2CC - 2 Cheap Cars Group

[Basil]

LOL, That's going back quite a few years mate. Turners has two distinct era's. Before Tina, and after Tina.  The brilliance of that marketing campaign has been completely transformative.
 

[lorraina]

The ground work was laid well before Tina's arrival.
ie Deciding to move more to retail rather than wholesale, and better positioning their sites for retail.
Their 3 new sites in Christchurch are a continuation of this wise policy.
Will be interesting seeing how well 2CC develop their new super site at Sylvia Park.
This could be 2CC's "game changer".

[lorraina]

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[Basil]

ps.Can you name a NZ listed company that has a stronger balance sheet than 2CC's.

Two spring immediately to mind, (I am sure there are plenty more) and I own plenty of both.  Neither have any debt.  MCK and HLG.
A PE of 9 for 2CC seems quite high to me for a market minnow with its somewhat patchy track record, sorry mate, I'm just calling it as I see it.  Wishing you all the best with it though.

[Dolcile]

I guess the question is whether the recent $3.3m npat is bottom of the cycle and they can get closer to the $6m the year before on a steady state?

[lorraina]

Two spring immediately to mind, (I am sure there are plenty more) and I own plenty of both.  Neither have any debt.  MCK and HLG.
A PE of 9 for 2CC seems quite high to me for a market minnow with its somewhat patchy track record, sorry mate, I'm just calling it as I see it.  Wishing you all the best with it though.

Agree with your HLG ,however I doubt the major shareholder of MCK will share the "rewards".
Interesting that HLG's equity ratio is 47.12% while 2CC;s is 61.58%.
"Not a lot of people know that."

[Basil]

I guess the question is whether the recent $3.3m npat is bottom of the cycle and they can get closer to the $6m the year before on a steady state?

That certainly is the $64,000 question mate.  For mine, the ~ $6m was earned with very strong tailwinds from Government incentives on EV's, PHEV's and hybrids and all of those incentives are gone.  Competing against the marketing and management brilliance of Turners and their used car market intelligence is going to be hard work for all used car dealers is how I see it but others will see it differently and that's perfectly fine.  There's plenty of room for as many different opinions as there are car dealers     Keep in mind also that the $3.3m was generated with the tailwind of a net $600K of carbon credits from the previous year, which presumably is not repeating, so was really a normalized net profit after tax of circa $2.9m.  Extract from annual result follows:
"Included in the FY25 revenue is $1.7m related to carbon
credits generated and retained in prior reporting periods, but not previously
recognised due to uncertainty regarding their realisation. At the gross
margin level, this revenue is partially offset by $1.1m of carbon credit
costs associated with net credits attached to vehicles sold during FY25".

[Basil]

Agree with your HLG ,however I doubt the major shareholder of MCK will share the "rewards".

MCK - I think there's a very good chance of a significantly improved takeover offer in 2026.  Their stand-still agreement to not make another higher offer expires in late January 2026.  Less than a year ago they held just a fraction over 70%, now ~ 86% after the recent takeover attempt...they only need another 4% to get to compulsory acquisition.  Its game on early next year I reckon.  Disc: I have been very quietly hoovering up more MCK shares.

[lorraina]

I hope you are right,but with just 4% required I can not see them being generous.
It is not in their nature.

[Basil]

I hope you are right,but with just 4% required I can not see them being generous.
It is not in their nature.

I agree its going to be interesting.  Crackity and I had an interesting discussion with ACC's head of equities at the annual meeting and some interesting follow up correspondence and we've all applied a fair degree of intellectual horsepower to this.  There's quite a lot of complexity around this that I won't go into on here in any great detail but in brief getting to quite a bit higher than 90% is likely to be CDL hotels objective. Assuming they make another offer they will want to get price agreement from at least half, 8% or more of the remaining minority shareholders, i.e. a lock up price agreement to get to 94% before making their next takeover offer.  Doing it that way closes the gate on any chance of remaining minority shareholders having any price appeal rights under the compulsory takeover code provisions.   We know that and I am sure CDL Hotels know that and will want price certainty.   We know they will want price certainty and if I am in any way involved, will use that fact in negotiations.  There is likely to be some interesting discussions and negotiations going on behind the scenes between ACC and other key shareholders and CDL Hotels later this year or early next year, in my opinion.  I'd like the new takeover price to start with a "4" and make that clear to ACC head of equities but accept ultimately he is the kingmaker and between him and CDL hotels, they will set the price.  About half way between the absurdly low $2.80 offer and the independent valuer's report, (2.80 + $4.70) / 2 = $3.75, adjusted for earnings during calendar year 2025, say 20 cps = $3.95 wouldn't surprise me.  More would be nice, we will see.

[lorraina]

I do not see your name here...lo.

Total Number of Shares:105578290 Extensive Shareholding:Yes
Shareholders in Allocation:
Allocation 1:74743077 shares (70.79%)
 
 CDL HOTELS HOLDINGS NEW ZEALAND LIMITED
 Floor 7, 23 Customs Street East, Auckland Central, Auckland, 1010 , New Zealand
Allocation 2:5428319 shares (5.14%)
 
 BNP PARIBAS NOMINEES (NZ) LIMITED
 Bell Gully, Deloitte Centre, Level 5, 1 Queen Street, Auckland, 1010 , New Zealand
Allocation 3:4693469 shares (4.45%)
 
 ACCIDENT COMPENSATION CORPORATION
 81 -83 Molesworth Street, Wellington ,
Allocation 4:4375571 shares (4.14%)
 
 CITIBANK NOMINEES (NEW ZEALAND) LIMITED
 Citgroup Center, Level 11, 23 Customs Street East, Auckland, 1010 , New Zealand
Allocation 5:3527356 shares (3.34%)
 
 HSBC NOMINEES (NEW ZEALAND) LIMITED
 188 Quay Street, Auckland Central, Auckland, 1010 , New Zealand
Allocation 6:1292150 shares (1.22%)
 
 JP Morgan Chase Bank NA NZ Branch
 Level 13, 2 Hunter Street, Wellington, 6140 , New Zealand
Allocation 7:906000 shares (0.86%)
 
 Leng Beng KWEK
 12 Tanglin Hill, Singapore ,
Allocation 8:636135 shares (0.60%)
 
 NZX WT NOMINEES LIMITED
 Nzx Wealth Technologies Limited, Unit 1 Level 3 260 Oteha Valley Road, Albany, Auckland, 0632 , New Zealand
Allocation 9:549242 shares (0.52%)
 
 NEW ZEALAND DEPOSITORY NOMINEE LIMITED
 Level 2, Nzx Centre, 11 Cable Street, Wellington, 6011 , New Zealand
Allocation 10:475251 shares (0.45%)
 
 Kay Hong CHIAM
 11 Venus Road, Singapore, 574299 , Singapore
Allocation 11:463297 shares (0.44%)
 
 MFL MUTUAL FUND LIMITED
 Dunne Consulting Group Limited, Level 1, 41 Taharoto Rd, Takapuna, Auckland, 0622 , New Zealand
Historic data for shareholders

[Basil]

That's a very old substantial shareholding list lol.    Have a look in next years annual report at the top 20 shareholders, assuming the company is still listed on the NZX then.

[lorraina]

Often the way with NZ Companies office.

[lorraina]

Some interesting comparisons between TRA and 2CC.
Company,.....Share Price,. NTA ........ ,SP x NTA,........yield ....... PE ...... Market Cap.... Equity Ratio
TRA..............$6.77...............$1.66 ............... 4x ..........;;; . 4.28%.......15.61......$610mil............32.5%
2cc...............65cents...........43cents........... 1.5x. ............8.98%........8.98.........$29.6mil...........61.58%..

 2CC's very high equity ratio,means they are "well positioned" to finance their "super sit" at Syliva Park opening in August,[and any further expansion] with out calling on shareholders for more capital.

[Dolcile]

That certainly is the $64,000 question mate.  For mine, the ~ $6m was earned with very strong tailwinds from Government incentives on EV's, PHEV's and hybrids and all of those incentives are gone.  Competing against the marketing and management brilliance of Turners and their used car market intelligence is going to be hard work for all used car dealers is how I see it but others will see it differently and that's perfectly fine.  There's plenty of room for as many different opinions as there are car dealers     Keep in mind also that the $3.3m was generated with the tailwind of a net $600K of carbon credits from the previous year, which presumably is not repeating, so was really a normalized net profit after tax of circa $2.9m.  Extract from annual result follows:
"Included in the FY25 revenue is $1.7m related to carbon
credits generated and retained in prior reporting periods, but not previously
recognised due to uncertainty regarding their realisation. At the gross
margin level, this revenue is partially offset by $1.1m of carbon credit
costs associated with net credits attached to vehicles sold during FY25".

So after tax we are talking about roughly $430k of NPAT that was "abnormal". So 2CC is trading at about 10.4x FY25 earnings.