TRA - Turners Automotive Group

[Waltzing]

Auto prices still up in the US according to CNBC this morning....

average second hand car price over 20 G US!!!

what?

[BlackPeter]

Guy on other channel reported that Todd told a preso this morning TRA was 47th biggest co on NZX .....obviously inferring he's hoping for inclusion in NZX50

That'll take share price to 5 bucks

Absolutely - it worked for HLG. They used to be before the NZX50 inclusion above $5 and managed to maintain this position ;

[LoungeLizard]

Absolutely - it worked for HLG. They used to be before the NZX50 inclusion above $5 and managed to maintain this position ;

NZX50 inclusion certainly worked for HLG traders and long term holders. Holders have seen an increase of around 60c on pre-inclusion prices and traders would have made a bundle at the peak of around $6.90. No reason to suggest that there wouldn't be a similar outcome if TRA is included. And in the meantime, both stocks return a healthy dividend. What could go wrong?

[Basil]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/416869/401066.pdf

At first glance this looks more solid than I expected.  Its very impressive they expect to grow profit in FY24 in a very weak economy with very strong funding cost headwinds and have raised the dividend guidance.  In light of the above headwinds, I was expecting a slight pullback in FY24 profit and retention of the 23 cps dividend guidance so this surpasses my expectations.  Longer term, there's a lot to like about how they are growing the brand and of course their award-winning marketing strategy is a key driver of that.  Knocking on the door of NZX50 inclusion too.  Disc: One of my largest holdings.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/416864/401061.pdf
Although NZ still has a high level of economic uncertainty, Turners' business has continued to perform
exceptionally well.

[Waltzing]

US second hand prices have stayed up with average over 20 G... cant be right?

EV's will face huge resource problems getting the material and manufacturing of these computers on wheels faces constraints and cost increases...

Now where is that old Gold MX 5 in the car shed ... dust it off and fix the dents and maybe its worth something? Tires look ok ... gosh it may have gone up in value more that stocks lately...

It was destined for the crusher .. not hard on fuel ... maybe it could be used for shopping at the super market ..

[LoungeLizard]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/416869/401066.pdf

At first glance this looks more solid than I expected.  Its very impressive they expect to grow profit in FY24 in a very weak economy with very strong funding cost headwinds and have raised the dividend guidance.  In light of the above headwinds, I was expecting a slight pullback in FY24 profit and retention of the 23 cps dividend guidance so this surpasses my expectations.  Longer term, there's a lot to like about how they are growing the brand and of course their award-winning marketing strategy is a key driver of that.  Knocking on the door of NZX50 inclusion too.  Disc: One of my largest holdings.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/416864/401061.pdf
Although NZ still has a high level of economic uncertainty, Turners' business has continued to perform
exceptionally well.

Good call in backing up the truck there, Basil.

The market certainly seems to have liked both the result and the bullish forecast for FY24. Says a lot about the confidence of TRA Management to forecast a 24c dividend for next year - that's a gross yield of 8.5%.

 Roll on September NZX50 rebalancing!

[Basil]

Thanks LoungeLizard.  Shareguy very kindly shared Forbar's latest index research with me earlier today.
My read is index inclusion is highly likely in December and a slight chance for Sept.

Really though that's just going to be the cherry on top because what I find most interesting, and I must admit a little bit surprising, is their ability to perform very well indeed in very weak economic conditions and with very, very strong funding cost headwinds.  I'm really looking forward to how they grow eps once those headwinds abate.

In the meantime, I note @ $3.70 TRA trades on FY23 PE of just 9.75 so with growth this year I think a forward PE of 9.5 seems like a conservative estimate.  Based on a forecast of 24 cps fully imputed dividends = 24/0.72 = 33.33 cps / 370 = gross prospective yield of 9.0% which can be boosted to an effective yield of 9 / 0.98 = 9.18% by taking shares in lieu of divvy at a 2% discount.  Additionally, its not that long until the Q1 dividend so if you get a bit creative and treat that as part repayment of the purchase price, based on a net purchase of $3.64 and taking the DRP the gross yield could be calculated ats high as 9.34%.  Further, I think the chances of annual dividends growing nicely in the years ahead are very good indeed as they continue to roll out their branch expansion and try and convert more wholesale auction sales into higher margin retail. 

All looks like very sound long-term investing to me.  Fits my classic definition of a GARP stock (growth at a reasonable price) as well as a great dividend hounds stock.
Chairman and CEO's address http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/416929/401154.pdf

[winner (n)]

Directors got their pay rise ..a few dissenters

[Waltzing]

Chart looks good and building a good base for sure...

Maybe a good time to sell any spare petrol engine cars to TRA..

will there be an october sell off on markets and get TRA 20 cents cheaper? probably not...

[Red Baron]

Directors got their pay rise ..a few dissenters

Three zubstantial zhareholders (Bartel Holdings Limited, Montezemolo Holdings and Harrigans Trustees) vith a total of 21,771,936 zhares.  Maybe add 1,271,023 ACC zhares to the total to get 23,042,959.  Now zubtract that number vrom the total zhares on issue.

86,700,247-23,042,959= 63,657,288.

Zhareholders voting against director fee heist: 3,415,604

3,414,604 / 63,657,288 = 5.4%

OR if we just consider the shareholders villing to vote at all

3,414,604 / 44,000,000 = 7.8%

Vor a company that is apparently 'doing vell', zis is more than a 'zlap on ze hand'.  Zis is a 'kick up ze bum'.

RB

[Onemootpoint]

Chart looks good and building a good base for sure...

Maybe a good time to sell any spare petrol engine cars to TRA..

will there be an october sell off on markets and get TRA 20 cents cheaper? probably not...

There's always a chance international markets, and by that I mean the USA, may drop back a bit by October, and it probably should. This may (likely will) rub off on our market but with a quality stock like this wait to buy in (if not already in) at one's own peril. Can always buy more should it drop back a bit. As Basil laid out above, the yield is extremely attractive and GARP certainly applies to TRA.

[Waltzing]

Yes TRA is another winner() stock pick by the grand master of the hunting pack...

Well he did say he was having a break to look after his fitness.... those hunts can go on for a mighty long time and hunting down all the prey is a big day out  and some RR is always needed by any HOUND...

[Onemootpoint]

Yes TRA is another winner() stock pick by the grand master of the hunting pack...

Well he did say he was having a break to look after his fitness.... those hunts can go on for a mighty long time and hunting down all the prey is a big day out  and some RR is always needed by any HOUND...

Hehe, true; and probably well deserved.

[Basil]

Yes TRA is another winner() stock pick by the grand master of the hunting pack...

Well he did say he was having a break to look after his fitness.... those hunts can go on for a mighty long time and hunting down all the prey is a big day out  and some RR is always needed by any HOUND...

You're far too kind mate...I'm no better than a greedy Beagle that's never satisfied with the amount of dog food in my bowl lol
But, speaking of that and being the insatiably hungry dividend hound I am, yesterday I couldn't help comparing the track record of how dividends have grown over the last 5 years between TRA and GNE, both trading on a yield in the 9's.

Using my standard 5 year comparison timeframe I always use when comparing stocks because the most recent years data is the most relevant in my opinion, I noted Inflation since 2018 has been 20.5% in total (RBNZ inflation calculator website) so that's the baseline.
GNE have grown dividends just 4% so are 16.5% behind inflation.
TRA have grown dividends from 15 cps to 23 cps up 55% so 34.5% ahead of inflation.

I then started pondering what about the next 5 years.  Clearly the board sent a very strong signal that dividends will not be growing at GNE for many years as they try and build up their solar generation, so their dividends are highly likely to decline in real inflation adjusted terms in the next 5 years.
On the other hand, I see the prospects for TRA dividends growing as being very good as they continue to roll out their branch network and continue to convert more wholesale vehicle sales to higher margin retail.

On top of that, GNE is facing an index exclusion event and TRA is likely to face an index inclusion event before year end.

Further, TRA pay quarterly, and their imputation level attached to dividends is not under threat, whereas GNE's is...hounds prefer full imputation credits which reduces the size of the amount of food the Govt take out of their dog bowl. 

Looking out another 5 years I think TRA divvies will be somewhere in the 30's, cents per annum and at best GNE will be stuck where it is.

Finally, hounds hate it when they read woke things in presentations things like looking through the three lenses of people planet and prosperity the results were very good.  Any pure bred dividend hound that's any good only looks through one lens, how much dog food can I catch here?

Then I mused, sure, GNE might be able to replace rapidly declining Kupe output and forthcoming end of life Rankine retirement in due course with solar energy of an equivalent output and earnings for GNE shareholders, or maybe they can't and the obvious end of life headwinds to GNE's outputs are exactly that, obvious indications they cannot sustain those dividends over the long term?  Why bother taking the chance when they already have an abysmal track record of not growing earnings anywhere near the rate of inflation?  To me that's like backing a racehorse at the track that keeps on losing and telling yourself it must come right.  Then I reminded myself of the definition of insanity, doing the same thing over and over again and expecting a different result.  No, if you want dividend growth GNE is definitely not the place to be invested, whereas the prospects at TRA are very good..

I like backing winners so yesterday I asked myself why back GNE at all, why not just buy more TRA instead and grow dividends not let them decline year on year on year?  Philosophy 101 "To they own self be true"  I am a pure bred dividend hound that loves large feeds that keep growing. 

[BlackPeter]

... pretty compelling arguments.

Still - the reasons for owning both I can see are:
1) diversification is good to spread risks (they are quite different industries with different cycles),
2) nobody can predict the future - and five years is a long time for investors, when it is often necessary to change once views in days, weeks or months.
3) All these solar farms costing money now will as well increase the value of GNE. They do invest money to make money (and they will).

Discl: holding both.