10-Bagger Transaction Capital has looked at the JSE overseas after 10 years

Mobility and digital services group transaction capital 10-bagger in eight years, depending on how you measure it.

This is ten times the share price jump from the March 2014 low of 470c. Shares traded at R45 this week, slipping from a recent peak near R52.

If you add the special dividend of R2.10 paid in 2014, the transaction capital has been especially kind to the shareholders. It is also worth noting that the share price has risen 4.5X since the March 2020 Covid crash.

Source: Share Magic The last six months since the end of March have seen a significant increase in the performance of 74.2% owned WeBuyCars, which has reached 10,000 car sales per month. Headline revenue rose 58% to R406 million in six months, showing the resilience of the used car market during the Covid period. The acquisition of WeBuyCars in the early stages of Covid was fortunately over time, when people started trading in big ticket purchasing items like cars.

It opens its largest vehicle supermarket in the Dome of Johannesburg, with a capacity of 1,125 bays, as well as small dealerships in Polokwane and Nellspruit with 220 and 370 bays, respectively.

Read: WeBuyCars bought the dome to build a huge used car dealership

Over the next 12 months, it plans to launch three more dealerships in different parts of South Africa, said David Hurwitz, CEO of Transaction Capital.

The group has also expanded to Morocco, with plans to replicate similar services available in SA in three major North African countries.

Why Morocco?

“Morocco is like SA in market size,” Hurwitz said. “It is very fragmented in terms of competition and bans the import of second-hand vehicles.

“If we set up in three big cities of the country, we have covered most of the country. It is also politically stable and physically and mentally close to Europe. ”

Other geographies under consideration are neighboring countries such as Zimbabwe and Botswana.

“We expect future earnings from WeBuyCars to continue to grow at the same rate in the medium term,” Hurwitz said.

Trading capital shares over 10 years

Taxi business

Another key pillar of the business is SA Taxi, which provides a variety of support and financing services to the minibus taxi industry. The sector was first damaged by the July 2021 riots in Kovid, then KwaZulu-Natal and Gauteng, and more recently by floods in KwaZulu-Natal, which suppressed passenger activity.

Although passenger activity is increasing in South Africa after the epidemic has recovered, it remains low compared to pre-epidemic levels and is not expected to return to normal in the short term.

With industry profitability in the strain, taxi operators are under pressure to pay their loan installments and insurance premiums. The retail price of a minibus taxi has increased by 6.6% from September 2021 to April 2022, the recommended retail price of a Toyota HiAce diesel car is now R528 800.

Petrol and diesel prices, meanwhile, have risen sharply – up 28% and 29%, respectively, in the last 12 months There has been no fare increase for passengers during this period, which has made it unstable for taxi owners and drivers.

Rent increases are expected to be announced soon.

SA Taxi currently provides responsible headline earnings for the R181 million group, down 4% from 2021. Hurwitz says the sector will begin to improve next year as the effects of the floods and landslides begin to subside.

Digital services

The third part of the business is Transaction Capital Risk Services (TCRS), a debt collection and digital services operation that increased the headline revenue for the group by 25% to R164 million.

Hurwitz says what started out as a debt recovery business has now expanded to offer a range of digital services, both in SA and abroad.

“For example, we now provide grievance redressal services for customers purchasing clothing from an e-commerce retailer in the UK. This is a new sector in a new geography. TCRS headline revenue has increased by 25%, and we think it could be higher. ”

Regarding the group’s ability to continue to make a profit on market rules, Hurvitz said he is confident the story of the increase in transaction capital still lingers in childhood. Huge new markets are waiting to be tapped for both TCRS and WeBuyCars.

To maintain this momentum, it is difficult to expect a group that has achieved a 30% compounded annual growth rate (CAGR) on total shareholder returns since 2013 or a 20% CAGR on key title earnings. But many were asking the same question of TCRS three or four years ago and still, the benefits keep coming.

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