Question: With low interest rates, higher cost of purchasing a house that money might flow into higher auto sales. However, this has not happened as auto sales are trending lower, is this a sign of stagnating wage growth and lower expectations? I am therefore not confident if to continue to hold Automotive Holdings Group (AHG) for a couple of years more waiting for an upside in price. Your thoughts would be welcomed.
Answer: Yes, I would be surprised if we saw a big pick up in auto sales – they are coming off a very high base.
In regards to AHG, it currently has a couple of challenges. Firstly, it is not just an auto dealer – it also operates a refrigerated logistics division which has had some issues. Secondly, there is the regulatory headwind of ASIC moving to impose some conditions on the commission received from selling motor vehicle and other insurances.
At its AGM in November, the company provided guidance for FY17 profit to be higher than FY16.
According to FNArena, the brokers are largely positive on AHG. The consensus target price is $4.61, with sentiment at +0.5 (scale -1.0 is most negative, + 1.0 is most positive). It is trading on a forecast multiple of 12.7 times FY17 earnings, 12.1 times FY18 earnings. The forecast dividend yield is 5.8%.
Bottom line – while the multiples are attractive, I can’t see any really compelling reason to own the stock.
Question: My wife has 805 ANZ bank shares which she re invests the dividend. They have been held for our four grandchildren. Our problem is that the $23,659 affects our ability to now receive a part pension. Can we transfer the shares into their names (they are 14 years to 16years) and if so will it be deemed a “Gift” for Centrelink purposes?
Answer: There is nothing to stop you transferring the shares, although as you foreshadowed, they will be deemed by CentreLink as gifting. You can gift up to $10,000 in one financial year, or $30,000 over 5 financial limits, without impacting your pension.
Two other points to consider:
a) they will count as a disposal for CGT purposes – so you may have to pay tax on any gain; and
b) it can sometimes be a little difficult to register shares directly for minors (people under 18). Unless they have photo ID, you may have to use a sub-account structure – technically they stay in your name, but are designated as belonging to your grandchild through an account designation. From this perspective, it may be easier if you wait until they turn 18.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.