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TGA - Thorn Group

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Wow some great thoughts, clearly some bright people are watching this stock even if not invested.

BTW, does anyone know of any other stocks like this which are currently investing in future projects rather than focusing on returning capital to shareholders?
 
galumay said:
New risk for TGA unfolding with a potential class action against them by Radio Rentals Customers,
http://www.abc.net.au/news/2017-03-...g-class-action-over-goods-loan-scheme/8394290
Click to expand...
Legal action scrutiny will probably be more effective than ASIC. If the compensations fairly due extends to more than the 2.8m for overpayment and 4m for income threshold breaches that the company has set aside then a class action is probably warranted. If 6.8 covers it then participating in the class action will just see some of what would have been paid back to customers anyway end in the lawyers pocket. No surprise the provision got some attention from the lawyers.

A fair go was their motto and it is the key to their success. We will get to see how far they have strayed from their motto before this all quietens down.

I welcome the scrutiny as it will confirm or deny my underlying assumption that the company at least tries to walk it's talk.

The recent negative media and MB trying to get a class action up is probably not a coincidence
 
galumay said:
New risk for TGA unfolding with a potential class action against them by Radio Rentals Customers,
http://www.abc.net.au/news/2017-03-...g-class-action-over-goods-loan-scheme/8394290
Click to expand...


She doesn't look like someone who has a spare $3,400 lying around, to not notice for a number of years. It seems like a case of laziness and then after the fact trying to get someone else to reimburse her.

What sort of precedent would this set? The whole fitness industry, as an example, is built around that business model. If you have fraudulent transactions on your credit card you need to notify the bank. If you do it years later they'll tell you it's your problem. I think a bit of personal responsibility is needed here.
 
The price had rallied promisingly after the big fall caused by class action news, but then it fell again because the CEO is now resigning!
 
Can someone with more technical analysis capabilities then myself tell me if $1.26 is the resistance point for TGA? Looking at the 10 year chart and then also at more recent times it would appear that is the case but just wanted a second opinion.

I still believe the underlying business has merit and will continue to produce profit and reasonable dividends. Everything that's occurred in recent times is mainly noise as far as I'm concerned but typically the market likes noise and overreacts to it. Obviously holders wouldn't be happy with where the share price is currently but providing TGA can obtain a solid CEO and navigate the class action etc etc then I think we'll see the underlying value shine through once again.
 
The 10yr chart shows that the share price of TGA is at a critical level. TGA has followed the general index (XAO) quite well until the beginning of 2016 (marked by the arrow).

Price trading below 2.00 was the confirmation that something was amiss with the business at that time. Longer term holders don't jump ship unless they think they think the ship is sinking.

Right now it's another sink or swim moment. If the company has any worthwhile value new long term holders will invest. I suspect they'll wait until there is some clarity about the current issues.

 
Is it danger signs now from a technical point of view that its drifted below that resistance area?
 
kermit345 said:
... I still believe the underlying business has merit and will continue to produce profit and reasonable dividends...
Click to expand...

If you believe that, you should keep buying regardless of the price level. In this game, the lowest average cost wins.

The exact same issues concerning TGA were debated on this thread in early 2012. You might find it helpful to review the posts of that period and then see where the share price was about 2 years later. Those who were bullish on TGA then and held it into 2014 saw 100% gains.

The fact is that TGA has a solid balance sheet and, despite the distractions that it has had with NCML and other parts of its business (all of which it has now disposed of or put into run-off), it has normalised earnings of easily $20 million NPAT. You can buy the company in the market today for $185 million with a division making up 31% of group EBIT growing at around 80%.

With this kind of value profile, you really want TGA to go down further or to stay at current levels so that you can build up a sizeable position.
 

Did they sell them then and capitalise or are they now seeing where it has been ?
 
Rainman said:
Ask them. I sold out at $3 plus change.
Click to expand...

I can probably guess the answer

Well done exiting at $3

A turn up through $1.26 might be the first indication that we have seen the bottom.
 
Boggo said:
I can probably guess the answer

Well done exiting at $3
Click to expand...

The average selling price was lower. But the position was closed out around $3. The point is that TGA offers a decent margin of safety at this level.

In some ways, it is more attractive today than it was at the beginning of 2012 because its trade finance division today is growing so much faster. TGA didn't have that division in 2012.
 

There's a difference between then and now. TGA was nowhere near as leveraged, credit provisioning was far more conservative and it wasn't using all of it's excess funds on a business that has dismal returns on capital (TEF).

Not to mention the Consumer Leasing business margins just got crunched, albeit some of those costs are transient (legal, systems implementation, etc.)
 

None of this is permanent and none of it will be a permanent drag on TGA's earning power going forward. You don't get to buy an ok business for 7 times forward earnings without some hair on it.
 
Rainman said:
None of this is permanent and none of it will be a permanent drag on TGA's earning power going forward. You don't get to buy an ok business for 7 times forward earnings without some hair on it.
Click to expand...

EPS in this case is easily manipulated.

Provisions for impairment were basically flat for the year, yet loan books increased substantially, particularly in a business that has not existed in rough times.

Historically TGA have been good at this, provisioning more than enough... It seems this is no longer so, at least for this financial year.
I can live with all the other hairs, but this particular one is a little too coarse for my liking.
 

And this doesn't even take into consideration the substantially reduced returns on equity...
 
Klogg said:
EPS in this case is easily manipulated...
Click to expand...

When is that never true of any financial business?

I look at TGA's historical cash flow. It is a cleaner measure than EPS. On a per share basis, operating cash flow has been between 0.65 cents and 0.85 cents and has been on a steady upward trend for 10 years and more.

That suggest that historically TGA's customers pay. But maybe the business finance division will deviate from historical precedent. Then maybe it won't. I don't know. If forced to make a call, I'd think that small and medium business owners would be better credits than those in the consumer division.

All you can do is to make allowance for the risk that they won't be in your valuation. That is the point of having a margin of safety: to make room for adverse developments and still buy at a discount.
 
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