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TRANSACTION CAPITAL

April 16, 2024
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WORLD-CLASS TECHNOLOGY TO CREATE OUTSTANDING RETURNS

Transaction Capital (TCP) actively identifies and invests in alternative asset classes. Just like with African Rainbow Capital, you have to KNOW WHAT YOU OWN. SA Taxi and WeBuyCars are the two most prominent investments of Transaction Capital. You really need to understand these two assets but combine them with the TCP Risk Services (TCRS) Model to fully understand this company.

 

I will break down the three divisions below, but in the back of my head I am asking: What is next for TCP? Lets dive in.

 

SA TAXI

The taxi industry in SA is unique and SA Taxi is a unique platform built around this industry. Some fun facts

  • The most common model is a white Toyota Quantum Sesfikile
  • Passengers hail taxis using hand signals to indicate where they are travelling
  • Regional taxi councils determine the fares for each route
  • Fares are paid in cash to a conductor whilst often passengers themselves manage the cash by passing it to the driver

 

SA Taxi has developed its own innovative developmental credit philosophy and strategy. This approach is built on the industry knowledge amassed over many years. This niche capability evaluates each taxi owner as a small business and not solely on their individual credit score, enabling it to extend credit in this niche, under-served market segment.

 

SA Taxi provides developmental finance, insurance & other services to empower SMEs & create shared value opportunities thus enabling the sustainability of the minibus taxi industry.

 

Under the SA Taxi umbrella, you will find:

SA Taxi Finance The finance of pre-owned vehicles

SA Taxi Direct SA  Taxi established their own direct dealership in 2015, which sells both new and pre-owned premium minibus taxis. Due to strong relationships with Toyota, this channel offers SA Taxi greater returns on the entire vehicle deal and provides a profitable and reliable marketplace for sale of refurbished vehicles.

SA Taxi Auto Repairs Services  include repair and maintenance which is completed timeously ensuring that owners vehicles are back on the road as soon as possible.

SA Taxi Auto Parts Imports and locally procures new minibus taxi parts directly from source. In addition, its salvage operation recovers and refurbishes used parts from vehicles that are not economically viable to repair. This contributes to a reduced vehicle refurbishment cost.

SA Taxi Protect All financed vehicles are required to have comprehensive insurance. SA Taxi has designed its highly competitive comprehensive insurance products that are sold through this division

SA Taxi Rewards Leverage the industrys purchasing power to negotiate better pricing to benefit minibus taxi operators, associations and ultimately the entire industry. Also partnered with Bridgestone to launch its tyre programme. This offers operators with a tyre at a lower cost and of higher quality, with a safety specification designed specifically for minibus taxis.

 

WE-BUY-CARS

TCP owns 75% of WeBuyCars. This has proven to be a very profitable deal for the company. WeBuyCars had an astounding 2021. Competition in this sector is increasing, so keep a close eye on results every six months. WeBuyCars has a first mover advantage and now the strength of a listed parent behind them.

 

WeBuyCars is a trusted principal trader of used vehicles through its e-commerce and physical infrastructure, offering finance, insurance and other allied products. This uniquely composed offering, which combines customer convenience and competitive pricing, positions it well to benefit from the current market context.

 

The strategy to sell vehicles on-line via its e-commerce platform continues to deliver positive results, with e-commerce sales increasing significantly to approximately 30%. In addition, vehicle bays have increased to about 5 800 in 2021, and are expected to approach 7 000 bays with the opening of the newly acquired Dome in December 2021. The Dome is expected to be one of the largest, if not the largest, vehicle supermarket in Africa. As a result, WeBuyCars target to increase the volume of vehicles traded to 10 000 per month is on track to be released sooner than initially anticipated, with the groups revised target for the medium-term now increased to 15 000 vehicle sales per month.

 

TRANSACTION CAPITAL RISK SERVICES (TCRS)

This is the more unknown and complicated division of TCP. In plain English TCRS buys non-performing debt from other companies at a discount and then attempts to collect the full debt and make a huge profit. Lets say, you owe FNB R1000. FNB views you as a non-performing or high-risk client. FNB sells your debt to TCRS for R750. TCRS collects the full R1000 from you and makes R250 profit. They get paid to take on high risk.

 

Why is TCRS so profitable? They have exceptional technology, data analytics and artificial intelligence to help them manage their risk. Technology and intelligence their clients simply do not have.

 

Can you also see how beautifully TCRS, SA Taxi and WeBuyCars come together? The businesses complement each other.

 

THE NUMBERS

TCP had a very rough 2020 due to the Covid-19 pandemic. 2021 we saw the company return profits to pre-pandemic levels and also reinstating dividend payments.

 

I am attaching a slide where TCP rightfully compares their 2021 to 2019 instead of 2020. Anyone can look amazing against 2020.

 

  • Core earnings increased 27%
  • Net Asset Value per share is up 72%
  • Dividend 0f 52c per share

 

The interim 31 March 2022 results should be released in the next few weeks. Keep an eye on the revenue and profits from all three businesses. Also watch closely for any announcements of new acquisitions. The business has a healthy amount of cash at R2.2 billion.

 

Know what you own 


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