By Chantal Marx.
Friday was a relatively quiet day on the corporate news front, with the only major event being Transaction Capital's (TCP) release of its circular related to the unbundling of WeBuyCars (WBC). The latter also hosted an investor roadshow, offering TCP shareholders and would be investors a glimpse "under the hood".
Our highlights:
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The used vehicle market in South Africa is a lot more defensive than the new vehicle segment. In fact, South Africa's vehicle "parc" is growing despite a reduction in new vehicle sales.
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Additionally, used vehicle dealers are agnostic to imports and currency volatility - eliminating another cyclical component relative to local peers (Motus and CMH operated across the vehicle value chain - imports, distribution, new vehicles, used vehicles, aftermarket parts).
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WBC's market shares are estimated at 10% to 12% and it is targeting a 23% share by FY28. This means that it must increase the number of vehicles sold monthly from 14 000 to 22 000.
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WBC generated revenue of R20 billion and core net profit after tax of R660 million. FY23 was a difficult year for the company, with sales coming off an exceptionally high base in 2022 that was complemented by very low new vehicle inventories due to a chip-shortage that emanated from the Covid-19 pandemic.
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The company's digital real estate is regarded as a key competitive advantage. The technology is proprietary, easily scalable, and provides extremely valuable insights via data collected. This allows the company to be very precise in managing inventory, generating sales leads, and protecting customers.
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WBC views Carmax in the US and webuyanycar.com in the UK as following business models most like itself. Carmax trades on a forward PE of 20 times (compared to CMH and Motus trading on forward PEs in the mid-single digits). Webuyanycar.com was taken private recently on a price to sales ratio of 1.9 times - this is exceptionally lofty compared to Carmax' 0.4 times.
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No further capital raise is anticipated post the listing.
Important dates:
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The WBC pre-listing statement will be published on 12 March.
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TCP shareholders will vote on the unbundling and accompanying transactions on 15 March.
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WBC is planning to list on 11 April.
A full note and valuation on WBC as well as a separate publication outlining the impact on Transaction Capital shareholders will be published well in advance of these events.
