TRA - Turners Automotive Group

[Left Field]

Anything worthwhile in the presentation pack
The first page turned me off and didn't bother go any further

Don't care.... don't hold.... purely academic interest for me to see how Basil spins it.

[Basil]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/411835/394857.pdf

Excellent result in the face of significant headwinds, especially tough economic conditions and the fastest and most significant increase in the OCR ever.
Many thanks to the hard working team at Turners.
Great to see them announce they've just won the most trusted used car brand again in 2023, for the fourth year in a row.  This shows trust in the Turners brand is building and underpins their branch expansion network in the years ahead.
Result slightly exceeded my expectations of $45m by $0.5m and that was after taking another $0.5m in provisioning overlay.  Great to see a DRP scheme introduced which will help with their brand expansion strategy.

From the Call:-
Solid runway of growth ahead with used cars over the next 4-5 years.
They expect approx 15-20% take-up with the DRP
Cautious on outlook for FY24 given strength of headwinds.
Interesting hearing their comments on new vehicle franchise operations and their challenges...not all it's cracked up to be with very prescriptive business model requirements from the OEM's...Turners more than happy to stick to their knitting with used vehicles.
They expect the number of other used car dealers to continue to decline in the next 12-24 months by ~ 10%
Latest economic indicators suggesting scenario 2 of the runway to $50m NPBT more likely which is still a ~ 10% growth in earnings over the next 3 years despite clear and very strong economic headwinds.

My thoughts in brief.
I think the Tina brand building marketing is brilliant and Turners growth in market share speaks for itself.  Tina is to Turners what Tammy is to Briscoes.  Just look at the empire and wealth Rod Duke has built.  I'm really comfortable with Turners strategy going forward to build further market share with the steady expansion of their retail network and optimization of sales strategies with plans to significantly increase the percentage of retail v wholesale sales.

Metrics
Currently trading on 10 times FY23 eps which feels pretty conservatively priced to me considering the track record of growth and clearly articulated runway of growth ahead.  Gross yield at $3.75 ~ 8.5% and trades cum fully imputed 7 cps final divvy.  (Being paid very well to hold and enjoy growth in the years ahead).

Conclusion.
I think the team at Turners are doing a very good job.  I am a happy holder.

Disc: I've recently significantly increased my stake in the early - mid $3 range and am very pleased I did.

[lorraina]

Developing their own sites Turners [insurance] get to keep the development margin.A good earner.
• Property, plant and equipment increase due to
development of sites in Rotorua, Nelson, and
acquisition of sites in Tauranga, Napier, and
Christchurch.

[winner (n)]

...............

Metrics
Currently trading on 10 times FY23 eps which feels pretty conservatively priced to me considering the track record of growth and clearly articulated runway of growth ahead.  Gross yield at $3.75 ~ 8.5% and trades cum fully imputed 7 cps final divvy.  (Being paid very well to hold and enjoy growth in the years ahead).

...............

A PE of about 10 is probably pretty fair / reasonable at the moment

Last 5 years EPS grown at 6.3% pa and the next 2/3 years at 4%/5% pa so not that brilliant is it

so market probably valuingon dividend yield at the moment.

I'd prefer Price/Book metric over PE for an outfit like TRA. Financial performance is rather similar to HGH (ROE, growth etc) and maybe the marketsees TRA as a finance co rather than a car sales company.

Might up date my metrics history model to see what falls out ... but thinking $4.10 could be a stretched target share price

[Basil]

....A PE of about 10 is probably pretty fair / reasonable at the moment

Last 5 years EPS grown at 6.3% pa and the next 2/3 years at 4%/5% pa so not that brilliant is it

I think current pricing on a trailing PE of 10 is pretty conservative and reflects the fundamental uncertainty with the economy at present but may be an opportunity.

My primary filter with finding good GARP, (Growth at a reasonable price) stocks is to use a no growth PE of 8 as per Ben Graham's valuation methodology and add one PE for every percentage point of average growth in the last 5 years if I think it can be maintained in the medium term going forward.

In today's Turners presentation they show eps of 26.2 cps in FY19 growing to 37.7 cps in FY23, which is more than a 9.5% compound average growth rate in eps over that period.
I think what Todd and the team are trying to illustrate here is that since launching the Tina marketing program and refining their integrated business model the business has shown very strong growth despite the headwinds over the period, (don't forget we've had 3 years of Covid crap to deal with in those 4 years).

I definitely believe they are driving the business in the right direction and whilst the headwinds readily apparent in the economy are currently very strong, if one takes a medium term view its clear they can continue growing the business very nicely over the next 5 years.

Leaving aside the starting point Turners management chose and reverting to my standard valuation methodology to measure growth, in FY18 eps was 29.3 cps and we have 37.7 cps in FY23 so an annual average compound growth rate of just over 5% per annum over my standard 5 year measurement term.
To me, in ordinary circumstances that merits a PE of no growth 8 plus 5, (one extra PE for each percent of proven growth) = 13.  13 x 37.7, $4.90, would almost give Todd his road map to $5.  To be clear, I am not saying it's worth $4.90 now.  We need to drive through this recession to the other side to get those blue sky days back and then patient shareholders will reap the rewards.

I think current pricing reflects the excessive level of concern about the short term impacts on the economy from current economic factors and overlooks the solid growth this business has enjoyed in the last 5 years and is highly likely to continue to enjoy in the medium to long term.

Turners fits my classic definition of a very good GARP stock, still trading at a very attractive price for anyone prepared to look through the economic malaise the country is presently mired in.

Credit where its due, to post a record result like this with all the headwinds of FY23 is a very pleasing result indeed and a real credit to the hard working team at Turners and their brilliant marketing strategy with Tina.  Better economic conditions will prevail in due course and shareholders will see even better results in the medium term after what could be a challenging FY24.  My late Mum often said to me, there's always sunshine after rain son.  Shareholders with patience will be well rewarded in due course.    The roadmap to $5 is quite clear to me....but like the old Mainland Cheese advertisement says "Good things take time"

 

[winner (n)]

Say dividend in 2026 is (only) 30 cents and interest rates have fallen and punters are happy with a 6% return than they might pay $7 for TRA in 3 years

Jeez ....share price nearly doubles in 3 years ........while you collect nearly 10% pa divie


BUY NOW AND DONT MISS OUT

[Waltzing]

BUY VOLVO!!!!!

Viking warrior of the roads...

Dont miss out before they become cult cars...

Destoyer...

[Onemootpoint]

BUY VOLVO!!!!!

Viking warrior of the roads...

Dont miss out before they become cult cars...

Destoyer...

Slightly off topic if I may but with reference to waltzing's post above...

While in Göteborg a few years ago was able to visit the Volvo museum. Worth it if you're a car/ vehicle fan and happen to be in the vicinity. At the time (one of) the Volvo used by Roger Moore as The Saint was displayed prominently.

[Waltzing]

Off topic ..

Just down the road then and will have to put it on the list... 

Thanks for that OMP..

Take the Purple train from Landskrona ... picture coming shortly for all you train spotters.

[winner (n)]

OMG ......Tina has died.

You were simply the best Tina. RIP Tina

[Basil]

She was simply the best! What a legend.
83 a fair innings.
Fortunately Turners Tina is young and building a legendary career of her own for shareholders.

[Onemootpoint]

You were simply the best Tina. RIP Tina

The first thing that came to mind when I saw the news this morning; along with a few memories from the era.

TRA slightly down in sympathy.

[winner (n)]

The first thing that came to mind when I saw the news this morning; along with a few memories from the era.

TRA slightly down in sympathy.

Been a sad week

First Rolf "Trust British Paints, Sure Can" and now Tina

[winner (n)]

No worries about your Tina

Bubbah is live at the Mangere Arts Centre tomorrow night

[lorraina]

https://www.youtube.com/watch?v=p4WG_y7owmM&pp=ygUfdG9uaWdodCB0aW5hIHR1cm5lciBkYXZpZCBib3dpZQ%3D%3D