2CC - 2 Cheap Cars Group

[nztx]

Interesting announcements today on new Board replacement:

NZX filing link:

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/NZA/396474/375959.pdf

Gordon Shaw & Michael Stiassny invited

Mr Stiassny is also on NTL board

[arekaywhy]

https://www.nzherald.co.nz/business/nz-autos-bank-pulls-funding-over-boardroom-changes/6Q5S4NHZ5U2C65O2E6BB6M5HKI/

not great for these guys

[Plata]

No idea why anyone would buy into this over TRA given it is of much higher quality and on similar PE ratio. Seems like the NZA founder/Supreme leader isn't cut out for the public listing lifestyle and that should concern any potential investor.

[Ferg]

From the article: "All non-executive directors of the company, Charles Bolt, Tim Cook and Tracy Rowsell, as well as executive director and founder shareholder Eugene Williams - who owns 34.4 per cent of the company - resigned last month."

That is a major concern.  What is going on?  A fall out of personalities?  Or something more sinister?  They say they are trading profitably for the first 4 months of the fiscal so maybe it is the former.

[Plata]

A spurned founder with 34% of the company, you'd expect they would be highly motivated to sell out over time if they disliked the other management enough to resign. Think it was over irreconcilable differences in preferred company strategy, that in itself is concerning. What situation or decision was so difficult/polarising/risky that it detonated the board?

[Basil]

Pretty sure 2 cheap cars have been featured on Fair Go a lot.  Some of their business practices could be the catalyst for a fallout over business strategy...just a theory but obviously it's anyone's guess.
Where there is smoke there is fire.

[Recaster]

Might be turning the corner. NCFO is in the black.

NZA Note

Will be interesting to see if gross margins on vehicles are still falling or if they have improved when the annual result comes out for FY23.

[lorraina]

With the huge demand for 10,000 replacement cars, due to being written off because of flood damage,NZA's 2cheapcars should be "well positioned."

[BlackPeter]

With the huge demand for 10,000 replacement cars, due to being written off because of flood damage,NZA's 2cheapcars should be "well positioned."

You are right - though admittedly, I still would find it difficult to buy a car from a company implying in their name that they sell "cheap" cars. Sounds like a red flag to any potential buyer, doesn't it? Anyway, while some people look for quality, maybe they still found their market niche.

[lorraina]

They are selling about 11,000 cars a year.
It appears, as per TRA, the profit is in add ons,finance and insurance.
I compared their prices on a Nissan Tiida and they are about $1,500 to $2,000 CHEAPer than other dealers such as TRA.
Think of them as The Pak n Save of the Used car dealers..

[Auto Rower]

The wheels certainly fell off today .

[lorraina]

Last year's fall out between the founders continues with Eugene Williams starting up in opposition.
He is an aggressive seller of his shares.
I see this as a "window of opportunity" and have bought a good amount of NZA shares for myself and the wife.
New chairman,directors  CEO, and CFO have already turned the ship around and strengthened the foundations for further profitable growth.

On 45,554,500 shares on issue.
NPAT of $3.8 mil is eps 8.34 cents.......PE 3.6..
NPAT of $4.2 mil is eps 9.22 cents........PE 3.25
NPAT of $3.8mil..Payout half of eps in divie is 4.17 cents and at share price of 30 cents the yield is 13.9%
NPAT of $4.2 mil .Payout of half eps in divie is 4.61 cents and at share price of 30 cents the yield is 15.37%
Here is the company's result presentation.
Their outlook statement is very positive.
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/NZA/412150/395357.pdf

PS Interesting noting their EV and Hybrid sales are 41% of total sales.

[Buzz]

I think it would be prudent for investors to take into account that the automotive importers and sales industry is exposed to revenue and expenses distortions since the CCD and CCS schemes have been introduced.

These 'social engineering' experiments by the government affect the entire industry, for as long as the schemes are in place, and until they aren't. In simple terms the schemes generate revenues and expenses, where previously there were none, and disproportionately affect the importers and retailers depending on their choices of trading behaviours.

And, one day they will all just 'go away', perhaps soonish if Act/National get into government.

[Basil]

As with all forecasting, before investing you need to carefully look at the credibility of the company and its track record with previous forecasts.  This minnow, (market cap of only $12m), has not exactly been wildly successful to date and always seems to be mired in one form of controversy or another.  Incredibly rare to have seen the sort of boardroom ructions that have gone on here and may be indicative of a problem with the culture at this company.

One thing I always do when assessing a company as an income stock is look at the five year track record of dividends.  When you do that you can form a view of whether their track record suggests this will be a reliable source of retirement income or a highly speculative and / or variable one.
Might be worthwhile also for people to have a look at the downtrending chart for the last 2 years.
I'll leave it at that as plenty of others have also warned about this company.

[lorraina]

I seem to remember you said much the same things about Turners when I started to invest in them,including director Paul Byrnes and Chairman Grant Baker.
Some very personal attacks on Baker when he preferred to pick up his new Ferrari ,rather than attend the TRA's agm in person..
NZA have a strng board and a very capable CEO.