TGA is an operator in the household goods rental market in Australia.
TGA provides a range of audio/visual products, kitchen and laundry appliances, computers, furniture and fitness equipment through its Radio Rentals and Rentlo national store network.
TGA also provides other services through its Cashfirst, Thorn Business Services, Thorn Equipment Finance and National Credit Management Limited.
TGA is a group that should perform well in the toughening economic conditions, as unemployment rises, we expect that there will be an increase in demand for their services.
On the flip side, we also expect defaults to also increase. However, TGA has shown over the years its procedures and processes keep bad debts below 2%.
The company has a strong brand name that should assist in protecting the business from competitors.
The stock price has fallen back since the half yearly announcements that showed revenue up 12%. Net Profit was down after tax by 5%.
Although this is a disappointing headline figure, when we take a closer look at the net profit figure and adjust for the startup costs of their 'rent try and buy program' and the sale of debt in 2012, the net profit figure shows a modest increase of 2.9%.
Net remains conservative at 18.5% and the forecast dividend for 2014 remains at $0.11 per share.
TGA is currently trading at a 13% discount to our fair value of $2.30 and provides a gross yield of 7.7% based on forecast dividend for 2014.
The company’s dividend is supported by its cash flow and it maintains a low debt level.
For more information about Thorn Group Limited (TGA) please contact us on 07 4771 4577.