TRA - Turners Automotive Group

[winner (n)]

Found a book my boss gave me years ago to read years and had another read recently. It is On Grand Strategy
by John Lewis Gaddis.

I think he gave it me because as the WSJ says it is the best education in grand strategy available in a single volume . . . a book that should be read by every American leader or would-be leader

Anyway there's mention of hedgehogs and foxes in describing leadership.

So I thought how does our beloved Todd Hunter stack up...... AI gave me this - and it seems so true ....Todd is a great leader —

Based on the principles outlined in Jim Collins'  Good to Great, Todd Hunter of Turners Automotive Group exhibits the characteristics of a Hedgehog, specifically by focusing on a single, clear, and sustainable business model that has driven consistent, long-term success.

Here is the breakdown of why Hunter aligns with the Hedgehog concept:

The "One Big Thing" (Hedgehog): Hunter has concentrated Turners' efforts on becoming the undisputed leader in the New Zealand used car market by creating an integrated "auto eco-system."

This strategy revolves around the "flywheel effect": purchasing and consigning more cars, which increases retail sales, which in turn drives growth in their finance and insurance divisions.

Deep Focus on the Core: Instead of diversifying into unrelated industries, Hunter has doubled down on the core automotive retail, finance, and insurance businesses. This approach has led to consistent record profits, even during challenging economic times.

The "Tina" Effect: The "Tina" marketing campaign is a clear example of focusing on a single, compelling message to drive the economic engine—persuading Kiwis to sell their cars to Turners, which secures necessary stock.

Operational Discipline: Under his leadership, Turners has embraced a "culture of discipline," focusing on what they can be the best at, which has resulted in high employee engagement and strong shareholder returns.

While he is capable of adapting to change (a trait of a fox), Hunter's leadership style is defined by a focused, long-term strategy rather than pursuing many disparate, fleeting opportunities.


But AI elaborated -

Todd Hunter, the Group CEO of Turners Automotive Group, appears to be a hedgehog by result, but a fox by method.

In the business framework established by Jim Collins in Good to Great, a "hedgehog" simplifies a complex world into a single, overarching vision that they execute relentlessly. Here is how Hunter fits the categories:

The Hedgehog Traits (The Vision)

The "Flywheel" Focus: Hunter has spent nearly 20 years at Turners, refining a singular "auto ecosystem" strategy. This "flywheel" focuses on the intersection of car retail, finance, and insurance, where each part strengthens the others.

Disciplined Growth: Under his leadership since 2016, the company has delivered consecutive record profits by sticking to this core competency.

Cultural Consistency: He is frequently praised for building a "strong culture internally" and maintaining a high level of employee engagement as a core competitive advantage.


The Fox Traits (The Tactics)

Embracing Complexity: Award judges have explicitly noted that Hunter is "not afraid to embrace complexity," a trait typically associated with the "fox" who sees many things rather than just one.

Diversification & Change: While the goal is singular (the auto ecosystem), his methods are "transformational" and involve constant "diversification of the business" to stay ahead of economic headwinds.

Adaptive Strategy: He has led Turners through significant digital transformations and strategic investments (like the Quashed insurance platform), showing a fox-like ability to pivot and integrate new tools into the core mission.

Ultimately, Hunter functions as a "Hedgehog with Fox-like reflexes"—he maintains a single-minded focus on the Turners ecosystem but uses a wide, complex array of strategies to ensure it wins.

[winner (n)]

The thrust of Gaddis's thinking was hedgehog is good at doing just one thing, whereas a fox is good at doing many things.

Hedgehog leading often led to failure ...thing America in Vietnam and Kodak

So he makes the case for being both.

[Mos]

How about those interested in Turners including myself take a stab at what the key points of the 26 March strategy presentation will be? Including 5 year targets. I will have a crack at over the next couple of weeks and would love to see entries from Turners holders/followers.

https://www.nzx.com/announcements/467150

[Basil]

Okay, I will play in a tongue in cheek way, for now. Todd will roll out his $5 share price target again in 5 years time after announcing a 3:1 share split on the day.

[Waltzing]

Anyone seen any old skoda for sale at Turners...

Wheeler Dealers... skoda's ... honestly... dont miss that instalment on History channel...

oh its on Discovery Turbo... who actually watches that channel....

NO NO.. we dont...

[Pierre]

Dealer numbers stay flat

January's total lowest for more than two decades and almost 200 below figure from year ago.

Posted on 17 February, 2026 by Autofile


The number of dealers on the Motor Vehicle Traders Register (MVTR) remained flat at the end of January after dropping by just two last month to 2,597.

It comes after the total nudged higher at the end of 2025 when it increased by four traders through December to stand at 2,599.

January's total is the lowest for that month in more than 20 years. It is also 192 below the 2,789 recorded at the end of the same month last year.

Dealer numbers have largely been in decline since reaching a high of 3,535 in November 2017.

[entrep]

Thought I'd run some of the numbers and comments here through an AI program that I've been working on. This is the result.

The Valuation Reality
Let me lay this out plainly:



The maths of what's happened:

The stock has roughly doubled. But earnings have only grown about 50-60%. The other 40-50% of the share price gain has come from multiple expansion.

This is the critical point. When a stock re-rates from 8x to 17x earnings, that PE expansion is a one-time event. You can't re-rate from 17x to 34x — that would put Turners on a higher multiple than most tech companies. So the future return from here is essentially going to be driven by:

Earnings growth (~10-12% if things go well)
Dividends (~4-5% gross yield)
Maybe modest further multiple expansion (unlikely to be significant from 17x)

That gives you a plausible total return of 14-17% gross in a good year, but with meaningful downside risk if earnings disappoint or the multiple contracts.

Red Flags — Ranked by Severity

1. The Provision Coverage Decline (MOST CONCERNING)

This is the one that genuinely worries me. Let me be specific:

Total provisions have dropped from 1.98% of gross receivables (Sep-24) to 1.56% (Sep-25)
They're releasing the economic overlay provision ($2.3m → $1.9m → $1.4m) during a period when NZ consumer arrears are at 11.99% — the highest on their own Centrix chart
They justify this by pointing to their own arrears being well below market (2.6% vs 5.1%)
The average credit score of new originations is improving (744, up steadily)

Here's why this concerns me: Every finance company looks good on arrears right before they don't. The book is growing fast (13% in 6 months). New loans don't go into arrears immediately — there's a seasoning period. The true credit quality of this rapid growth won't be apparent for 12-18 months.

Releasing provisions while simultaneously growing the book aggressively during a recession is exactly the pattern that has preceded credit losses at numerous finance companies historically.

Am I saying they'll blow up? No. Their credit scores genuinely are improving. But the direction of provision coverage should be going up during uncertain times, not down. The fact that it's going down flatters reported earnings.

If they had maintained 2.0% provision coverage instead of 1.56%, the extra $2.1m provision would have reduced HY26 NPBT from $30.4m to $28.3m — still good, but less impressive.

2. Credit Management Goodwill Risk (MODERATE)

Management has explicitly flagged they'll review the carrying value at year end. The division earned $1.1m in HY26 (annualised ~$2.2m). Even at 8-10x earnings, that's only worth $18-22m. If there's $25m+ of goodwill allocated to this segment, an impairment is likely.

The forum is treating this as immaterial, and in the grand scheme it probably is — a $5-10m writedown wouldn't be business-threatening. But it would be a first for Turners under current management and could spook sentiment.

3. Cash Flow Quality (MODERATE)

Reported $21.9m profit, negative $30.9m operating cash flow. Yes, this is because they're growing the loan book, which is a productive use of capital. But it means:

The dividend is essentially being funded by borrowings, not operating cash flow
The business needs continued access to wholesale funding markets to sustain operations
Any disruption to securitisation markets (as happened briefly during COVID) would create immediate liquidity pressure

The new $200m public securitisation is positive for diversifying funding sources, but it also adds complexity and market-dependent refinancing risk.

4. Concentration in NZ (LOW-MODERATE)

Turners operates almost entirely in New Zealand. That's a $230 billion GDP economy with 5 million people. There are natural ceiling constraints on growth. The "only 10% market share" line sounds good, but getting from 10% to 20% in a mature market is extraordinarily hard. Most of the market share gains come from passive consolidation (competitors dying) rather than active conquest.

The branch expansion pipeline is sensible but the incremental profit contributions are modest ($200k-$700k per branch). You'd need a lot of branches to move the needle on a $60m NPBT business.

What Could Actually Go Wrong?

Turners' biggest risk isn't a blowup — it's deceleration followed by multiple compression. Here's the scenario:

NZ economy recovers slowly (which is the base case, they call it "two-speed")
Earnings growth slows from 12% to 6-7%
Market decides this is a 13-14x earnings business, not a 17-18x business
Stock goes from $8.50 to $6.50-7.00 (still a good company, just lower multiple)
You collect your 4-5% gross yield while you wait

That's not catastrophic but it is a meaningful drawdown and could take 2-3 years to recover from.

The more severe scenario involves credit losses accelerating in the finance book, but I give this lower probability given the improving credit quality metrics.

My Honest Take

If I owned it from lower levels, I'd be holding but with a trailing stop. The business is genuinely good and the growth is real. But I'd be trimming if it got above $9-10 because the valuation cushion has evaporated.

If I was looking to buy today, I'd want to see it back around $7.00-7.50 (roughly 14-15x FY26 earnings) before I got interested. That's a 12-18% pullback from current levels, which is entirely possible if any of the following occurs:

Quarterly earnings miss or guidance downgrade
Credit losses spike unexpectedly
Broader NZ market selloff
Credit Management impairment announcement

The fundamental problem with buying at $8.50 is this: You're paying 17x for a business that management is guiding to grow ~10%. That means your expected return is basically the earnings growth plus the dividend yield, minus any multiple contraction risk. That's maybe 12-15% gross in a good year, with asymmetric downside risk if anything goes wrong.
Compare that to $3.50-4.50: paying 8-9x for the same growth profile, getting a 7%+ gross yield, with massive re-rating upside. That was a genuinely compelling risk-reward. Today's buyers are paying roughly double the multiple for a business that hasn't doubled its earnings capacity.

Bottom Line

The stock was deeply mispriced at $3-4. It's approximately fairly priced at $8.50. Fair value and a good buy aren't the same thing. If you're going to buy, size it modestly, understand you're paying a full price for quality, and be prepared for periods of underperformance if the growth doesn't materialise as fast as the market expects.

[Basil]

The stock was deeply mispriced at $3-4. It's approximately fairly priced at $8.50

Which is exactly where I well and truly backed up the truck. Let me make this clear. HLG is currently, deeply mispriced, just like TRA was at $3.50.  TRA is no longer deeply mispriced but that does not mean its not a great hold for future growth.
I think that's not a completely unfair overview, I'm not going to comment on specifics, but that analysis is fundamentally flawed in one respect.
We're 11 months through FY26.  The market is always a forward looking beast, always has been, so the market is viewing TRA on a forward PE of 15.5 for next year and all the thinking around TRA being priced at 17-18 times forward earnings is thus, fundamentally flawed.  15.5 forward PE for a company that's got a 5 year EPS CAGR of 12% during the deepest and most protracted recession in N.Z. in decades is not expensive for a company with a clear growth path in the years ahead during what will hopefully be more settled economic times.  The list of companies on the NZX trading on more attractive metrics than that with a well proven double digit EPS CAGR is very, very short.

[Waltzing]

surely it disserves its current price... and its the start of 2026... its hardly a company with a big risk profile accept for its loan book but that risk is therefore the same as every other finance company including the banks...

hold till well after 2030 or even longer ...

its a stable...its iconic... If you  say turners y dont say which turner are you talking about.. no no.. they know who you mean... it now part of the lexicon...

Like Maca's, you say Turners its TINA...

Do they have a value on the Name alone, the good will must be huge...

The market has decided that its P/E is going to be met...

The risk of a non recovery is real but hang on as Sir B has stated they did this in a recession that the government doesnt know exists....