While other investors were, presumably, half seriously toying with the idea of stowing away cases of cider and biltong strips, I was ruing that I had opened my big mouth about my scintillating gains on Sasol.
Last week I was up more than 20%. Right now I am practically back at the price I bought it at. But I expected to be tested with Sasol. For me, there was enough in the latest production report — especially the separation of the local operations and international chemical businesses — to keep me interested.
I doubt Rupert family-controlled investment company Reinet is regretting the sale of its remaining interest in British American Tobacco (BAT) — not with segments of the US market taking a brutal pounding after the outlook for AI was potentially altered by suggestions that the China-developed AI platform DeepSeek might cause a bit of a disruption. Cash is always king, but it wears a double crown in a market correction.
It is worth noting that BAT shares have climbed almost 6% to about £31.30 over the past week. Meanwhile, Tiger Brands continues to chart a new, compelling course with a rather nifty sale of its quarter stake in South American foods business Carozzi for $240m (with a sumptuous $59m extraordinary dividend priced in). I don’t think too many punters, or the few who even knew about the Carozzi investment, which was made back in the late 1990s, foresaw anything close to this valuation being realised.
Officially Tiger will earmark these proceeds for core business bolstering and strategic projects (like baking efficiencies and production gains into the bread segment). But the group did reiterate, quite tantalisingly, that once the investment requirements are funded, excess cash will be returned to shareholders in the form of share buybacks and special dividends. What, no big acquisition plans? We’ll wait and see.
I am not a shareholder of WeBuyCars (WBC), but I took the trouble to scan through the its annual report and found it a riveting read. My only real involvement with the company has been as a customer. I flogged my KTM 690 Enduro to WBC, probably not getting top dollar for that unique bit of machinery. But I knew I had to let go of that beast quickly after I blew out both my contact lenses when careening up Ou Kaapse Weg.
I got full value from the WBC auction platform when I managed to secure a very old BMW F650 Dakar, which I was able to restore to fair running order. As one of my tennis partners accurately remarked after a test drive, “super comfortable, but goes like a tractor — until you hit the power band”. At my age, plowerful is probably better than powerful ….
But back to WBC. While it is perceived as predominantly an online sales platform, the group added 14 new “dealership pods” to its network, bringing the total spread to 83 buying pods at the end of the 2024 financial year.
Cash is always king, but it wears a double crown in a market correction
There’s more to come, with WBC buying land in the bustling Lansdowne area in Cape Town (for a 24,000m² supermarket for up to 1,300 vehicles) as well as in Montana in Pretoria North (for a supermarket holding 750 vehicles). The group has also acquired an existing motor vehicle dealership facility in Vereeniging, which will be up and running in May with accommodation for 400 cars. This is an interesting move — not that WBC is ever likely to make an advance on the likes of Combined Motor Holdings (CMH).
Maybe I’m wrong. But buying up market share by snatching well-placed dealership precincts that can be enhanced with a WBC makeover does make sense. The group indicates in its annual report that it continues to gain market share, with sales volumes surpassing 14,000 units in the last quarter of the financial year.
Directors cited “continuous efforts in enhancing and investing in the group’s innovative digital business platform”. The platform allows the group to hone its all-important price strategies — critical in a business where higher volumes compensate for lower margins (that is, lower than the traditional dealership models of businesses such as CMH and Motus).
The annual report adds that the platform — and I really like this bit — “facilitates large-scale experimentation, enabling exploration of various business processes and pricing models dynamically”. As the business continues to scale, so does the volume of data gathered.
To put the data gathering in context, the WBC website averages 7-million monthly visits. The target is to buy and sell 23,000 units per month by financial 2028. In the past year WBC sold 165,000 vehicles and bought 168,000 — so that’s quite a medium-term target.
Fascinating, too, is the group’s recent decision to realign vehicle buying and capital allocation to what one might call a middle-of-the-road mass market in a price bracket of R150,000-R300,000. Not surprisingly, then, the annual report does acknowledge the surfeit of lower-priced new vehicle alternatives now available, most notably several “more affordable” Chinese vehicle brands, which now account for a chunky 10% of new vehicle market share, pitched at very competitive pricing points.
That said, WBC is hardly fazed. Chinese vehicles will soon be a meaningful part of the used vehicle market, and WBC calculates that its brand-agnostic approach positions it well to integrate these vehicles.
WBC is a really nice business, but the earnings multiple is running way too rich for a tractor rider like me. Probably worth noting that I said the same thing when the share price hit R25 in June last year.
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