TRA - Turners Automotive Group

[Ferg]

Something I have been playing with.....it uses historical earnings.  Pick a number for the high and low PE range.  TRA share price is up there versus historical averages, but that may be Mr Market expecting further EPS growth.

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[winner (n)]

No doubting Turners consistently do well

Sales are growing steadily, consistently achieving 11%/12% ROE and payout about 60% of profits in dividends

Result is that although EPS growth is 9.5%pa the high payout ratio contributes to Book Value (Shareholder Equity) only growing at about 5% pa over last few years

The other day TRA P/B ratio was 2.2 times ....I reckon this is far to high for a retail/finance company that's only growing equity at 5% per year.

Maybe share price is currently reverting to a more realistic level..... which probably about Ferg's midpoint

[Dolcile]

Is P/B really a useful measure when the book values include land and buildings at Cost not Market Value and there is significant intangible asset value, like brand, that isn't on the balance sheet. 

Genuine question. 

[winner (n)]

Is P/B really a useful measure when the book values include land and buildings at Cost not Market Value and there is significant intangible asset value, like brand, that isn't on the balance sheet. 

Genuine question. 

Agree with the property but .....wonder what the difference is?

They do have $163m of intangibles on the books ...mainly brand and goodwill....do you thinkmitbshould be more?

[Basil]

Thanks Ferg.  Clearly shows that earnings were going nowhere in the late 2010's and then in the 2020's the Tina campaign was launched and has been completely transformational with EPS growing at a CAGR of 12% for the last 5 years and you're quite right, the analysts covering Turners expect growth to continue at a very similar rate in the years ahead.  TRA shares trade ex the 9 cent fully imputed dividend tomorrow.

Briscoes with no growth on a PE of 19.5.  Eagers Automotive with modest growth on a PE of 23.  TRA with its much superior growth rate on tomorrow's theoretical ex divvy price of $6.79 trade on 12.8 times next years (FY27) forecast earnings.  Hmmm...and some people reckon its on a stretched PE.  They're entitled to their opinion but I don't agree.

[winner (n)]

Is P/B really a useful measure when the book values include land and buildings at Cost not Market Value and there is significant intangible asset value, like brand, that isn't on the balance sheet. 

Genuine question. 

P/B and PE are related

P/B = Shareprice / Equity
PE = Shareprice / Earnings
Earnings = Equity x ROE

Give them an algebraic shuffle and see what you come up

[Basil]

EPS and the EPS growth rate is what matters. Also relevant for many investors is DPS which ahs been growing at a CAGR of 14% per annum in the last decade, a rate unmatched by any other company on the NZX.

Salt Long Short Fund.  3 or their 5 largest long positions are N.Z. companies, Tower, Turners and Genesis, see bottom right of page 1.  Disc: I also hold significant positions in those three.
https://www.saltfunds.co.nz/_files/ugd/9b51d8_5fc4a121039746f0974d47cfa4c58042.pdf

[lorraina]

Although I love strong eps growth core improving a business is worth noting.
In ChCh Turners had one large retail site which was tucked away.
Now they have three fantastic high profile sites,which puts Turners in the right place for years to come.
They are improving their sites right around the country.
Better sites will lead to more cars being offered to them,more cars sold ,which in turn leads to higher finance and insurance sales.
Their business model is very simply yet very clever.

[Sideshow Bob]

Ex divvy tomorrow. 

[winner (n)]

One reason for Briscoes trading at much higher multiples than Turners is that they have a much higher ROE

Briscoes ROE been 25%/30% last few years v Turners 11%/12%

Means something

[Basil]

Leasing stores instead of owning them. Same reason HLG has such a flash ROE.

Means nothing if it doesn't translate to higher EPS and DPS.  (It does for HLG as they have a huge runway of growth in Australia.)

HLG growing earnings on a forward PE of 11, Briscoes shrinking earnings on a PE of 19. Hmmm

[lorraina]

Well Turners have certainly made heaps with their very astute property deals.
Each time they buy and develop a site they retain the development margin.
Great use of part of their insurance company's float. 

[Dolcile]

personally I don't mind if we see a pull back / some SP weakness.  I'd like to buy some more.

[Basil]

Dealer to public sales up 14% in June, strongest gain in ages.  As usual, the "Tina effect" will result in ongoing market share gains on top of that.
https://www.turners.co.nz/globalassets/terms-and-conditions/market-report-cars---June-2025.pdf
Also note public to dealer sales have been up very strongly the last 2 months, ~ 17% so the message that we love buying cars is getting through !
At $6.71 Turners trades on just 12.7 times forecast next years EPS of 52.9 cps and has been growing at a 12% CAGR since the Tina campaign kicked off and is forecast to do similar in the years ahead.  Compelling buying at the current level in my opinion.

[Waltzing]

if there is no drop off in performance stats over the next 2 years and the PL holds up and debt stays at same levels... percentage to NP then the P/E could take a prem rate...