TRA - Turners Automotive Group

[Dolcile]

6 bucks incoming

[Basil]

6 bucks incoming

I think the business is tracking so well they're a year ahead of plan, at least.
Forbar's late Nov 2024 research has their FY26 forecast at $57m NPBT, they should go close to that in FY25 in my opinion.

[Greekwatchdog]

For Bars review

Turners Automotive (TRA) has upgraded its FY25 net profit before tax (NPBT) guidance by +6%, reflecting a recovery in vehicle margins (consistent with the directional trend in pricing data from our sales tracker) and tailwinds from falling interest rates. The FY25 result will be TRA's fifth record result in a row. TRA's PE multiple has expanded by ~+20% over the last six months and it now trades at a premium to its long-run average. We see this as justified given TRA's growing track record of execution, improved margins and returns, enhanced brand strength, and reduced risk profile. TRA is a well-managed structural growth story (an +10.2% EPS CAGR from FY25 to FY28), offering a cash yield of ~5.2%. We continue to view the risk/reward as positive and retain our OUTPERFORM rating with a higher target price of NZ$6.95.

What's changed?
Earnings: NPBT rises +5%/+7%/+6% over FY25/FY26/FY27, primarily on higher vehicle sale prices and margins
Target price: Our target price increases +19% to NZ$6.95 (representing 14.3x 12-month forward PE) on earnings upgrades and the incorporation of a modest premium to peer multiples (which have themselves lifted) given continued solid execution.
Guidance upgraded on higher vehicle margins and interest rate tailwinds
TRA upgraded its NPBT guidance for FY25 to 'at least NZ$53m', up +6% from prior guidance of greater than NZ$50m and +3% ahead of our prior estimate of NZ$51.6m. The improved outlook has been driven by: (1) a recovery in vehicle margins in Auto Retail, and (2) lower interest rates, which are supporting profitability in TRA's Finance division. A declining trend in vehicle prices led to significant margin compression in Auto Retail during 1H25 and an -18% decline in segment profits. Data from our sales tracker suggests vehicle prices have trended upwards in 2H25, consistent with TRA's commentary around margin recovery.

All businesses expected to show growth in 2H25, on track for NZ$65m NPBT target
TRA expects all four of its business divisions to report NPBT ahead of 2H24 in 2H25, consistent with our expectations. The diversified nature of TRA's businesses has been a key component of its strong performance through a challenging economic period over the last three to five years. As the cycle turns, TRA remains focussed on achieving its FY28 NPBT target of >NZ$65m. We think the market should be treating this target as conservative, and we expect this goal to be reached in FY27. Our FY28 PBT estimate is NZ$72.5m.

Valuation still undemanding despite rerate
Multiple expansion has been the key driver of TRA's share price outperformance over the last six months (+26% versus the NZX50). That said, TRA still trades at just 12.2x 12-month forward EPS, representing a ~30% discount to the NZ market median. We see this as undemanding for a structural growth story that is leveraged to a potential domestic economic recovery.

Earnings revisions
We increase our NPBT estimates mid-to-high single digits across FY25 to FY28, driven by higher vehicle prices and stronger margins in Auto Retail. We now expect TRA to hit its FY28 NPBT target of >NZ$65m one year early, in FY27.

[Basil]

Valuation still undemanding despite rerate
Multiple expansion has been the key driver of TRA's share price outperformance over the last six months (+26% versus the NZX50). That said, TRA still trades at just 12.2x 12-month forward EPS, representing a ~30% discount to the NZ market median. We see this as undemanding for a structural growth story that is leveraged to a potential domestic economic recovery.

Agree 100%.  NZX's cheapest growth story.  $7 easily achievable within 12 months just based on eps growth.
I genuinely believe that the way the business has been managed so well and their extraordinary track record of dividend growth and 5 years of record profits in a row with all the well-known challenges of Covid and the deepest and most protracted recession in the economy since the GFC, Turners have well and truly earned the right to have a market median multiple and accordingly I'd rate the chances of multiple expansion as being very good..
$75m by FY28 giving eps 60 cps and a market multiple of 17 times = $10 on the cards by FY28 in my opinion.  Maybe $10 in due course just a pipe-dream ?  Time will tell but it wouldn't surprise me.  Great yield of circa 7% gross, growing each year, while we wait and see.

[Basil]

Bought a few more today at the close.  Current price very attractive in my opinion. 

[Waltzing]

when seasoned investors who already have good solid positions continue to buy this stock and its current performance one is reminded what long term thinking really is....

with things starting to move in the direction of some return to world economic markets functioning almost normally bar a few trade wars...the odd invasion here and there and the wealthy now able to buy there way into countries... Gold Investor Cards.. NZ could have the  Gold Kiwi Card..

could the 2026-27 years offer a glimmer of hope before something else comes along to ruin a get the party started year...

yup its a T stock for sure...its almost a Treasury stock ....

New Registrations of Tesla down  50 percent in Europe already wonder how that car is doing here now...

[BlackPeter]

when seasoned investors who already have good solid positions continue to buy this stock and its current performance one is reminded what long term thinking really is....

with things starting to move in the direction of some return to world economic markets functioning almost normally bar a few trade wars...the odd invasion here and there and the wealthy now able to buy there way into countries... Gold Investor Cards.. NZ could have the  Gold Kiwi Card..

could the 2026-27 years offer a glimmer of hope before something else comes along to ruin a get the party started year...

yup its a T stock for sure...its almost a Treasury stock ....

New Registrations of Tesla down  50 percent in Europe already wonder how that car is doing here now...

Just 50% down? Incredible there are still so many Tesla buyers around ... but hey, the alt right probably just looking after their own. 2nd largest party in the recent German elections.

[Basil]

yup its a T stock for sure...its almost a Treasury stock ....

As eluded too in several recent posts, the last 5 years with all the extraordinary challenges of Covid, the deepest recession by some economists reckoning in more than 30 years and the most rapid increase in interests' rates by the RBNZ ever, has truly been a litmus test for the resilience of N.Z. businesses.
TRA have have passed all of these rigorous tests with flying colours.  I therefore have complete confidence in their dividends and while they're obviously not as safe as Govt bonds, I would say they are one of very the safest high yield bearing shares on the NZX and all the more attractive for the way they've grown so convincingly over the last decade.  So yeah, in a nutshell, I absolutely do look on TRA as a safe haven yield stock.     I don't need the dividends at this stage so I reinvest them through the DRIP program but in the years ahead, getting the dividends quarterly will be a cornerstone foundation block of enjoying a very comfortable retirement.

[SCOTTY]

4th March 2024 - TRA  3rd Q divided declared

[Pierre]

More market share for TRA. This from Autofile:

"The number of dealers on the Motor Vehicle Traders Register (MVTR) has fallen for the fifth consecutive month and stood at 2,765 at the end of February.

The tally is 24 fewer than the 2,789 recorded at the end of January and extends a decline that started after the total reached 2,880 in September last year.

Last month's figure – the lowest it has been in 12 years – is also 158 down from the 2,923 traders on the register at the end of February 2024.

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

[Waltzing]

The ONE STOP SHOP....

how do you compete against this monopoly or fast becoming one ...scaling up...

some telsa bargains coming soon.... but who wants all the techno junk going wrong....

Elons brain is muss and so probably is the car...and is that why the rockets keep blowing up....

[Basil]

Todd warned me of the horrific depreciation with EV's.

[raW tent Buffer]

The ONE STOP SHOP....

how do you compete against this monopoly or fast becoming one ...scaling up...

some telsa bargains coming soon.... but who wants all the techno junk going wrong....

Elons brain is muss and so probably is the car...and is that why the rockets keep blowing up....

What a load of drivel.

[Waltzing]

yes the EVIL T will be under huge competition from the Team China....

TRA is a ONE STOP SHOP.... no doubt about it and hopefully they have a handle on their ledgers...

As SIR B has stated lowering interest rates good for the finance division...
 
Off topic:
Musk is in serious need of Sigmund Freud....https://www.youtube.com/watch?v=mQaqXK7z9LM

apparently someone Molotov cocktailed his shop...

off topic:
my doctor of the mind encourages the flamboyant use of language... it justs more fun...

[BlackPeter]

Todd warned me of the horrific depreciation with EV's.

... and that's even without Musk's support to devalue them ;