TRA - Turners Automotive Group

[LoungeLizard]

Lots of buy pressure and no sellers = up 9c on the day. Bodes well for holders.

[seaweed]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/418266/403026.pdf

70% of that at a very low margin.  Presume ND means not disclosed and will be at a higher margin.

I continue to believe there is a very good chance for NZX50 inclusion with the December rebalance and that could lead to a 0-25% increase in the share price that could be temporary or otherwise.  More importantly I believe the business is in very good shape and well placed to grow in the years ahead and at around $3.50 is trading on compelling metrics of forward PE ~ 9 and gross yield based on 25 cps fully imputed, (my estimate) 9.9%.  Additionally, it presently trades cum a 6 cent fully imputed dividend.  Back that out as a return of capital and the gross forecast yield becomes 34.72 cps gross / $3.44 = 10.09%, (10.3% if you take the advantage of the 2% discounted DRP).  I think the prospects for dividend growth in the years ahead are also very good.
Disc: My #1 investment position on the NZX.

Yes have to agree with you on that. But am a wee bit nervous buying in over $3.80. seeing what happened to HLG the week following NZX inclusion, dropping about a $1 with all the traders racing for the exit to make the quick buck. You got to be fast...The Quick and the Dead. But in saying that, TRA is a good company for long term holders. And good luck to those who got in at 3.20 to 3.40 or at a lower price. Will have to agree with you again on HLG sp, being good buying in again at around $5.40 if other investors let it get down to that price with a 24c div on the horizon. So I will stay on the sideline for now with TRA and will be a lot of fun watching the before and after NZX inclusion and waiting for the dust to settle before and if I decide to buy in.   

[Waltzing]

yes great company in an old Banger (car) economy... is that the right spelling as havnt used that word ever before..

[Basil]

Yes have to agree with you on that. But am a wee bit nervous buying in over $3.80. seeing what happened to HLG the week following NZX inclusion, dropping about a $1 with all the traders racing for the exit to make the quick buck. You got to be fast...The Quick and the Dead. But in saying that, TRA is a good company for long term holders. And good luck to those who got in at 3.20 to 3.40 or at a lower price. Will have to agree with you again on HLG sp, being good buying in again at around $5.40 if other investors let it get down to that price with a 24c div on the horizon. So I will stay on the sideline for now with TRA and will be a lot of fun watching the before and after NZX inclusion and waiting for the dust to settle before and if I decide to buy in.   

It's a shame you didn't action a buy in in mid Sept with the shares in the mid $3's.  Index inclusion thing has been well discussed already but its worth noting that when HLG was included the share price really didn't hit the afterburner until a month before it happened so I reckon there's still plenty of juice to come this year.   In terms of TA the chart shows it in the nice uptrend for some time now and trading well north of its 200 day MA in what's been a very soggy market so that's very encouraging. TRA shares have been $4.60 before in early 2022 and traded on a forward PE of 12.7 at the time.  Apply that same PE to this years estimated record earnings of say 40 cps and that's $5.08...can't happen some might say but who knows, maybe it might on index inclusion in December ?

TRA have shown steady earnings growth over the years and I think they have a cohesive, well-constructed plan to grow going forward.  Their well-articulated target of $50m before tax, either next year (FY25), or FY26 looks highly likely to happen to me and would represent eps of just on 42 cps.  By then we will hopefully be seeing interest rates coming down off their peak and TRA will have tailwinds from funding their loan book, (lending at higher rates) being funded by more moderate interest costs.

EPS to the best of my recollection has grown at a CAGR of about 4% over many years and I think in normal times that commands a fair PE of 12, perhaps 13 if the 10 year Govt stock reverts to more moderate level's.  Sticking with 12 on eps of 42 cps when they make $50m before tax that's 12 x 42 = $5.04.  I think its going to $5 sooner or later, just a matter of time.  In the meantime, there's the superb yield to enjoy and the excitement of likely index inclusion.  But if it's not for you that's fine mate.  I'm not here to sell it to anyone...just sharing my thoughts and enjoying good banter.  Who knows what the future is, but I do like to try and play out how I think things will go and take positions on that based on my best estimates. Let me put it this way, this is not my #1 NZX position without solid reasons including superb management and brilliant marketing.

[Onemootpoint]

Great post.

I'm quite bullish on TRA. Should there be a further dip in the international markets (read S&P) during the next month or so it may present a further buying opportunity if our favourite stocks follow. If not, I am still content with what I have.

[Waltzing]

Yes OMP!!!!

one of the best posts yet from the Sir B!!!

DISC: will bet on anything , Horse, DOG or stock that makes a profit... and the next big stock might just be RM in germany...

[BlackPeter]

OMG - all the experts agree - must be either a no-brainer or alternatively one of these "run for the hills" events?

But anyway, I am holding them as well and agree that I still expect them to further rise (and not just because of an arbitrary index inclusion).

TRA has (at SP=3.87) in my books a forward PE of 9.6 and this comes with a 3 yrs forward earnings CAGR of still nearly 7 (10 yrs backward CAGR 12.9). Obviously - analysts (who provided the forecasts) are as often wrong about the future as they are right :p ;

Still - while nobody knows the future, Turners proved to be so far amazingly resilient in bad times ... which I take as good sign for the future ;

[winner (n)]

OMG - all the experts agree - must be either a no-brainer or alternatively one of these "run for the hills" events?

But anyway, I am holding them as well and agree that I still expect them to further rise (and not just because of an arbitrary index inclusion).

TRA has (at SP=3.87) in my books a forward PE of 9.6 and this comes with a 3 yrs forward earnings CAGR of still nearly 7 (10 yrs backward CAGR 12.9). Obviously - analysts (who provided the forecasts) are as often wrong about the future as they are right :p ;

Still - while nobody knows the future, Turners proved to be so far amazingly resilient in bad times ... which I take as good sign for the future ;

Yes BP ...one of the best prospects (possibly the best) on the NZX at the moment

[Basil]

Apologies, I had another look at the CAGR in eps in the last 5 years and its 7%, (not the 4% I posted above).
Working off the eps figures off Jarden's site its a fraction higher than that for the last 10 years.
My yardstick for finding cheap GARP stocks is No growth PE of 8.5 (Ben Graham when 10 year risk free rate is 4%), adjust for current 10 year rate of 5.5% suggests a no growth stock has a baseline fair PE of 7.5 at present + 1g, (not the 2g Ben Graham uses) where g is the average CAGR in eps, so 7.5 + 7 = 14.5. 
I then apply this to forward eps estimate not backward Ben uses.  Based on this well proven formula to screen good value GARP stocks, TRA would be good value at 14.5 x 40 cents = $5.80.

I think the business has been incredibly resilient during Covid and during this cost-of-living crisis.  In better times in the years ahead, who knows where it will end up but give this plenty of time and who knows, maybe somewhere in that ballpark is not out of the question?    Happy to hold in the years ahead and see how this all pans out.

[winner (n)]

Hey Basil ....Ben Graham would be dismayed with you using the past EPS CAGR rate as he said g is future CAGR growth

Never mind .....TRA might do as well over the next 5 years as the last 5

On your version of that formula at current price implied future growth is 2.5% pa

[Basil]

Yeah I'm just looking at historical CAGR in eps to get a handle on likely future growth.
I think 5% per annum for the next couple of years as they deal with the headwinds and then coming back off the high's in interest rates growth will revert to the previous average trend of 7% per annum over time, perhaps with a couple of 10%'s thrown in there when they get tailwinds from falling rates.
Shares look like a classic really good value GARP stock to me no matter how you slice and dice it.

[Waltzing]

 pastels ... winner hasnt got one on this stock?

picture of CIGAR... 

[winner (n)]

Turners market report shows number of Dealer to Public transactions in September were down 2% on last year

Things might be slowing down

[winner (n)]

Yeah I'm just looking at historical CAGR in eps to get a handle on likely future growth.
I think 5% per annum for the next couple of years as they deal with the headwinds and then coming back off the high's in interest rates growth will revert to the previous average trend of 7% per annum over time, perhaps with a couple of 10%'s thrown in there when they get tailwinds from falling rates.
Shares look like a classic really good value GARP stock to me no matter how you slice and dice it.

Have some waltz but won't put them up as some of lines a bit lumpy and could be at odds with what is being said here

[Waltzing]

thinking the NZ market is not a growth market ... and if this is a growth stock ? well it is dominate and well run...

JOB market holding up in US and rates wont be coming down any time soon...