Turners' shares undervalued, chairman says

The market has undervalued Turners Automotive Group’s shares, according to its chairman Grant Baker. He told the annual shareholders meeting on Wednesday that despite many changes to the business during the past five years, including investment into 10 business and growing its asset base from $104 million to over $550 million, “we still do not feel our share price reflects the significant advances and progress we are making, in fact it currently sits well below the analysts’ target prices”. Turners is New Zealand's largest second-hand vehicle retailer with a national network of 27 automotive retail sites and Baker says it is in “excellent shape”. “As part of our recent market announcements we have confirmed guidance for (full-year) FY18 net profit before tax of $29 million to $31 million, the mid-point representing a 22 per cent increase over last year.” Baker says the group’s vision remains the same: “to build an integrated automotive financial services group”. “We have been in the market raising new capital for the business and have announced a $30 million equity raise. We have raised $25m in a placement to institutional investors in NZ and Australia, and are also offering a $5m share purchase plan to retail shareholders and bond holders,” he says. “The company needed to move quickly to ensure we secured the funds for the expected growth, but also creating some more liquidity into the shares was important.” He says 75 per cent of funds raised will be used to grow Turner’s finance book. Turners chief executive officer Todd Hunter told the meeting that revenue was up 47 per cent with growth driven by higher vehicle sales which is generating more finance and insurance sales. “We reported a record operating profit before tax of $24.6 million, which included eight months’ contribution from Buy Right Cars. The Autosure policies were not transferred until the start of this year, so FY18 will be the first time that we see any profit contribution from this business, Hunter said. “Net profit after tax remained strong at $17.6 million, an increase of 13 per cent on last year." Turners paid fully imputed dividends of 14.5 cents per share for FY17.