TGA - Thorn Group

[McCoy Pauley]

No thread on this one, so I thought I'd get the ball rolling.

Thorn Group Limited (ASX:TGA) floated as Radio Rentals a few years back. It primarily operates in the Australian household goods rental markets that offers a wide range of audio visual products, kitchen and laundry appliances and computers along with a new range of furniture and gym equipment on a rental basis. RR Australia was formerly known as Radio Rentals Australia. It also owns and operates Big Brown Box business.

Major shareholders include the NAB (5.8%), IOOF Holdings Ltd (10.0%), Perpetual Limited (14.0%) and Investors Mutual Limited (8.3%).

It has a market capitalisation of just under $155 million, with 128.7 million shares on offer. It turns over just under $44 million in the most recent reported financial year and announced a profit upgrade in November 2009.

The share price bottomed at $0.39/share in early 2009 but is now trading at about $1.20/share. Seems to find a bit of a resistance at that level as it's consistently bounced off that mark in the last couple of months.

I picked some up late last year. I was attracted to the relatively low P/E ratio (8.8 as at 27 January 2010) and comparatively high dividend yield (4.62% as at 27 January 2010).



It'll be interesting to see how this company fares if/when the economy improves. It was hammered as part of the overall market downturn in 2008 but it's rebounded strongly in the last 6-8 months.

As always, DYOR.

[McCoy Pauley]

Hmm, well, not sure what's happened since I started the thread, but the TGA share price has taken a tumble in the last couple of weeks and is down almost 4% today as well.



Looks to my novice eyes that we're nearing a possible break-out scenario one way or the other (up or down).

[McCoy Pauley]

Interesting - a trade of almost 3.5 million shares @ $1.04/share went through just after the market closed (1602, by my broker's watch). Only represents about 2.7% of the number of shares issued in TGA, but this is the biggest volume in more than six months.

I'll be interested to see if a notice of substantial holding in TGA is filed in the next few days with ASX.

[McCoy Pauley]

No notice filed as of yet but interesting (at least to me) to see the share price jump suddenly today to $1.20/share, having hovered in a band between $1.075 and $1.13/share for the last few weeks. I don't have any real indication why that would be the case and the volume was quite low. As a holder of shares in the company, I'm pleased to see the SP take off like that but I query the sustainability.

[ROE]

good stock something I like to own one day now that I fully understand the business

Shame it didnt register on my radar during the GFC :-)

[McCoy Pauley]

TGA released its full year accounts at the end of May and announced a nice little profit increase of 33% YoY.

Unsurprisingly, the share price has taken off on a little bit of a tear since the announcement and the company is beginning to attract some mainstream media attention with articles written in the AFR and the Eureka Report in the last fortnight.

[McCoy Pauley]

TGA share price still rewarding all holders. Peaked at about $1.80/share a few weeks ago and has dropped back to $1.68/share as of today. Been in a nice up-trend since the release of its full year results a few months ago.

Still holding and looking to accumulate more on weakness.

[ROE]

I like half yearly update ...another kickass business...

Bought in sometimes ago after did an extensive research on the business
and found it can sustain double digit grow for some year to come.

now it deliver what I confident it can deliver
I was expecting 12-15% sustain growth rate but this
business suprise me once again with high double digit (38%)

just like FGE and CIL surpise me with my way convervative estimate

[McCoy Pauley]

Indeed, ROE. It (and TLS) was the only shining light in my portfolio today. As a former Treasurer once opined, the half-year results really were a beautiful set of numbers that brought home the bacon.

Also good to see that the board and management have decided to cut losses on the Big Brown Box venture. Hopefully the fall-out should be minimal and the board and management can focus all their efforts on their core activities for the rest of FY11.

[ROE]

Indeed, ROE. It (and TLS) was the only shining light in my portfolio today. As a former Treasurer once opined, the half-year results really were a beautiful set of numbers that brought home the bacon.

Also good to see that the board and management have decided to cut losses on the Big Brown Box venture. Hopefully the fall-out should be minimal and the board and management can focus all their efforts on their core activities for the rest of FY11.

I always knew Big Brown Box venture is a flopped even before it takes off
I dont know what the management is thinking...they just cannot compete with online business..it's a different type of game all together.

Online business has very few competitive advantage unless your are ebay or Google because each has built a moat for themselves through innovation and user based ...online Actions business first to the market with user based pretty much destroyed everyone else who start it up after......

the other mob CCV which I also own will run into the same issues with their website hehe, but it is an experiment that they can learn from that cost bugger all to their cash flow so it's not really a concern

Own TGA and CCV you got the whole market cover with high debt house hold, who ever win you win

Just like owning Microsoft and Apple, who ever win you win, if both win you win double hahaha

TLS my basket case for now haha..bought in $2.92 bought a bit more $2.64 and that is it
lock and load and see how it go in a 3 years...if it doesnt pay off I have something to learn from while I collect 28 cents dividend :-) ..... TLS a bit of a test case for me because I based an analysis on something that I haven't done before

[So_Cynical]

Thorn yet another darling of the "value" brigade...i just cant see how having high debt households as your customer base can be a good thing the CEO (i think) was on Lateline Business just now and came across as a smart cookie...said they will grow there market share in the small and medium business tech services space..leasing/HP of low end technology i suppose.

[ROE]

Thorn yet another darling of the "value" brigade...i just cant see how having high debt households as your customer base can be a good thing the CEO (i think) was on Lateline Business just now and came across as a smart cookie...said they will grow there market share in the small and medium business tech services space..leasing/HP of low end technology i suppose.

I know a few people living in 1/2 Mil house rent fridges and furniture
that a few sale taken away from HVN :-)

The millionaire next door by Dr Stanley do exist in Australia
it just not the people who live in expensive house and drive luxury car and rent Fridges

and if you want to know why Thorn are so good, read their business model, it is Superb :-)
they manage to pull a model most people dream off ...

how can you lend to the unemployed and having default less than a few percent..MAGIC
their default rate is better than banks.

PS: Corporate is the next big thing for them...Tabcorp rent a few thousand TV from TGA a year
remember Coates hire before got bought out by Private Equity, such an awesome stock.. TGA giving me another second change of Coates hire

[skc]

I know a few people living in 1/2 Mil house rent fridges and furniture
that a few sale taken away from HVN :-)

The millionaire next door by Dr Stanley do exist in Australia
it just not the people who live in expensive house and drive luxury car and rent Fridges

and if you want to know why Thorn are so good, read their business model, it is Superb :-)
they manage to pull a model most people dream off ...

how can you lend to the unemployed and having default less than a few percent..MAGIC
their default rate is better than banks.

PS: Corporate is the next big thing for them...Tabcorp rent a few thousand TV from TGA a year
remember Coates hire before got bought out by Private Equity, such an awesome stock.. TGA giving me another second change of Coates hire

ROE, have you looked at TSM? Similar business with focus on technology products (as opposed to fridges and sofas as well), but with slightly better distribution model imo. They do deals in store like JB / DickSmith, and have better reach to the SME customers.

TSM is selling at PE ~10 which is about as expensive (or cheap) as TGA but without the track record in growth. Thoughts?

[ROE]

Yes I have a details look at TSM last year
I sent you a message in your mail box

[skc]

Yes I have a details look at TSM last year
I sent you a message in your mail box

Thanks for sharing your thoughts.

Some news on Big Brown Box here (to make sure I have 75 chars )

http://www.smh.com.au/business/big-b...123-185o1.html

[ValueSnatcher]

Ive been studying a few companies in this area lately. Anyone know of any other similar companies/competitors. I can think of flexirent and thinksmart..

[chrisalex]

I haven't read through all the thread but TGA make their money by lending cash at around 30 - 40%. About 2 years ago the shares hovered around .70c, and now they are pushing $2.00, and it may appear to keep heading that way. Their clients are low income people, and I think the maximum the average Joe could borrow was $1000 over 2 years.
This makes repaying not too difficult. I get annoyed if they are referred to as loan sharks. They provide a service to people the Banks and Building Societies won't help.
In short, I like them, and they even pay a little dividend.

The disappointing thing is two years ago when I noticed TGA I didn't have the deposit on a bread roll.
DYOR chrisalex

[Spudded]

ROE, I think we may have a fairly similar portfolio What other stocks are you delving into at the moment?

[ROE]

Ive been studying a few companies in this area lately. Anyone know of any other similar companies/competitors. I can think of flexirent and thinksmart..

Flexirent and thinksmart is not really a competitor to TGA, they operate in a different market

Flexirent and Thinksmart let you borrow the money to buy the goods from HVN or JBH
you pay the repayment and or interest and if something goes wrong with the equipment it is your problem...

TGA purchases the equipment and lent it out to you, TGA own the equipment you pay the rental. TGA will service, will install will do everything for you all you do is use it...
if it is broken they come and fix it for you ....

TGA also capture the population that cannot qualify for Flexirent and Thinksmart credit check... TGA has much much wider customers base, from the unemployed
to the long term dole bludgers on Centrelink, to people in 500K home
small business and big corporate...

This full service rental is good for big business like Tabcorp where they don't
have to worry about buying thousands of TVs for their TAB shop and worry about servicing and keep track of inventory and capital expenditure... Just outsource the lot
to TGA and pay them a monthly bill and factor that margin into their business..

TGA also expanding into short term loan market which the other 2 dont touch.
TGA is really cutting into CCV market and CCV is its competitor in this market

that why I own both, I don't have to worry hehe, they both good companies and
if whoever win I win and if both win and that is the case right now double bonus...

Hopes that help, right now TGA is pretty has a monopoly in this market, there is smaller guy around but they are bugger all compared to TGA and cant compete on service and geometric spread...

Also this business has first mover advantage pretty much like Brambles in Logistic
with their CHEP Pallets...someone want to compete with Brambles they need to buy Billion dollar worth of Pallets first to make any dent into Brambles market...

once you acquire enough equipment and customers based it would take someone a
**** load of capital to compete with you before they even turn a dime of profit...
as capital return on purchase take some months to filter through.

and if you have smart management they keep their eyes and ears open and as soon as some one come in they can shut them down by compete on price that make it
un-viable for the new guy to operate due to the startup capital cost...

[ROE]

ROE, I think we may have a fairly similar portfolio What other stocks are you delving into at the moment?

Nothing lately cant find too many good stuff ...

I just top up more CCV some weeks ago

I made a lot of money out of CCP but I could have made a lot more but I was a little conservative, I have many more opportunity to top up CCP as low as $1 to $2.50

I wont repeat this same mistake with CCV and I take step to action it some weeks ago, plus now my capital is a few hundred percent more than when I start pounding on CCP, so I can be a little more generous on each stocks...

There is another stock mirco-cap I'm looking at, it had a too much of a good run it discourage me from making the purchase

..at the current price is Ok but I don't have too much margin of safety..6 months ago it was perfect but 6 months ago my initial assessment blind me from looking deeper

then last night I had sometimes and I went back and check stocks I dismissed in the last few months and see how they are doing.... I came up with a different opinion this time around....check out the price, pretty sad for me it double....and another 10% or so rally today....so I decided to stay out and keep watching and learning :-)

I'm still hoping it pull back but I have little hope, buy side outnumber seller 2-3 to 1
This could be the one that got away and could be a 10 baggers....

The search continue :-)

very few investors in small and micro cap stocks maybe we can create a google groups and throw ideas around....keep it small (5-8 people) keep it relevant....
that give all of us opportunities to pound on stock we think could be the next 10 baggers...

Occasionally I venture into big brother territory when I see opportunity but this is purely for dividend play with a reasonable margin of safety and modest capital return that at least keeping track with inflation

but micro cap, small caps and mid cap is where it will delivers us the 10 baggers....
I have nothing but many many good memories with small caps and micro caps