2CC - 2 Cheap Cars Group

[Basil]

Crikey! Has the self proclaimed dividend hound lost his mind and suddenly become a share trader chasing short term capital gains?
Grab your popcorn, sit back and watch this space. David Sena versus Basil the Beagle.

I hope you enjoyed the show and didn't get too sick eating huge quantities of popcorn lol.

Anyway...best order in a new shipment of popcorn if you aren't completely sick of it already.  I hate the stuff as it gets stuck in the gaps of my teeth and is super annoying.  MFB is next cab off the rank for completion of the Cameron partners review in November.  The fun and games there are about to commence.  Toot, toot, all aboard the MFB train.

[Otago K]

I hope you enjoyed the show and didn't get too sick eating huge quantities of popcorn lol.

Anyway...best order in a new shipment of popcorn if you aren't completely sick of it already.  I hate the stuff as it gets stuck in the gaps of my teeth and is super annoying.  MFB is next cab off the rank for completion of the Cameron partners review in November.  The fun and games there are about to commence.  Toot, toot, all aboard the MFB train.

Firstly a quick Thanks for the commitment you have had to task that was at hand. While I might have not always seen things as others might have along the journey I have taken some time since things began being disclosed over the last day and for the skin I have in the game, I've got in a pragmatic sense it's better than where we started and I can also consider what some redeploying the funds might offer. Certainly I personally feel the 2CC holding has a greater value but it is what it is, and the cash out is where it will end.
I can't not also fail to take a moment to say Thanks to lorraina, and if not too disrespectful say Congratulations for the wins of your long held convictions to 2CC.

[Basil]

Reasons I am accepting Sena's revised offer at 90 cents.

1, The fact is that microcaps as a general asset class do command lower metrics than mid caps like TRA. Classic well established investment analysis theory suggests that the average intelligent investor needs a 1-2% extra ROI for the risks and lack of liquidity with very small companies

2. TRA has a proven track record since the Tina Campaign of 12% CAGR in EPS whereas by comparison. 2CC is low single digits EPS growth but as Snoopy has pointed out this has been achieved on declining sales and only through extra operational efficiencies Sena has been able to achieve. You can only take that process so far

3. TRA's business model is more diverse with multiple revenue streams and there are solid grounds to believe that they will return to an EPS CAGR in the years ahead at a very similar rate to the last 5 years after slightly slower growth this year.

4. On an objective basis there are credible signs that 2CC's business is a pure cyclical. Yes he's on track for $5m+ in FY27 but there are very strong tailwinds to the budget car sector from the Middle East crisis and he's been at similar levels of profit in previous years so where's the growth ?

5. There is a credible case to be made that there is no growth here because although numerically it can be shown that there has been low single digit EPS growth since it listed this could simply be because of the stage of the cycle it listed at compared to now. i.e. the evidence is not compelling that this really is a growth company.

6. With Sena likely holding over 80% going forward if the takeover fails, the liquidity will dry up and shareholders will be locked in for who knows how long, like MCK shareholders are now) and a disaffected majority shareholder might make changes to certain aspects of the way the company is run to their own advantage. I'm not going to elaborate on a public forum how that might be done.

7. I am comfortable with my across the business cycles forward earnings estimate of $4.5m which I note is nearly 40% higher than FY26. That puts the shares on a PE of 9. By comparison with the recent pullback by TRA from just over $9 to around $7.50 based on average analyst forecasts TRA are trading on a forward FY28 multiple of just 12.6 times with a 5 year CAGR of 12%. I think that's compelling and a great place to reallocate the proceeds of the takeover.

8. I've met Todd and Aaron many times and they have my full confidence. I've never met David Sena and the fact that he's only allowing online meetings is frankly quite a turn off.

 9. I think for the proven growth rate, better liquidity with it being a mid cap stock, well proven management team with decades of experience and the fact that I know and trust Todd and Aaron I am far more comfortable holding TRA going forward than 2CC and I think their metrics are actually better value than 2CC on a risk, more resilient and stable business model and growth adjusted basis. (5 years growing record profits in a row compared to wild swings in 2CC's profitability over the same timeframe).

10.. I have come to seeing 90 cents as either fair value, or so close to fair value, (certainly 85-90% of fair value), there is no point in holding out for more which might take years to materialize.

11. I think 90 cents will be enough to seal the deal and the holdouts will simply delay the receipt of their funds due to their delayed compulsory acqusition process they will put themselves through.

12. A bird in the hand is worth two in the bush. Happy to take the money and move on to the next opportunity.

[Plata]

I accepted earlier today. 90 cents is fair to both parties given the circumstances IMO. If it gets stuck at 89% acceptances shall we all send open emails to the holdouts

[Basil]

I accepted earlier today. 90 cents is fair to both parties given the circumstances IMO. If it gets stuck at 89% acceptances shall we all send open emails to the holdouts

Yes lol
I accepted earlier this afternoon.

[SCOTTY]

I emailed my acceptance on Wednesday 16th. Received email today confirming application processing and acceptance.

[Left Field]

Crikey! Has the self proclaimed dividend hound lost his mind and suddenly become a share trader chasing short term capital gains?

Grab your popcorn, sit back and watch this space. David Sena versus Basil the Beagle.

One thing for sure, outside entry and long term holder, Percy/Lorriana will be a sure winner . Well done Percy.

Interesting times ahead. GLH's

While Basil the Beagle has accepted the latest 90c offer despite previously saying he would never accept an offer below $1.00 and now seems to think the 2CC saga is all over,  maybe there will be a final twist at the end of this movie as Red Baron AKA Snoopy has pointed out;

"........the reason shareholders who have already accepted are so keen for the 'hold outs' to change their mind is the other change in the offer when it was raised to 90c. which doesn't get talked about. Namely, that if the deal does not get to a 90% acceptance, then the alternative partial buyout offer is now off the table. So no-one will get a payout!

No wonder (some of) those who have already accepted are so keen for the hold outs to change their minds!

Personally, I hope you hold outs keep holding out. I want the takeover offer to fail so that I can become a long term investor in 2CC......

I can't help but repeat myself: I hope you hold outs keep 'holding out'." Say's Snoopy.


The other twist in the 2CC saga that is not mentioned by some who should know better, is the short term IRD tax issue for those chasing short term opportunistic 2CC capital gains, which has the potential to reduce their returns significantly.

(No IRD issue for Percy and long term holders, but a potential issue for all who purchased 2CC around $0.80c and accepted the $0.90c offer?? )

IMO this saga isn't over.

[lorraina]

Some of my random thoughts.
Should the take over go ahead I would have taken advantage of "a liquidity event".This is important when buying/selling a large holding in an illiquid stock.
Should the take over not go ahead.
I think David Sena is looking to grow the business.We have seen him increase the number of cars 2CC now have for sale.I expect he will also open more sites.This will be positive in the long term,however to pay for this expansion the dividend will be greatly reduced.
I do not expect the share price will go down to 66 cents.May drop to between 75 cents and 85 cents,as more investors are now aware of 2CC's fundamentals.
I still hold to the view the shares are currently worth between $1.05 and $1.35.

[Fiordland Moose]

Always logical, sensible, and unemotional about the issues at hand Percy. Forums are lucky to have your contribution.

[Basil]

I think David Sena is looking to grow the business.We have seen him increase the number of cars 2CC now have for sale.I expect he will also open more sites.This will be positive in the long term,however to pay for this expansion the dividend will be greatly reduced.

I'm curious about your thinking here mate.  Its a very capital light business model and it would appear all they need to open a new site is a portacom and new signage, wouldn't $100K cover it ?

Keep in mind with their existing policy of paying out 60% of profit the company is retaining 40% which based on my estimate of future maintainable profit across the cycle of $4.5m amounts to $1.8m per annum retained.

I think if they stocked each new site with say 100 cars at an average cost of $5K = $500K + $100K for site establishments costs = $600K they could potentially open three new fully stocked sites a year.  That's a much faster expansion rate than they've had in the past and that's with keeping the 60% dividend payout ratio.

Based on that $4.5m profit and 60% payout ratio that's $2.7m in fully imputed dividends = 6 cps or 8.33 cps gross, so more than a 10% gross yield for those like me who bought in recently at about 80 cents and that's my estimate across the business cycle.   Not many companies can pay a sustainable gross yield of 10%+ across economic cycles.

I'm not going to comment on tax on here or the other forum other than to say people should get professional advice if they have doubts about their own situation.  Investors can have a range of intentions when buying into any company whether that's under takeover offer or not.  Clearly they want the share price to move north, (that's the case for almost anyone who buys a share), but the case for dividend income is also crystal clear as are the prospects for some growth over time.  It will depend upon the investors intentions when buying and people will know for themselves what those are and others should mind their own business and own tax situation and not concern themselves with others.  Anything could happen here including shareholders being stuck invested in a highly illiquid company for years.

I'm well known as a dividend hound and I am more than happy to hold for dividend income, (which I note is a considerably higher gross yield than Turners), if the takeover doesn't succeed noting also that the gross yield this year with tailwinds to the business from the Middle East situation is likely to be in the region of 13%.  (I expect EPS of about 12.5 CPS in FY27 and fully imputed DPS of about 7.5 CPS)

[lorraina]

On Saturday 2CC had 751 cars for sale.
Now lets guess how many cars did they actually own.
In Japan 250 to 300.
On the water to NZ 250 to 300.
Presale sale preparation.250 to 300.
In expansion mode lets take 900 to 1,000 off site and 751 on site...1651 to 1751.
On balance date 31st March we know they had 412 cars for sale and showed inventory in their a/cs of $18,041 mil
Today 751 cars for sale is 82.22% higher than 412 on 31st march.Therefore perhaps inventory is now over $30 mil.

[Basil]

Thanks for unpacking the total stock situation more fully lorriana. Certainly the huge increase in stock in recent weeks is an interesting twist in the plot of how this plays itself out.

It might all come down to what ACC decide to do with their 2.7%.  Time will tell.

[lorraina]

If the takeover goes ahead we get cash shortly.You have your eye on some stocks, [two of which I have too]..
If it does not go ahead we are left holding a growth company with little or no debt,which the market has said is worth more than 90 cents..
Perhaps we should look at it as a win win situation..lol