Rowan Williams, director Nitrogen Fund Managers
Buy: Optasia
Optasia, a UAE-headquartered AI-driven fintech firm focusing on airtime credit and microfinance solutions for the underbanked consumers across Africa and other emerging markets, listed on the JSE on November 4. The group has high growth prospects as it positions itself for further expansion across new markets and services. Optasia uses proprietary AI-based credit decision-making to support mobile operators, financial institutions and digital service providers in extending credit and financial access to underbanked users. The company processes more than 30-million loan transactions daily to more than 120-million active users. Optasia has partnerships with major mobile network operators, including Vodacom and MTN, supporting its expansion across emerging markets. It operates in 38 countries, mainly in Africa, the Middle East and Asia. FirstRand acquired a 20.1% stake in Optasia through an off-market transaction at the IPO price of R19 a share. With the share trading at about 5% above its IPO price, the growth prospects are not fully priced in, presenting an attractive entry point for investors.
Sell: WeBuyCars
WeBuyCars (WBC) provides an extensive trading platform to facilitate the sale and purchase of used vehicles in the South African market, including offering ancillary financial services such as finance and insurance. The share has performed extremely well since listing via an unbundling from Transaction Capital, following an extensive restructuring. As a result, market expectations for future profitability are high. The company recently issued a trading statement, guiding for core headline earnings growth of 11%-17% for the year to September 30. This falls below market expectations of a more than 20% increase, resulting in the share trading down over 13% after the release of the trading statement. The arrival of competitively priced Chinese and Indian vehicles in the South African market makes new cars more affordable, reducing demand in the second-hand market where WBC operates. Sales of a basket of affordable Asian new vehicles are up more than 40% from a year ago. This has likely resulted in WBC sales shifting towards lower-margin business-to-consumer cash sales, which operate at a lower markup ratio than vehicles sold with financing and insurance arrangements. The new shares issued at the IPO to fund additional investment in capital and inventory also diluted growth in headline earnings per share to between 1% and 6%, disappointing the overall market.
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