Transaction Capital (TCP) is a distinguished player in South Africa's financial sector with its three main divisions: minibus taxis, risk services, and a 75% stake in WeBuyCars. Its subsidiary, SA Taxi, leads in financing, insuring, and selling minibus taxis, effectively monopolizing the minibus taxi industry's value chain. Since its listing in June 2012, TCP demonstrated robust growth, with an annual compound growth in earnings per share of 21% up to 2023. However, the company faced a significant challenge in 2023 with a R1.8 billion provision for bad debts in its minibus taxi division, amidst the backdrop of rising interest rates, fuel costs, and diminished consumer spending.
Despite these challenges, the company's diversification, including its involvement in debt collection through Transaction Capital Risk Services (TCRS) in South Africa and Australia, underscores its resilience. The minibus taxi industry's critical role in South Africa's transportation ecosystem, with over 15 million trips per day, highlights the defensive nature of this sector, though it has not been immune to the economic pressures exacerbated by COVID-19 and other factors.
The Hurwitz family trust's share sale in December 2022 and the subsequent halving of TCP's share price, along with Coronation's increased stake in the company to 16.57%, indicate fluctuating investor confidence. The year to 30th September 2023 brought further challenges, with the company reporting a headline loss of R3.7 billion, largely due to a R1.1 billion write-down of repossessed taxis. The future of SA Taxi hinges on refinancing deals expected to be concluded by March 2024.
The decision to cease financing new minibus taxis, focusing solely on second-hand ones, reflects a strategic shift in response to the myriad pressures facing the industry. These challenges include fuel prices, interest rates, maintenance costs, load shedding, and depressed commuter volumes, compounded by operators' inability to hike fares.
Despite these setbacks, the planned unbundling and separate listing of WeBuyCars, which reported a 16% revenue increase and a 20% rise in core earnings during the four months to 31st January 2024, presents a new growth avenue. This move suggests Transaction Capital's adaptability and potential for recovery.
TCP's share price recovery since November 2023, following the application of a 65-day exponentially smoothed moving average strategy, signals potential for a turnaround. With WeBuyCars' impending IPO and its solid performance, TCP's strategic adjustments offer promising prospects for investors, marking it as a potentially undervalued opportunity for those looking for a stake in South Africa's resilient sectors.
Despite these challenges, the company's diversification, including its involvement in debt collection through Transaction Capital Risk Services (TCRS) in South Africa and Australia, underscores its resilience. The minibus taxi industry's critical role in South Africa's transportation ecosystem, with over 15 million trips per day, highlights the defensive nature of this sector, though it has not been immune to the economic pressures exacerbated by COVID-19 and other factors.
The Hurwitz family trust's share sale in December 2022 and the subsequent halving of TCP's share price, along with Coronation's increased stake in the company to 16.57%, indicate fluctuating investor confidence. The year to 30th September 2023 brought further challenges, with the company reporting a headline loss of R3.7 billion, largely due to a R1.1 billion write-down of repossessed taxis. The future of SA Taxi hinges on refinancing deals expected to be concluded by March 2024.
The decision to cease financing new minibus taxis, focusing solely on second-hand ones, reflects a strategic shift in response to the myriad pressures facing the industry. These challenges include fuel prices, interest rates, maintenance costs, load shedding, and depressed commuter volumes, compounded by operators' inability to hike fares.
Despite these setbacks, the planned unbundling and separate listing of WeBuyCars, which reported a 16% revenue increase and a 20% rise in core earnings during the four months to 31st January 2024, presents a new growth avenue. This move suggests Transaction Capital's adaptability and potential for recovery.
TCP's share price recovery since November 2023, following the application of a 65-day exponentially smoothed moving average strategy, signals potential for a turnaround. With WeBuyCars' impending IPO and its solid performance, TCP's strategic adjustments offer promising prospects for investors, marking it as a potentially undervalued opportunity for those looking for a stake in South Africa's resilient sectors.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.