John Hughes mentioned in one of his presentations that...

John Hughes mentioned in one of his presentations that Institutional investors who focus on growth stocks are tending to be replaced by value investors who are more interested in earnings. Many of the latter are small retail investors [perhaps buying within their SMSFs]. I imagine that currently at least one institutional investor is exiting the share register. Today's large transaction was:

11:59:49AM $2.090 . 338,344 . $707,138.96 S3 XT

These institutional-investor exits happen periodically. I remember when PPT exited in about May 2012 at circa $1.40.

The results are about where they should be according to various communications from management since the annual report for YE 30/03/2012 to the effect that TGA had planned to "invest" in growing Thorn Equipment Finance, converting Cashfirst into the broader Thorn Financial Services, turning around NCML, trialing Rent-Drive-Buy and growing Radio Rentals/Rentlo via store expansion and new products. Will these initiatives work? We will have to wait until 2015 to see if significant traction has occurred.

In addition to the above initiatives flattening EPS growth for a while, 1H2014 was further flattened by the sudden spike in 2-year financial leases of low-margin cell phones, for which generous provisions (20%) were made. The over provisioning will syphon back into the bottom line in later months, which we should witness in 2H2014.

I do not understand the degree that TGA makes profits from buying prepaid telephone subscriptions and bundling them in with the 2-year lease for the phone. John Hughes mentioned it as an opportunity, but TGA's webpage does not mention it. An article at:

http://www.radio-rentals.com.au/media/wysiwyg/pdf/CEO%20Article.pdf

there is a comment ascribed to Thomas Derum, CEO, iTelecom Wholesale – namely:

“We enable Radio Rentals to create innovative subscription revenue streams, enhance customer loyalty, and challenge the traditional telecom market. The partnership is built on openness and is aligned to meet the strategic vision and business outcomes set by James Marshall.”

This may help to explain why TGA pursued the circa 10% retail margin smartphone business, which has always bothered me.