TRA - Turners Automotive Group

[Waltzing]

Time allocation for this stock on this forum has gone up .... it takes more time to follow this stock than to follow the politics of the country...

[Hectorplains]

Time allocation for this stock on this forum has gone up .... it takes more time to follow this stock than to follow the politics of the country...

It still has some way to go to generate the attention of OCA or SKT...

Oh, and that's not a challenge, Basil!

Who knows maybe Todd will be inspired to follow in Chris footsteps on day too? 

[Basil]

Time allocation for this stock on this forum has gone up .... it takes more time to follow this stock than to follow the politics of the country...

LOL....not much real work done this week.  Deep dive into the report on Wednesday, then the call, then the ponderings, then yesterday afternoon's zoom meeting, more ponderings this morning and then writing that sermon...all in one week.  Just as well I am semi-retired and don't have a proper job lol.

Unsurprisingly the tank is a bit empty so next week after a break, I might type up a brief summary of yesterday's zoom meeting for those that couldn't attend.  In the meantime, I am sure there will be much chin wagging about this and many other shares at tomorrow's get-together at the Viaduct, Oyster and Chop at 3.00 p.m., all welcome.

[winner (n)]

Is Todd turning up at the get together

[Basil]

If so I hope he brings Tina, I want to give her a hug 

[winner (n)]

If so I hope he brings Tina, I want to give her a hug 

If so I hope he brings Tina, I want to give her a hug 

Sieni might might be there trying be in cognito

[Waltzing]

well HTP ...  at least this stock is GOING UP!!!

OCA ?  death by a thousand cuts... no thanks....

Amazing to say but second hand cars are out perfoming age care and property.... how about that...

Right now in the central WAKATOO there are age care suburbs going up in rural towns ... When all those people move in there will be wheel chair grid lock in th main streets...

a boom for rural NZ towns just off the express way... but those companies except SUM are ......

[Fiordland Moose]

Have got all the research analyst reports, some consensus estimates below for those interested. The three analysts are Jarden, Craigs, & Forbar.

FY24 EPS: 39.75 (PE 11.7x @ $4.66 spot)
FY25 EPS: 42.36 (PE 11x)
FY26 EPS: 48.85 (PE 10.2x)

FY24 DPS: 25 declared, 34.7 gross (7.5% gross yield @ $4.66 spot)
FY25 DPS: 27 declared, 37.5 gross (8% gross)
FY26 DPS: 29.3 declared, 40.7 gross (8.7% gross)
Thereafter: CIP & Forbar only provide 3 year forecasts. Jarden provide to FY30. The long term forecasts feel a bit optimistic but if achieved would be a fantastic achievement.

SPOT valuation: $4.46 (ie the value today, not the target in 12 months)
12 month target price: $4.88. Note, Forbar only provide a spot valuation (& are the lowest of the 3) and do not provide a 12 month target price. For those not familiar with the distinction, target prices are the most commonly referred to broker valuation. They are derived rolling forward the spot valuation by the cost of equity and then subtract the divided expected over that period. So if you had a spot valuation of $100, and cost of equity was 8, your roll forward would be 108, then less (say) expected dividends of $4, would give you a TP of $104.

Valuation methodology.
Forbar: blended average of DCF, peer multiples, and a dividend discount model.
Jarden: DCF
Craigs: DCF (though I note their cost of equity is quite high)

On the EPS and DPS forecasts they are in a tight cluster - not much variation at all between them - and that has been the cast for the last year or so. It would be fair to say TRA has been meeting or exceeding recent estimates, and has been in an upgrade cycle since March.

Turners 1 year forward PE multiple is sitting bang in line with its average from April 2017 to November 2023. and a tiny smidge below its 12 month forward consensus dividend yield.

Agree there is some scope for multiple expansion or gross dividend yield compression (I prefer the later) as interest rates fall and the market becomes more familiar with TRA business model and resilience. It does get pinged in DCFs and their implied PE ratios as it is a fairly working capital intensive business (cars and more particularly the finance book). and a lot of the growth is capital intensive. I like the integrated model but worth recalling they did try to get rid of the book back in 2018 (plus or minus a year I forget).

I have a spreadsheet showing all the recent NZX 50 index inclusions (as well as the inclusions of NZX shares into offshore indices but shown separately as a different dynamic) and subsequent index pops and level of reversion thereafter. If get time can maybe share some of that. It basically looks at the # of trading sessions on either side of the inclusion, rebases the SP performance for each stock, and averages it across a number of stocks so you can see the average cycle (ie the rise of the price up to inclusion, and then what happens the other side)

Also has a bit of an analysis showing the correlation between the level of the pop and the relative liquidity. IE the average daily volume in the 12 month period to the index inclusion announcement, the # of shares required to be purchased, and the excess average days purchase required as well as the required shares divided by the shares outstanding. When looking across different inclusions it becomes a pretty decent indicator of the level of pop based on the relative liquidity. And when the intra peak price was achieved relative to the close on evening of inclusion over the sample of inclusions.

[Waltzing]

Enough of these long long posts....

 and now the threat of data analysis tables ...

its summer people ...  really...

soon this will bethe only stock one will be able to follow....

[Basil]

Hey Fiordland Moose thanks for sharing.  I have the other 2 reports but not Jarden's one and those estimates out to FY30 sound interesting.   Why not, just for fun so we know what a bull case might look like, post their eps estimates for FY27-FY30.

As you suggest if the risk free rate comes down in the years ahead and they keep growing at the same 7% they have for the last decade, we might see some really serious capital gains.  Index inclusion pop and reversion date sounds interesting too.  Care to share some more info ?

[Fiordland Moose]

They have dps of 33 in fy27 rising to 38.5 in fy30. Would love it to be achieved but had an aspirational feel to it (rising margins, ROEs and marketshare gets to 12% in fy30). Can get my head around their nearer term thinking.

[Basil]

Thanks. 38.5 dps in FY30 at the midpoint of their 60-70% payout range suggests they think eps is about 59 cps compared to 40cps in FY24.  This suggest a CAGR of ~ 6.5% for the 6 years after FY24, compared to 7% over the last decade.  Seems quite plausible to me, (and in line with my thinking).  We need to keep in mind that the brilliant Tina marketing campaign has only been going for a few years.

Market share growing to 12% over that time also seems a plausible target.
Todd commented very enthusiastically about how effective "Tina" has been in recent years in nearly doubling their market share.  He also somewhat flippantly concluded by saying the whole thing is covered in "pixie dust"  I did an optional marketing paper at Auckland Uni, seems like a lifetime ago now.  I see real magic and brilliance in their marketing and the public really seem to be warming and relating to our new rock star.

I can confirm from the Zoom meeting on Friday they have now signed an unconditional agreement for a further Tauranga site.  I think with their well outlined branch expansion and brand building strategies you'd be a brave man to bet against them continuing to grow market share at a decent pace.

On the PE thing, a company with a proven history of CAGR in the late single figures and similar outlook for the foreseeable future, deserves more widespread market recognition than its currently accorded.  Perhaps the pending NZX50 inclusion will be the start of that process.

[Basil]

Can they grow market share to 12% by FY30 ?

Had a good chat with a few people yesterday at the Oster and Chop get together about this.

The facts are since the brilliant Tina campaign a few years ago they have nearly doubled market share from ~ 5% to over 9%.  More than a 4% increase in a short period of time.

With their known branch expansion plans, opportunities they are pursuing for more land and their brilliant marketing efforts, in the next 6.5 years to the end of FY30 I'd be quite surprised if they didn't at least add another 4% market share to take it over 13%.   13% would be a very conservative target in my view.  Something in the range of 14-15% wouldn't surprise me at all.

[winner (n)]

How many sites has Turners Auto Retail got at present?

The 2019 reports said 33 sites ...but I'd like an up to date number

[lorraina]

From Turners website;
Turners Auto Retail Division is NZ's largest used vehicle network
and operates across 3 key areas: Used Cars; Used Trucks & Machinery; and Damaged and End of Life Vehicles. With 30 branches nationwide and over 500 members of our team, we take pride in the contribution that we've been making to keep NZ moving for over 50 years.