TRA - Turners Automotive Group

[winner (n)]

That AÍ pretty clever eh KW

I might ask it 'is investing in a company that sell cars that has acclaimed and award winning marketing a good investment?'

But then again I have a feeling it's wise to stay clear of things like ChatGPT

This is an interesting article (and a bit of a worry)
https://www.nature.com/articles/d41586-023-00056-7

[KW]

That AÍ pretty clever eh KW

Its super clever, and most definitely about to lead us into a new future of tech innovation.  Think of the ramifications for call centres now that AI can respond like a real person. 

Also it appears a PR/IR career is now dead in the water LOL.  Good news for all our serial apologists on the stock market.
https://twitter.com/Cam49609198/status/1614166751402680320?t=cQiNM1v5xx64gkFmpZ4BzA&s=31

[Fiordland Moose]

That AÍ pretty clever eh KW

I might ask it 'is investing in a company that sell cars that has acclaimed and award winning marketing a good investment?'

But then again I have a feeling it's wise to stay clear of things like ChatGPT

This is an interesting article (and a bit of a worry)
https://www.nature.com/articles/d41586-023-00056-7

check out Midjourney or Dalle2...mindblowing. Got a free trial and did my 20 free images with midjourney - amazing and a lot of fun.

https://www.smithsonianmag.com/smart-news/artificial-intelligence-art-wins-colorado-state-fair-180980703/

https://www.midjourney.com/showcase/top/

a new frontier w/ all this AI stuff.

[Basil]

The only surprise is it took this long to get told off by KW...I knew it was coming lol
In my defense, I am investing for retirement income and the age old cliche "don't bite the hand that feeds you" springs readily to mind.  With a payout ratio of under 70%, (which could be tweaked to maintain the dividend if absolutely necessary), and with Turners coping with the prevailing headwinds really well I thought I would take the opportunity to post below a full list of other stocks on the NZX paying you a 10% gross yield on a quarterly basis.
.
.
.
Oh my goodness to the best of my knowledge there are none.  Could the share price keep declining? Yes.  Do I think they can sustain the current dividend across the business cycle?  Yes
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/402756/383897.pdf
I think other dividend hounds might like to refresh themselves with this presentation from the first half results.
In terms of dividend sustainability, I think the following is worthwhile noting.
Despite all well known headwinds that Turners freely acknowledge in this presentation they have guidance in the market that net profit will be at or slightly above last year's record which amounted to 36.4 cps.
Their dividend policy is to pay out 60-70% of after tax profit.
Last year's payout of 23 cps, (also forecasted from FY23) represented a payout ratio towards the bottom end of that range at only 63%.
I think the 10% gross yield is pretty safe.
Its also worth noting they have only declared 10 cps so far this year so the second half is highly likely to include fully imputed quarterly dividends of 6 cps and 7 cps as was the case last year.

[Waltzing]

"ChatGPT"

imagine public companies created FA reports in PDF with the object tags they should have been using for a while now.

MS is  or might be going to  it in search but as one FA on CNBC said the scope for its use long term is HUGE.

FA reports could be fed to an AI engine but only if they construct the reports using smart reporting engines.

Sorry to post this on this thread...

But the future of this new platform is HUGE....

It should be spun off and onto a Ticker already but sadly its not ...

It is also very very heavy of engery ....

But back to cars...and this straneg company that MR P pointed out owned its own sites?

Gosh ... Thanks for MR B and his fast arithmetics..

[Perky]

You could get some STU Basil to give your dividend stocks more Steel?

It pays you more ...only twice a year though..less chances for you to spend it on toys

Lots of infrastructure spend coming up as NZ try's to catch up on under investment...in everything...


Maybe except govt reports.

[Basil]

Off topic
Page 37 with the five year history of dividends for STU makes for a sober read
https://steelandtube.co.nz/sites/default/files/report/Steel%20%26%20Tube%20FY22%20Annual%20Report3.pdf

Just as well the next 5 years are going to be much better...or maybe as soon as they hit headwinds again they stop paying dividends or reduce them to some pathetic level again like in 2018, 2019 or 2021?

Holders are no doubt hoping STU goes back to the glory days of 2013 to 2017 when they paid a minimum of 15 cps each year, see page 22 https://steelandtube.co.nz/sites/default/files/report/S%26T_Annual_Report_2017.pdf
I reckon residential construction is going to tank later this year and take commercial down with it.  No matter how you slice and dice it I reckon the construction game is cyclical and not conducive to highly dependable and reliable dividend income.

[Perky]

TRA is a consumer cyclical company?
Which part of the cycle are Turners customers heading into?
Turners customers had access to cheap money last 10 yrs but that is ended for now. Wind has changed from warm northerly to cold southerly


STU...to the moon. What it loses in residential rev. it will grow infrastructure and manufacturing

Govt spending $60 Billion on infrastructure next 4 years. New hospital, schools, northland dry docks,  Auckland port move, central interceptor,new harbour crossing, light rail, heavy rail, CRL, stormwater, wastewater upgrades

Climate change will hurt TRA...Climate change will strengthen STU...a lifetime ahead of fixing what mother natures delivers.

Govt is specialist at spending your tax money when economy needs a boost.

Lots of steel needed. Not many cars or finance required by govt.

I will buy Turners one day..when i buy it probably lower price and smaller dividend than now...but I'll take my chances on STU for a while yet

Looking forward to the next STU report 15 February

[winner (n)]

Turners finance NIM very high .....That's good

And insurance float helps finance new sites ...that's pretty good too.

[winner (n)]

The only surprise is it took this long to get told off by KW...I knew it was coming lol
In my defense, I am investing for retirement income and the age old cliche "don't bite the hand that feeds you" springs readily to mind.  With a payout ratio of under 70%, (which could be tweaked to maintain the dividend if absolutely necessary), and with Turners coping with the prevailing headwinds really well I thought I would take the opportunity to post below a full list of other stocks on the NZX paying you a 10% gross yield on a quarterly basis.
.
.
.
Oh my goodness to the best of my knowledge there are none.  Could the share price keep declining? Yes.  Do I think they can sustain the current dividend across the business cycle?  Yes
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/402756/383897.pdf
I think other dividend hounds might like to refresh themselves with this presentation from the first half results.
In terms of dividend sustainability, I think the following is worthwhile noting.
Despite all well known headwinds that Turners freely acknowledge in this presentation they have guidance in the market that net profit will be at or slightly above last year's record which amounted to 36.4 cps.
Their dividend policy is to pay out 60-70% of after tax profit.
Last year's payout of 23 cps, (also forecasted from FY23) represented a payout ratio towards the bottom end of that range at only 63%.
I think the 10% gross yield is pretty safe.
Its also worth noting they have only declared 10 cps so far this year so the second half is highly likely to include fully imputed quarterly dividends of 6 cps and 7 cps as was the case last year.

Well played Basil getting TRA cheap enough to get those yields.

No doubt those who bought for the 7% gross yield in mid 400s a year ago (at that time TINA was an investing strategy) are still pretty contented with their lot ...quarterly divies and all that.

They'll get their capital back one day

Getting to the stage where TRA is a buy again .....10% divie and decent future capital gains

Qualifies as DOG OF THE NZX stock with current yield

[Basil]

Thanks Winner.  I feel I am getting to know the company fairly well.  Historically the main segment they are in, (modestly priced used cars) has held up well in tougher economic times.
10% yield and the modest dividend payout ratio that could easily be tweaked a bit if necessary to maintain the dividend, along with good management with a clear plan for growth over time, gives me comfort to hold for income. Happy to trust management to chart a steady course through the choppy seas directly ahead. It'll be fine, smooth sailing conditions again in due course.  For what it's worth I agree it's getting close to a buy as opposed to a hold but I can also understand people not wanting to buy in a downtrend.  I feel the worst in terms of share price declines is behind us but doubling down, (for twice the dividend income), if it did go down to say $2.50 has quite a bit of appeal too so I am not overly concerned either way.

By the way, you are right my friend.  It doesn't pay to revalue your portfolio too often, probably not at all in recent times lol

[winner (n)]

TRA now trading at just over Book Value

In current environment that seems about right

For interest sake here's how TRA P/B ratio has tracked over the years

Just shows approaching 5 bucks in 2021 was totally ludicrous ...but 3 bucks now is more rationale

You cannot view this attachment.

[KW]

Just shows approaching 5 bucks in 2021 was totally ludicrous ...but 3 bucks now is more rationale

Everything in 2021 was completely ludicrous.  Personally, I am wiping all of 2020 and 2021 from my trend analysis and going back to 2018-2019 trends to see where stocks "should" be.  In TRA's case, most of 2018-19 was spent in a downtrend to $2.15-$2.20 before picking up in late 2019 (as the old bull market entered its late stage runup).  

Most of us on this particular forum have been around the stock market a long, long time, so we should all remember that back in normal times most of the stocks on the NZX paid 7-10% dividends, mostly because they were low growth.  Investing in the NZX has always been mostly a dividend play, as even the "growth" stocks were mostly trash, and anything decent rapidly decamped to the ASX or got taken over.   

In regards to future profits, I read an interesting twitter thread regarding used car sales, the crux of which is that people cant buy new [used] cars because the value of the trade in will not come close to covering paying back the financing on the old car which was bought during the pandemic when used car prices were ludicrously priced.  So what dealers are doing is ignoring standard industry practice of not selling a car on finance to someone who already has a car on finance, figuring that the customer will simply default on the old car and not the new one.  Dog eat dog world, let the debt defaults fall on someone else.  But basic principle applies here - what happens if people cannot do what Tina says to do - bring your old car in and walk out with another?

[winner (n)]

Good observations there KW

One thing that's an issue for TRA is that EPS growth is rather inconsistent over the years

Since 2015 its been like this

2016    -14%
2017    -4%
2018    17%
2019    -5%
2020    -6%
2021    28%
2022    16%

A few red years eh ..... but through the ups and downs EPS has grown from 28.6 cents in 2015 to 36.3 cents in 2022 (CAGR 3.5% pa)

Perky - maybe a bit like STU performance

(Think my numbers are correct)

[Basil]

what happens if people cannot do what Tina says to do - bring your old car in and walk out with another?

I think management are wide awake to the current challenges and have clearly acknowledged them in their 22 November half year presentation. http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/402756/383897.pdf

Holders might like to reflect on what they had to say on pages 5, reflect on the dividend history at page 15 and the company outlook for FY23 in pages 36-38.

Always a good sign that management are open and transparent when both the CEO and CFO but their email and phone numbers on a presentation, (page 39).

I think we all know there are some fairly choppy seas to navigate for the rest of FY23 and those conditions are likely to persist in FY24.  I'm confident management are fully abreast of all the challenges that lie ahead and note that despite these, they have a forecast in the market for FY23 being at or slightly ahead of last years record profit.

In terms of the dividend the payout ratio being only 63% last year and well inside their stated range of 60-70%, I note earnings could fall by as much as 10% and they could still pay the same dividend however it would be at the top end of the range.

Looking through this pending recession I think Turners are well placed to continue to grow market share, profitability and dividends.