TGA operates the Radio Rentals and Rentlo businesses.
TGA is Australia’s number one electrical and household appliance rental business whose majority of customers comprise of a specific demographic who are usually on social security.
One of the most attractive features of TGA is its arrangement with Centre link via the Centre pay system. The system allows for automation of payments to TGA directly from these social security benefits.
TGA’s earnings yield is 17% and generating a return on capital of 22%.
The acquisition of National Credit Management provides an avenue for growth and for management to apply its experience to this business and potentially expand the margins. This business whilst has recurring revenues leans more towards almost being counter cyclical, in a recession more people rely on the services and products that TGA offers.
We expect that in the coming years unemployment will increase and more Australians will look to use the services of companies like the TGA.
This company has a good reputation and is well suited to take advantage of the current economic climate.
Currently the price is trading at $1.53, we have a price target of $2.00 on the company.
TGA is offering a current dividend yield of 6.2% fully franked giving it a gross yield of 8.8% with an upside in expected capital growth of 30%.
Although this is a relatively small company with a market cap of $214 million I would only recommend it for more aggressive investors with an investment time frame of 3-5 years.
It is a good yielding company which in the current economic conditions should thrive.
For more information on Thorn Group (TGA) please contact us on 07 4771 4577.