Zeda 101

June 17, 2024

Written by community member Letitia Janse van Vuuren


Key Data

Share Code: ZZD
Share Price: 953c
Sector: Consumer Services
Market Cap: R1.81bn
25 Wk H/L: 1800c/857c
P/E Ratio: 3.22

Latest Annual Updates

Revenue +20% to R4.45bn
HEPS +4% to 189cps
EBITDA +19% to R1.67bn
Operating Profit +25% to 803m
D/E Ratio -27% to 1.6
Return on Equity 28.3%
Dividend: None


Brief history

Zeda is an integrated mobility services company that operates Avis and Budget car rental businesses in South Africa. It was established as
Zeda Car Rental and Tours in 1967 and later entered a joint venture with Avis-Rent-A-Car Systems Incorporated, adopting the Avis

By the mid-1980s, Zeda became the largest Avis licensee outside the US and expanded internationally. In 1997, Zeda Holdings changed its
name to Avis Southern Africa after being unbundled from its parent company and was listed on the JSE. Barloworld acquired Avis
Southern Africa in 2005, making it a subsidiary and division of Barloworld. In December 2022, Zeda was unbundled from Barloworld
and was listed on the JSE for the second time.

Business segments

Zeda is Africas largest integrated mobility solution provider offering tailor made solutions from car rental, leasing, and car sales. The company
operates in 11 sub-Sahara countries, including Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, eSwatini and Zimbabwe. All together they have about 38% market share in the car rental business.

Their car rental business segment trades under the Avis and Budget brand names and generates revenue from short-term car rental services to a broad customer base. They offer rental and subscription solutions for individuals, businesses, corporations, and government entities, focusing on rentals that last up to 12 months. The company
has established strategic partnerships with airlines and travel agencies, positioning itself as a preferred mobility partner as part of
a complete travel offering.

In the leasing business segment, they operate as Avis Fleet and procure vehicles from various manufacturers based on specific customer requirements. These vehicles are leased to customers for periods exceeding 12 months, with an average duration of 44 months. The customer base includes corporate clients, small businesses, and government entities.

Furthermore, the company sells used cars from their rental and leasing operations to both retail customers and wholesalers.


Revenue Drivers

In recent interim results for the six months ended 31 March, the group reported an increase in revenue of 20% to R4.45bn.

The car rental contributed nearly 75% of the revenue, benefiting from a 102.5% increase in the international arrivals to South Africa during the first quarter of 2023 compared to the same period in 2022.

The remaining 25% of revenue was generated by the leasing business, showing a 6% year-on-year increase. This growth can be attributed to
a better mix of heavy commercial vehicles, strong resale prices of used vehicles, and increased sales of value-added products and

Bullish factors

South Africa remains an attractive destination for foreigners, and together with the favourable exchange rate (from a tourist point of view), tourism is expected to increase even further.

In addition to inbound, an expected increase in international airlines activities utilising chauffeur-driven vehicles presents the Group with an opportunity to continue to grow the business even further. 

Increased corporate business travel has also contributed significantly to the revenue.

These numbers are remarkable considering that car rental activities are currently operating at only 26.8% of pre-pandemic levels.

Bearish factors

Zeda demonstrates promising growth potential and Ive added it to my watch list, but is not without risks. It still has large amounts of debt
that is extremely expensive in the current high interest rate environment. Additionally, the company's heavy reliance on tourism and corporate travel also exposes it to potential fluctuations in these sectors. Current economic uncertainties and geopolitical tensions
could easily cover a bright future with clouds of uncertainty.

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