Turners lands top rating

Turners Automotive Group has been given a full coverage rating at outperform by an investment company and a 12-month target price of $5.30 a share.

The firm’s stock closed at $4.34 on July 29.

James Lindsay, Will Twiss and Kylie Mills, analysts from Forsyth Barr, say Turners is a “high-quality operator” that has gained market share and grown earnings through the interest rate cycle.

They have initiated the top rating for the business in a research report released this month.

“We see a clear pathway to further earnings growth driven by footprint expansion from new branches, margin recovery and book growth in its finance segment as the official cash rate falls, and further sales channel optimisation in its auto retail segment,” the analysts add.

“We think a premium valuation is now warranted given its improved business quality, track record of execution through the cycle and leverage to interest rate falls, and earnings growth outlook.”

Forsyth Barr’s report notes Turners offers a gross yield of about 8.9 per cent and has been one of the premier dividend growers in the New Zealand market over the past decade, reports BusinessDesk.

The analysts note the company has demonstrated strong execution during the current economic downturn despite a challenging consumer backdrop.

Its net profit after tax grew by 1.5 per cent to $33 million in the year to March, when compared with the prior period. 

Meanwhile, its profit before tax was up eight per cent over the same time frame to $49.1m and earnings before interest and tax increased 12 per cent to $58.6m.

The analysts add Turners’ profitability in finance has been constrained by rising interest rates, but “this has been more than offset by strong market share gains in auto retail and steady growth in insurance”.