Our opinion on the current state of KAROO(KRO)Cartrack was folded into a new international listing under the name Karooooo (KRO) on 21st April 2021. The company operates in vehicle recovery, insurance, telematics, and fleet management across twenty-four countries worldwide. With a 92% vehicle recovery rate, Karooooo claims industry leadership in this area. It has experienced rapid organic growth, with its subscriber base growing at a compound annual rate of 21% over the past six years. Notably, 96% of the company's revenue is derived from annuity income, providing stable, recurring revenue.
The company's founder, Zak Calisto, owns 68.5% of the Singapore-based firm Karooooo. Given its strong annuity income, rand-hedge characteristics, and rapid growth, Karooooo is an attractive investment for private investors. It has also been gaining strong institutional interest. The company's business model requires almost no working capital, and its high levels of annuity income ensure overheads are covered at the start of each month. Investors are encouraged to accumulate shares during any market weakness.
On 7th December 2020, the company announced its listing on the NASDAQ with an inward listing on the JSE, allowing it to raise funds on the international market. On 12th February 2024, Karooooo announced that it would buy back up to 1 million of its ordinary shares in the market, reflecting confidence in its future performance.
In its results for the six months to 31st August 2024, the company reported earnings per share (EPS) up 31% and a 17% increase in subscribers to 2,136,610. Subscription revenue grew by 15%. The company highlighted that Cartrack delivered record operating profit of ZAR293 million, a 16% increase compared to Q2 2024's ZAR252 million. The gross profit margin expanded to 74% from 71%, and the operating profit margin remained strong at 29%. Additionally, Karooooo Logistics’ operating profit grew by 20%.
Although the share is not cheap, trading at a P:E of 30.31, its impressive growth record and rand-hedge qualities make it a "must-have" investment for private investors.
