About ten days ago I skimmed through a Morgans analysis of TGA...

About ten days ago I skimmed through a Morgans analysis of TGA dated 17/11/2015 at https://my1.morgans.com.au/r.cfm/3BF23893-5393-47A2-89B8-4F3FD2C1020B, and I noted that it stated “PE/DCF valuation falls to A$2.62ps (from A$3.09ps)”. At the time, I was unsure what was behind the words “PE/DCF valuation”, so I looked at the report more carefully today.

The Morgans analysts had arrived at a DCF-based valuation of $2.88, and by using a 5-year average PER of 10.5, they also deduced a target price of $2.40 based on a 23c normalised EPS estimate. The PE/DCF valuation is the average of $2.88 and $2.40, which is $2.64, as the report calculates. However the report refers to $2.62 in its generalised statement – a minor typo, I presume. In summary, Morgans values TGA at $2.85, but its analysts thinks Mr Market will price it at $2.40 within twelve months of the report's date of 17 November 2015.

Because I have no intention of selling TGA at the current SP, and no funds to buy more TGA, nor much desire to hold more TGA than I now hold (too many), there is no purpose me double checking the Morgans report to support any action on my part. However, in broad terms I concur with it. I'll recalibrate my views when the regulatory issues become clearer, and when I have had a chance to read TGA's EOY material in May 2016.

As an aside, I learned tonight that MNY has also withdrawn from the SACC loans business. Because of the low NPAT contribution of SACC loans, TGA, MNY and CCP have in the face of ASIC's bolshie attitude, all withdrawn, or are withdrawing, from SACC loans, which is not exactly what, I think, Government wanted to happen, although its good news for pawnbrokers. For the same low-contribution-to-NPAT reasoning, I would neither be surprised, nor unhappy, to see TGA abandon its 2-year commercial leasing business.