TGA - Thorn Group

[Pioupiou]

skc, my TA knowledge lacks quite a bit but from looking at TGA's chart it looks like its in a downtrend from approx 4/4/2011 through to now and. . .

I have never understood the rationale for TA, and I have presumed that the wiggles in the graphs are useful in that they reflect the collective thinking of Mr Market. Whether it can usefully inform us what the market is thinking about a tending-to-be illiquid (about $600K a day), micro-cap (less than ($300m) that is relatively tightly held (about half a dozen shareholdes own 60% of the shares), I cannot say, but I suspect not.

For reasons that often make little sense, instos like Perpetual and IOOF may decide to sell a few million dollars of TGA, and this smashes the SP, whereas if it were WOW, that selling pressure is massively muted by the millions that others transact every day. I suspect that TA is not suited to make much sense of this, but, as I wrote, I do not know.

Fundamentally, nothing significantly has gone awry with TGA's business. I wish the SP would stay down at circa $1.50 to allow me to garner the funds to buy another 30,000.

 

[VSntchr]

I wish the SP would stay down at circa $1.50 to allow me to garner the funds to buy another 30,000.

Pretty soon you may be more influential on TGA's share price than perpetual! haha just kidding of course...but if I had the money I would certainly like to own the whole business at the price its shares are currently being offered for.

I have recently increased my holdings in TGA and have been reading everyones responses in this thread with interest.

 

[Bibimbap]

Tonight's your money your call gave the following views.
If the stock price holds at $1.48 support levels, it's likely to head towards $1.70 to $1.80.
But if it breaks below this, wait for next support level at $1.32.
Results due soon, so holders of TGA should wait till then.

I got a small amt last wk at $1.525

 

[Klogg]

Tonight's your money your call gave the following views.
If the stock price holds at $1.48 support levels, it's likely to head towards $1.70 to $1.80.
But if it breaks below this, wait for next support level at $1.32.
Results due soon, so holders of TGA should wait till then.

I got a small amt last wk at $1.525

If this thing dropped to $1.32, I would most likely be doubling my position - simply based on the fact that their recurring revenue is so strong and that SP would give an ~6.8% yield fully franked (8.8% gross).

My mouth waters when I hear these figures.

 

[skc]

I have never understood the rationale for TA, and I have presumed that the wiggles in the graphs are useful in that they reflect the collective thinking of Mr Market. Whether it can usefully inform us what the market is thinking about a tending-to-be illiquid (about $600K a day), micro-cap (less than ($300m) that is relatively tightly held (about half a dozen shareholdes own 60% of the shares), I cannot say, but I suspect not.

TA is nothing more than an attempt to see how supply and demand is flowing over different timeframes. The movement is "usually" supported by fundamental reasons behind it.

The share price graph does not represent the collective thinking of the market - it represents the thinking of the marginal buyer / seller. As a long term investor you don't care what the marginal guy does... as a trader I am taking prices from the marginal buyer/seller, and so using TA is sensible imo.

For reasons that often make little sense, instos like Perpetual and IOOF may decide to sell a few million dollars of TGA, and this smashes the SP, whereas if it were WOW, that selling pressure is massively muted by the millions that others transact every day. I suspect that TA is not suited to make much sense of this, but, as I wrote, I do not know.

Precisely where TA can be used t suggest that the selling has finished / paused / reversed by looking at price and volume. Fundamental analysis means little when you are faced with just flow - money needs to move out, prices fall unless people step up.

BTW, TGA has been falling / stalling for pretty much one year, including the release of 2 financial reports. The market isn't stabbing in the dark and usually isn't completely ignorant all the time. Clearly it has re-rated TGA's earning to a lower multiple based on the interpretation of its prospects by the marginal seller.

 

[Nutmeg]

I have never understood the rationale for TA

There's nothing to understand about technical analysis. Its pretence to rationality is hokum! Adapting and adopting what Voltaire said about the Holy Roman Empire, you can say about technical analysis that it is neither technical nor analysis.

 

[Julia]

There's nothing to understand about technical analysis. Its pretence to rationality is hokum! Adapting and adopting what Voltaire said about the Holy Roman Empire, you can say about technical analysis that it is neither technical nor analysis.

Perhaps consider that by so categorically rejecting something about which you clearly know nothing, you might well be missing some good opportunities.

 

[Pioupiou]

My point was not so much as whether TA works for traders (or for investors in conjunction with FA), but rather does it work well for a small cap like TGA. TA is in essence applied statistics, and statistical inferences require a reasonable sample to be reliable. If sustained selling by two instos, Perpetual and IOOF, is forcing down the TGA SP, exacerbated by trend-is-my-friend selling, then I am unsure if we can predict at what price they would stop selling.

The problem with the activity of one or two instos, is that it may not even reflect a rational analysis of the stock – selling could simply be policy driven (rebalancing, exiting sectors, raising cash, whatever). TGA would represent a tiny percentage their holdings, so they would not lose much sleep if they dropped a few hundred thousand dollars getting rid of a few million TGAs, which they may have bought for 50 cents. If you have ever had money invested in these instos, you will know how poorly they perform, so one should not presume that savy stock-market gurus have seen something in the annual reports, or patterns in the heavenly bodies, that we poor laymen have missed.

As a non-TA aside, if TGA never grew again, it would then need to hold back less of the EPS to fund growth, and hence by diverting retained earnings to buybacks it could continue to grow its EPS, which should be about 20 cents for YE 31/03/2012. This should allow one to establish a basis for calculating a near-worst-case SP. If you locate the Morning Star metrics for the USA-based Rent-A-Center, you will see that growing EPS via buybacks is what Rent-A-Center has been doing for a few years, and it enjoys a PER of 13. There is no reason to believe that TGA is suddenly going to stop growing after about 75 years of existence – it has such a few items in its range, that it can easily expand by adding a mere handful of new items each year, and dropping less profitable items. Rent-A-Center's main rival in the USA, Aaron's, is still growing, and it enjoys a PER of 18 (relative to YE 31/12/2011). US share prices are over priced generally, so I am not suggesting that TGA should enjoy a similar PER.

 

[skc]

As a non-TA aside, if TGA never grew again, it would then need to hold back less of the EPS to fund growth, and hence by diverting retained earnings to buybacks it could continue to grow its EPS, which should be about 20 cents for YE 31/03/2012. This should allow one to establish a basis for calculating a near-worst-case SP. If you locate the Morning Star metrics for the USA-based Rent-A-Center, you will see that growing EPS via buybacks is what Rent-A-Center has been doing for a few years, and it enjoys a PER of 13. There is no reason to believe that TGA is suddenly going to stop growing after about 75 years of existence – it has such a few items in its range, that it can easily expand by adding a mere handful of new items each year, and dropping less profitable items. Rent-A-Center's main rival in the USA, Aaron's, is still growing, and it enjoys a PER of 18 (relative to YE 31/12/2011). US share prices are over priced generally, so I am not suggesting that TGA should enjoy a similar PER.

Quick tangent off the main discussion. If there is a private business with no growth but the usual business / economic risks, how much %pa return would you demand/pay?

 

[odds-on]

Quick tangent off the main discussion. If there is a private business with no growth but the usual business / economic risks, how much %pa return would you demand/pay?

12% with control and owner perks.

 

[skc]

12% with control and owner perks.

I agree.

12% = PE ~8.3.

So without control one would demand a higher return... i.e. a lower PE.

 

[oldblue]

If sustained selling by two instos, Perpetual and IOOF, is forcing down the TGA SP, exacerbated by trend-is-my-friend selling, then I am unsure if we can predict at what price they would stop selling.

I wouldn't be attempting to use TA to "predict" anything - for TGA or any other stock. But it's a useful tool to overlay one's FA in timing buying and selling. That's all.

 

[McLovin]

I agree.

12% = PE ~8.3.

So without control one would demand a higher return... i.e. a lower PE.

Does the value change if the company is paying no dividends?

 

[skc]

Does the value change if the company is paying no dividends?

The premise was no growth and full control...

- If the company has no growth then what's all the cash for?
- If the owner has full control then dividend will be paid (or any other way to get the cash out).

If there's no control and no dividend... value is much lower.

 

[McLovin]

- If the company has no growth then what's all the cash for?

Just to keep the thing going along at zero growth.

My point being, under that scenario of zero growth, you'd be more concerned with what you have in your hand at the end of the year rather than accounting profit, at least IMHO.

This is probably an even more important aspect when you are buying the entire company from someone who has been looking to offload it.

 

[odds-on]

The premise was no growth and full control...

- If the company has no growth then what's all the cash for?
- If the owner has full control then dividend will be paid (or any other way to get the cash out).

If there's no control and no dividend... value is much lower.

I have read some small business valuation books before, they are very interesting reading as you have to take into account the structure, control, perks, taxation and how to get the cash out. Listed companies cannot be valued using these techniques unless you hold a large % of the company and therefore have a controlling stake. A minority shareholder has no control (or clue of what is actually going on) therefore needs to demand a higher return.

 

[odds-on]

I agree.

12% = PE ~8.3.

So without control one would demand a higher return... i.e. a lower PE.

I would happily buy a no growth private business for a return of 12%, I would just pay myself a nice dividend each year and milk the perks to the max. No control I would want 15% to 20% or PE 6.66 to 5.

 

[Nutmeg]

Perhaps consider that by so categorically rejecting something about which you clearly know nothing, you might well be missing some good opportunities.

I know enough about technical analysis to know that you don't find real value "opportunities" as a result of technical analysis. If there is any rationality to technical analysis, it can only be due to something fundamental in the company. Tell me one great investor who relies solely on TA. And if they don't rely solely on TA, then ask yourself why not? The most that any consistently successful investor might - and this is a big "might" - say about TA is that it assists in market timing. But then again I am yet to hear any consistently successful investor claim that they can consistently time the market.

 

[Klogg]

That's a little harsh IMO. While I prefer FA, I'm sure that there's a time and place for TA and can appreciate where it might be useful.

On that note, has anyone got any additional input from a TA perspective into TGA? Would be greatly appreciated.

 

[Boggo]

I know enough about technical analysis to know that you don't find real value "opportunities" as a result of technical analysis. If there is any rationality to technical analysis, it can only be due to something fundamental in the company.

And that statement is a contradiction that highlights the fact that you completely misunderstand tech analysis.

Tell me one great investor who relies solely on TA.

I could list a dozen but I will just ease you into it with one that's just up the road from you -
https://www.aussiestockforums.com/forums/showthread.php?t=23221&p=695592&viewfull=1#post695592