ARTICLES

Cartrack

One of the most interesting smaller shares on the JSE is Cartrack (CTK). This company specialises in the vehicle security business and has operations all over the world. Its client base is growing steadily as more and more people seek to secure their vehicles cheaply using modern tracking technology. In the year to February the company increased its subscription revenue by 19% to R1,2 billion. The company has an amazing operating margin of 33% which translates into headline earnings of more than 100c per share.

But the real point about Cartrack is that it is the perfect service company with a technology that is limited only by the number of vehicles on the roads of the world. It has no debtors, stock or capital tied up in plant and machinery. It basically has negative working capital, because it can still run its creditors out to 30, 60 or 90 days. It has no massive staff of semi-skilled or unskilled workers - so it has no union exposure. Such a company receives most of its income by way of an established debit order off its clients' bank accounts. It is already in profit before the month begins and any additional business it brings in goes directly to the bottom line. In many ways it is the ultimate tech share. Its assets get into their cars at night and go home. The capital risk is very low – because it has very little capital tied up in the business. Compare this to the average company which has union exposure, substantial capital invested in plant, machinery and property plus a burgeoning working capital position consisting of huge stock and debtors books and you will see that it is a management and an investor's dream come true. From a technical point of view, the company is really too small to be an "institutional share" with about R1,5m worth of shares changing hands each day on average over the past three months. Form a private investor’s perspective, this means that it is very easy to get into and out of, but it also means that the big institutions are not taking a serious interest in it yet. For example, on Thursday (26-4-18) 65 000 shares changed hands worth just over R1,2m. We suggest that this is a company that is evidently well-managed, making good profits and steadily growing its market organically world-wide. It is a service company with a winning technology and it has almost unlimited "blue sky" potential. Right now it is trading on an historical P:E of 19 - which is exactly in line with the average P:E of the JSE Overall index. We believe that it deserves, and will sooner or later command, a much higher rating. Consider the chart over the past two years:

The slightly boxy shape of this chart, especially a year ago, reflects the relatively thin volumes traded.

DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

PDSNET ARTICLES

Smart Local Investors

The last two months have been wild on the markets – mainly because of Trump’s ill-advised, on-again, off-again tariff policies. The issue now is:

Will this morph into a full-blown bear trend? Or is this correction almost over?

From his election victory on the 6^th of November 2024,

Jerome Powell

The Federal Reserve Bank (“the Fed”) is completely outside the control of the President and Executive Branch of the US government. The chairman of the Fed is appointed for a renewable 4-year term by the President. The President cannot remove the Chair without cause. The current chairman, Jerome Powell was appointed by Trump during his first term as President and reappointed by

Uncertainty Soars

Investors are by their very nature risk takers, but they are always trying to reduce the risk which they have to take to a minimum. Donald Trump, with his threat of an international trade war and his on-again, off-again tariffs has significantly increased the level of risk in markets across the world. This can be seen in the extraordinary volatility in the S&P500

Liberation Day

Trump has done the unthinkable. He has deliberately engineered the collapse of the US and world stock markets in the nonsensical belief that somehow an international trade war will make Americans richer. Nothing could be further from the truth. His actions have taken the S&P down from its all-time record high of 6144.15 on 19^th February 2025 to Friday’s

The Creation of Money

The money supply of a country is a symbol of the goods and services of that country. Obviously, if the size of the money supply is increased more rapidly than the real growth of its economy, then you have more money chasing the same goods and services, resulting in rising prices. Since, over the long term, the only organisation that can create money is the government,

V-Bottom is likely

The 10% collapse of Wall Street, which is a direct result of Trump’s random policy of on-again, off-again tariffs, is very similar to what happened to Wall Street in February/March 2020 when investors tried desperately to accurately discount the impact of the COVID-19 pandemic.

Normally, corrections in the market

The Trump Correction

It is relatively unusual for the activities of American presidents or what they say to have an impact on the New York Stock Exchange, especially during their first 100 days in office. Trump, however, is the exception. His confused, on-again, off-again rulings on tariffs have rattled the market. Markets hate uncertainty and even Trump himself doesn’t appear to know exactly

Dividends

Investors know that the return on a share is made up of a capital gain plus the dividend. Private investors are mostly attracted to the prospect of making a capital gain on the shares which they buy and do not often consider the dividends. What they perhaps do not realise is that a capital gain is actually just the dividend in a different form.

Quarterlies

One of the major differences between the US equity markets and the JSE is that listed companies in America are required to report every 3 months, not every 6 months as they are on the JSE. The quarterly reports of the S&P500 companies are closely followed by investment analysts and predictions are made for their profits.

Gold's Record Run

On Friday last week, gold reached a new all-time record high of $2871.42 per ounce. Its gain in rands has been even more impressive rising from less than R1000 per ounce in August 1992 to last Friday’s close of R52864.85.

In our Confidential Report of March