TRA - Turners Automotive Group

[lorraina]

Forbar today.

Turners Automotive Group Ltd
No Need to Shift Gears, Growth on Track
 

link

OUTPERFORM

 

We initiate full coverage of Turners Automotive Group (TRA) with an OUTPERFORM rating and a 12-month target price of NZ$5.30. TRA is a high quality operator which has gained market share and grown earnings through the interest rate cycle. We see a clear pathway to further earnings growth driven by (1) footprint expansion from new branches, (2) margin recovery and book growth in its Finance segment as the OCR falls and (3) further sales channel optimisation in its Auto Retail segment. While there are risks from a continued deterioration in the consumer environment, we view TRA's 12-month forward PE of ~10x as undemanding, especially in the context of our FY24-FY28 EPS CAGR of ~+10%. Additionally, TRA offers an attractive gross yield of ~8.9% and has been one of the premier dividend growers in the New Zealand market over the last decade.

NZX Code

TRA

Share price

NZ$4.22

Target price

NZ$5.30

Risk rating

Medium

C&ESG rating

n/a

Market cap

NZ$373m

Avg daily turnover

59.5k (NZ$262k)

Financials: Mar/

24A

25E

26E

27E

Rev (NZ$m)

362.1

387.4

414.5

436.6

NPAT* (NZ$m)

33.0

36.6

40.7

45.2

EPS* (NZc)

37.3

41.5

46.1

51.1

DPS (NZc)

25.5

27.0

30.0

34.0

Imputation (%)

100

100

100

100

*Based on normalised profits

Valuation (x)

24A

25E

26E

27E

PE

11.3

10.2

9.2

8.3

EV/EBIT

33.1

52.4

47.4

45.6

EV/EBITDA

21.0

26.3

24.1

23.0

Price / NTA

3.3

2.9

2.6

2.4

Cash div yld (%)

6.0

6.4

7.1

8.1

Gross div yld (%)

8.4

8.9

9.9

11.2

[Basil]

Thanks, Lorriana.

Their view pretty much lines up with mine.  No stock on the NZX has grown dividends at the consistent and impressive rate TRA has in the last decade.
Gosh 34 cps fully imputed (47.2 cps gross) in FY27 with further growth after that will be nice.

10% CAGR in eps forecast in the next 4 years on the back of the same CAGR in the last 10 years and on a PE of only 10 !  PEG of only 1.0 !
Gosh, talk about growth at a reasonable price !!  Go Tina and Todd !!

Turners June vehicle report.  Used vehicles overall, dealer to public are holding up well year to date and of course we know Turners is steadily growing its market share so they will be doing well despite the current headwinds, which look like changing to tailwinds shortly.

As usual I think Turners management (who are expecting a stronger second half), have read the market superbly.  That's what I've come to expect with such highly experienced and talented management.

https://www.turners.co.nz/globalassets/terms-and-conditions/market-report-cars---june-2024.pdf

No need to change gears here or change the investment "vehicle", (so to speak), either.  Disc: Very happy long-term holder.  My #1 NZX position.

[winner (n)]

Jeez Basil, that 47 cent divie in 2027 interesting

Orr is pretty useless and he'll probably overdo the rates cuts ....so just imagine if OCR goes down to say 2% and punters want a 6% divie .....TRA shares could be close to 8 bucks

Dreaming maybe but you never know

[Waltzing]

You mean the NZ economy performance requires more rate cuts than currently forecast.....

which acts as a boost to finance sector of which this business model conforms....

[winner (n)]

You mean the NZ economy performance requires more rate cuts than currently forecast.....

which acts as a boost to finance sector of which this business model conforms....

You know our Adrian ....always overreacts

[winner (n)]

Director Antony Vriens sold most of his shares ...keeping 300

Probably going to concentrate on Me Today

[Waltzing]

not sure name is a winner() .... you tomorrow ....

[Basil]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TRA/436021/424515.pdf

I'm not sure how this adds to the business, but management and the directors are highly skilled in their field and I trust them this is going to be value accretive to the business over time.  If it's not, $1m is not the end of the world in the overall scheme of things.

[Waltzing]

sure people want to check insurance from one portal...

[Bev]

Last year Turner's revenue from insurance was $46.1m.  I think this investment was a wise decision.

 

[Basil]

sure people want to check insurance from one portal...

Insurance costs have been rising at a fast rate in recent years so I think a lot more people will want to ensure they are getting the most competitive deal in the years ahead.

[Pierre]

I just did a quick check on Quashed for my car insurance.
Only 5 companies quoted - AMP, Cove, TradeMe (Tower), AMP and Protecta. No quote from Turners.
The quotes range from $430pa to $900pa higher than I'm currently paying via my broker!

[Waltzing]

they got some work to do then and the big players not all getting on board then...

still plenty of people with no idea may pile in anyway...

[Pierre]

Turner's TV advertising has been absorbed by the RBNZ governor.

Promoting a Reserve Bank webinar for secondary schools at the end of today's press conference, Adrian Orr exhorted journalists to promote it to students saying: "You know, as Tina says, the internet is everywhere!".

A light touch from the governor and shows just how deeply Tina has become embedded in the NZ psyche.😁

[Waltzing]

Dame Tina ...

TRA now a statistical indicator ...key indictator on the RBNZ statistical model..