TRA - Turners Automotive Group

[Basil]

Sounds like life's too easy Roger, get some FBU in the portfolio to spice things up ( or down would be more apt)

LOL, "thanks" but no thanks !!

are they scones an good at the AGM? and are there any fill rolls with perfect puffy pastry?
just wondering...

Come along and find out mate.  Should be a great vibe there this year !

[Waltzing]

It could well be down to inflation but DIV is not paid out of gross numbers and ...

it been an economic compression on most bottom lines...

inflation probably did not drive bottom line as accounting profit and loss isnt just credits...... they arnt allowed to do single sided entries... unless it tagged...

[Greekwatchdog]

For Bars latest

We downgrade our rating on Turners Automotive (TRA) to NEUTRAL from OUTPERFORM. TRA has re-rated by c.+50% over the past 12 months to 14.4x 12-month forward EPS—more than two standard deviations above its long-run average of ~10x. While we view this as well-deserved recognition of TRA's improving business fundamentals and track record of execution, the risk–reward picture now appears more balanced. We remain constructive on TRA's medium-term opportunity (FY25–FY28 EPS CAGR of +10%), but meaningful earnings upgrades will likely be required for TRA to continue its material outperformance (+85% versus the NZX50 over the past year). We see this as unlikely, given: (1) we and consensus already expect TRA to achieve its FY28 NPBT target one year early, and (2) the consumer environment in New Zealand remains suppressed, limiting upside.

What's changed?
Target price: Rises +10cps to NZ$7.40 on roll-forward, equivalent to 15.0x 12-month forward PE.
Rating: Downgraded to NEUTRAL from OUTPERFORM.
Re-rate a deserving reflection of TRA's quality and management execution
TRA's multiple expansion reflects market recognition of: (1) improving business quality—characterised by higher margins, higher returns, growing brand awareness, increased market share, and reduced risk in its Finance Book; and (2) a building track record of impressive execution (10-year CAGR of ~+10% for normalised EPS and DPS). While we have advocated for this re-rate to occur, TRA is now trading at a ~+10% premium to our blended peer group of automotive dealers and NZ retail peers, which we view as broadly fair in light of its idiosyncratic business qualities (higher margin and lower volatility) and earnings resilience through the cycle.

Consensus expects TRA's NZ$65m NPBT target to be achieved earlier
We and consensus expect TRA to achieve its FY28 NPBT target of >NZ$65m in FY27. Although TRA expressed confidence in achieving this target earlier, at its FY25 result, we see earnings risk as balanced, with strong levels of execution now baked into market expectations. Continued earnings upgrades will likely be needed to drive further share price momentum.

Consumer environment still challenging, no notable change in volumes in our sales tracker
A stronger-than-expected improvement in consumer sentiment is the key upside risk to our forecasts. However, recent data points and commentary from retail industry participants suggest a persistently challenging consumer environment, with limited evidence of a sustained recovery. Concurrently, our sales tracker shows only a modest improvement in TRA's sales volumes thus far in FY26.

Engine fully revved: time to shift back into NEUTRAL
TRA has delivered five consecutive years of record earnings and +85% outperformance (in total return) versus the NZX50 over the past 12 months. But with the stock now trading at 14.4x forward PE—more than two standard deviations above its historical average—we believe the risk–reward profile is more balanced. The market is already pricing in delivery of the NZ$65m FY28 NPBT target one year early, and further multiple expansion likely requires upgrades or a macro tailwind. With consumer conditions still subdued and TRA now trading at only a modest discount to the NZ market PE (~10%), we downgrade to NEUTRAL. We remain constructive on TRA's medium-term opportunity and ability to execute.

[lorraina]

EPS* (NZc)   43.3 47.9 52.9 57.4
DPS (NZc)   29.0 32.5 36.0 39.5
EPS and DPS growth still look solid .
Forward PE reducing.
PE   16.4 14.8 13.4 12.4

[Dolcile]

For Bars latest

We downgrade our rating on Turners Automotive (TRA) to NEUTRAL from OUTPERFORM. TRA has re-rated by c.+50% over the past 12 months to 14.4x 12-month forward EPS—more than two standard deviations above its long-run average of ~10x. While we view this as well-deserved recognition of TRA's improving business fundamentals and track record of execution, the risk–reward picture now appears more balanced. We remain constructive on TRA's medium-term opportunity (FY25–FY28 EPS CAGR of +10%), but meaningful earnings upgrades will likely be required for TRA to continue its material outperformance (+85% versus the NZX50 over the past year). We see this as unlikely, given: (1) we and consensus already expect TRA to achieve its FY28 NPBT target one year early, and (2) the consumer environment in New Zealand remains suppressed, limiting upside.

What's changed?
Target price: Rises +10cps to NZ$7.40 on roll-forward, equivalent to 15.0x 12-month forward PE.
Rating: Downgraded to NEUTRAL from OUTPERFORM.
Re-rate a deserving reflection of TRA's quality and management execution
TRA's multiple expansion reflects market recognition of: (1) improving business quality—characterised by higher margins, higher returns, growing brand awareness, increased market share, and reduced risk in its Finance Book; and (2) a building track record of impressive execution (10-year CAGR of ~+10% for normalised EPS and DPS). While we have advocated for this re-rate to occur, TRA is now trading at a ~+10% premium to our blended peer group of automotive dealers and NZ retail peers, which we view as broadly fair in light of its idiosyncratic business qualities (higher margin and lower volatility) and earnings resilience through the cycle.

Consensus expects TRA's NZ$65m NPBT target to be achieved earlier
We and consensus expect TRA to achieve its FY28 NPBT target of >NZ$65m in FY27. Although TRA expressed confidence in achieving this target earlier, at its FY25 result, we see earnings risk as balanced, with strong levels of execution now baked into market expectations. Continued earnings upgrades will likely be needed to drive further share price momentum.

Consumer environment still challenging, no notable change in volumes in our sales tracker
A stronger-than-expected improvement in consumer sentiment is the key upside risk to our forecasts. However, recent data points and commentary from retail industry participants suggest a persistently challenging consumer environment, with limited evidence of a sustained recovery. Concurrently, our sales tracker shows only a modest improvement in TRA's sales volumes thus far in FY26.

Engine fully revved: time to shift back into NEUTRAL
TRA has delivered five consecutive years of record earnings and +85% outperformance (in total return) versus the NZX50 over the past 12 months. But with the stock now trading at 14.4x forward PE—more than two standard deviations above its historical average—we believe the risk–reward profile is more balanced. The market is already pricing in delivery of the NZ$65m FY28 NPBT target one year early, and further multiple expansion likely requires upgrades or a macro tailwind. With consumer conditions still subdued and TRA now trading at only a modest discount to the NZ market PE (~10%), we downgrade to NEUTRAL. We remain constructive on TRA's medium-term opportunity and ability to execute.

Thanks Greekwatchdog.  Out of interest, are these updates freely available or do you need to be a client of Forbar?

[Greekwatchdog]

Thanks Greekwatchdog.  Out of interest, are these updates freely available or do you need to be a client of Forbar?

No problem, pretty sure you need account.

[Basil]

EPS* (NZc)   43.3 47.9 52.9 57.4
DPS (NZc)   29.0 32.5 36.0 39.5
EPS and DPS growth still look solid .
Forward PE reducing.
PE   16.4 14.8 13.4 12.4

Agree 100% and happy to hold and enjoy the ongoing CAGR in EPS of ~ 10% per annum as well as the very good fully imputed quarterly dividends.   

[Dolcile]

Regarding the PE ratio... Clearly the business is now far more diversified, far more resilient and has a great track record of delivering EPS growth.  Surely this justifies the two SD compared to historic averages.   This does not concern me one bit.

[Basil]

Remember the lost list of companies I posted that have grown eps by a CAGR of 10% over the last decade that are trading at a PE under 18.5 

Here's another complete list of companies trading on a PE less than 20 that have grown EPS by a CAGR of over 12% over the last 5 years
.
.
.
None except TRA.
With regard to Forsyth Barr moving to neutral after an 85% outperformance against the NZX over the last year, I would simply comment that the stock was very, very badly mispriced this time last year, something I actioned when buying more at just under $4.  Something that was an extraordinary opportunity as a buy a year ago has become a very attractive hold for the long term, in my opinion.  Forsyth Barr comment its 10% above its peer group.  I think it deserves to be considerably higher because of the vastly better growth rate and quality of the management team.

[KW]

You raise a fair point KW that inflation has certainly been a material factor over that period with some years over 7% per annum but according to the RBNZ inflation calculator the cumulative compound inflation from Q1 2020 to Q1 2025 totaled 23.48% and Turners earnings per share grew 77.46%.  Yes it was a material percentage but I would draw your attention to what is arguably the best other retailer on the NZX that trades on a PE of 19.2, that being Briscoes.  Its eps actually declined from 28 cps to 27 cps over that 5 year period with the loss in earnings due to inflation on top of that. 

Briscoes is certainly not alone in that regard, in fact, many other companies on the NZX hardly grew earnings at all or had an earnings decline over what was arguably the most challenging 5 year period of trading conditions in our lifetime.  To grow EPS by 77.46% over that period is a real stand-out achievement in my view and I really look forward to them kicking some serious financial goals when the economy eventually climbs its way out of the moribund state its in.

Prices rocketed by 35% just over the lockdown period.  And being car prices, they can go down as easily as they can go up.  More to the point, past performance in a high inflation period is not an indicator of future performance in a deflationary environment.
https://www.autocar.co.nz/report-nzs-used-car-prices-skyrocket-by-35/

[Basil]

Prices rocketed by 35% just over the lockdown period.  And being car prices, they can go down as easily as they can go up.

They have already corrected down just like they have for a lot of other assets like campervans, boats and houses.  Notwithstanding that and Todd saying that trading conditions last winter were worse than during the GFC, Turners produced its fifth consecutive record annual profit.
https://figure.nz/chart/0ByKhsHZZX7N8W2x-NoqpJaAW5J40VuaO

[Waltzing]

lock down has long gone... a recession came next ... turners dont look like they have luxury auction site... sure they will keep costs under control...

[winner (n)]

lock down has long gone... a recession came next ... turners dont look like they have luxury auction site... sure they will keep costs under control...

What is cost to gross margin ratio for Turners waltz ...is it getting better?

[Waltzing]

we havnt put the last 5 years through the AI work flow.... oh hang we dont have one of those... do we...ill go ask tech..

its the one to watch winner...all those add on businesses .. but if the economy improves and that is a big if...then we will see..

[Waltzing]

could struggle here for while.. news news news....