TRA - Turners Automotive Group

[winner (n)]

Thought we were going to burst through 430 earlier but faded away

Maybe tomorrow the day

Ma

[Waltzing]

lokie if in a hurry and cant wait for the DIV to go up and you need to get some coin to buy some  more tucka then im sure someone here could do you a deal....

say 425 for some .... but wait some went for 424 ... not bad buying for some lucky punter... notice those 10,000 blocks waiting..

[Basil]

I hoovered up a few more at $4.24 today.  Feeling good about tomorrow's print and more importantly, feeling very comfortable about the prospects for the future.  I feel even at that price it still trades on truly compelling metrics for such a really well managed company with a very bright future.

[lorraina]

A cracker.

https://www.nzx.com/announcements/422080

[Basil]

Presentation http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/422080/407740.pdf
Exceptional result in the context of the current economic conditions and very strong headwinds in the finance sector with the fastest increase in the OCR rate ever.

Points to note.  Net profit up 10% despite a huge 44% reduction in profit from the finance division, $4m lower than in the previous corresponding period (PCP). see page 14 for how graphically the finance division profit has contracted in the face of really fierce finance cost headwinds.
Note they expect NIM to increase from 4.6% to 5.0% in 2H and further improvement in FY25 as the average rate on their finance book re-prices and then additionally as the OCR rate decreases.

eps up 7%.
87% of inventory is <$15K

I am forecasting Net Profit of $50m for the year giving eps of 41 cps (up from my previous estimate of 40 cps). 
Forward PE at this level is only 10.4 for a business that's grown eps at a CAGR of 7% in the last decade and is currently achieving that growth despite strong economic headwinds.
I expect ongoing eps growth in the years ahead.
At 41 cps and the midpoint of their dividend payout rate of 60-70% (65%) (41 cps x 65% = 26.65 cps) they are well capable of paying well in excess of the 24 cents mentioned in the presentation which I noted contained several references to "at least" 24 cps.
If they pay 25 cps fully imputed the gross yield @ $4.25 = 8.2% (26 cps = 8.5%). 
I note their very impressive ~ 10 year history of dividend growth a very important consideration for people like me looking at this company as a retirement income stock.

$50 million net profit looks highly likely for FY24.  NZX50 inclusion announcement in very early December looks like a done deal.

Last word, once we see their net interest rate margins return to normal level's, (a process that is forecast to start in 2H) I expect a significant increase in their profitability and dividends in the years ahead driven off their strong improvements in retail market share.

Disc My #1 investment position on the NZX

[winner (n)]

A bit if a so so result for me

Macro seems the new buzzword in Turners dictionary

Rolling 12 months npbt now $45.7m

Saying full year expected to be above last year gives them plenty of wiggle room ......like H2 could be down almost 10% on pcp and they kept their promise ...but 10% up on pcp would give them that $50m

Todd's got to stop playing games with his numbers ...not a good habit .....possibly loves teasing the faithful.

Whatever market loves the report ...that's the main thing

[Waltzing]

600 in 24-36 months when inflation abates to 2.5 3.0.

36 months before 2.

[Basil]

I think to be fair Winner, after the FY23 result they were very conservative with guidance and didn't provide any.  Nothing wrong with a bit of conservatism with one's forward guidance.

I think it's clear where this is headed in the medium term.  The exceptionally strong headwinds within the finance division are starting to abate and a forecasted 40 basis point improvement in the NIM in 2H appears to be all off the back of the gradual repricing of the finance book as older lower interest rate loans are repaid and new loans are written at higher rates.  Notwithstanding the timing of OCR deceases, I am hoping for a similar level of improvement in the NIM in 1H FY25 and 2H FY25.

What follows is a list of all other companies on the NZX with a proven history over the last decade to grow eps at a compound average growth rate of 7% that are trading under a PE of 12

That's right, there are none.

[LoungeLizard]

The market certainly liked the result - up nearly 6%. The next bump of likely NZX50 inclusion could be significant given the very low number of sellers. $5 at a canter I reckon.

[BlackPeter]

The market certainly liked the result - up nearly 6%. The next bump of likely NZX50 inclusion could be significant given the very low number of sellers. $5 at a canter I reckon.

So - what would be in your view a good price to get out before the NZX50 inclusion bubble is turning and deflating?

[LoungeLizard]

So - what would be in your view a good price to get out before the NZX50 inclusion bubble is turning and deflating?

Well, that would partly depend at what price you got in at and partly as to why you bought the share in the first place. A traders exit point is going to be different than a traditional investor.

The HLG NZX inclusion "pop" peaked at around $6.90. From memory, over $1 more than pre-inclusion - but didn't last long and slid quite quickly back to $5.60ish before recovering. Impossible to say whether TRA will move by the same % but I would expect it to fall back along similar lines. SO - imo if it gets around $5.50 then that would be a really good point to sell, with an exceptional return even bought at today's prices. $5 would be the minimum - I wouldn't sell for less as the forward looking metrics, as Basil has pointed out, are still very strong. But, as I say, horses for courses.

[Waltzing]

great call LLZ .... be interesting to see how it plays out for sure.

[Mos]

Under promise, over deliver mode for full year.

[Basil]

How its been reported in the media https://www.rnz.co.nz/news/business/502998/growth-in-used-car-market-share-drives-turners-half-year-result
A few notes I scribbled down from the call yesterday.
# Oxford finance has been operating with one hand tied behind its back in recent times
# Expect headwinds with funding costs to reverse course to tailwinds in due course
# With fast stock turn and good nationwide vehicle data analytics the business has been able to pivot quickly to meet demand at the lower price points of $10- 15K, 9/10 stock are now under $15K up from 7-8/10 last year
# Looking to own more sites over time so shareholders benefit from capital gains accretion
# Napier to double in size and open January 2024
# Loan book now growing again, expect Halo effect on loan book from strong vehicle sales growth
# Expect 100-200 basis NIM improvement in next couple of years, (not going all the way back to previous highs as they are targeting more lower risk lending)
# Turners generated direct loans from their car yards are their best performing loans
# Economic overlay remains @ $2m
# Second half always a bit lower than first due to Dec / Jan holiday period. Unusual timing of Easter in late March 2024 could affect March sales a bit.  (I note we have a leap year in 2024 so that's another day of sales in February so should partially offset Easter effect).
# Regions have been a bit stronger than Auckland with Auckland customers probably feeling the cost of living pressure more.

[winner (n)]

Is today an ALL TIME HIGH FOR Turners ...since it became Turners