see what happened to most liquid and safest bond proxy SPK !!

If I was a holder I wud have been out by now . Liquidity is so low that even a decent size holder like Percy decides to quit can bring it back to 60s ...though I am sure he will also think its NOT a dividend trap ...40 Mil capitalisation is micro , easy to decimate or play with ...maybe TRA can look to gooble it if becomes attractive to them ...but promoters hold too much , they will call the shots but that can be dicey also for retail holders ...just my random thoughts as not a holder

Most companies selling a good to consumers are struggling in this environment. Even King Rod Duke turned in profit 5-6% down on previous year.

2CC say "Our focus remains on delivering gross margin expansion and prudent cost management. We have increasing control of the value chain at our Auckland hub and some exciting property developments to be announced shortly when finalised. While it’s a tough trading environment for many New Zealand businesses right now, we are working hard to ensure we deliver steady net profit after tax (NPAT

TRA say "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"

Since listing in 2021

2CC
Revenue 3 year CAGR 10%
EBIT 3 year CAGR 22%
NPAT 3 year CAGR 26%
BV 3 year CAGR 10%

Pretty impressive given the turmoil the business has been through.

I see 2CC as a dividend play however it is also a growth stock but must be discounted due to the low liquidity due to bugger all shares in the free float- once you take out David Sena and Percy's huge holding lol

[percy]

As at 31st March their inventory was $13.873 mil compared with last year's $8,377 mil.
Last year's was low.
I take it this year's was a lot higher,because they wanted to stay ahead of shipping issues, and with the view to open more Auckland sites.
They have talked about further expansion in Auckland. How many more sites they have not stated,but this one at 98 Wairau Road should be a cracker, as it is right in the thick of things.
It will be interesting seeing what their inventory is at the half year.
At a wild guess I am thinking around $12 mil.ie down nearly $2mil on 31st March.
We must remember even with the near $14mil stock level at 31st March they were sitting on $4.673 mil of cash and their underlying cash from retail activities was a very strong $4.925mil.Their equity ratio at 31st March was a very healthy 59.28 %.

With a challenging market 2CC is lucky to be in such a strong financial position.
Off the top of my head I can not think of any NZ company with such a strong balance sheet,and carrying such a high % of their market cap in cash..
David Sena and the team are cutting costs [such as online only agm],and improving their supply line logistics.
Improved supply line logistics will mean 2CC can reduce their stock holding substantially,and with their own buying team in Japan they can react to changing buyer's requirements very quickly.
Added to their cash pile will be another near $1mil in repayments from their own loan book.
Having the major shareholder as CEO means he is well focussed.[Think Rod Duke,Michael Hill,Stephen Tindall]
David Sena has stated ;
"Our focus remains on delivering gross margin expansion and prudent cost management. We have increasing control of the value chain at our Auckland hub and some exciting property developments to be announced shortly when finalised. While it’s a tough trading environment for many New Zealand businesses right now, we are working hard to ensure we deliver steady net profit after tax (NPAT),” he said".
I look forward to hearing more about the exciting property developments.Perhaps we will hear more on the 27th of this month at 2CC's agm.?
Wife and I are long term investors in 2CC,therefore liquidity is not an issue for us.
Reasonably cheap Japanese cars are incredibly good value.My own 2004 Nissan is such an example.
2CC and TRA are doing NZ car buyers a great service supplying great cars under $15,000.