ARTICLES

WeBuyCars - Follow-up

WeBuyCars (WBC) was spun out of Transaction Capital (TCP) and separately listed on the JSE on 11^th April 2024 – just over three months ago. Before the listing we published an article on the 8th of April 2024, in which we suggested that the share would be a solid blue-chip share favoured by the big institutions (pension funds, unit trusts and insurance companies).

In most new listings some of the people who received the shares as part of the unbundling do not want them and so sold them on the open market shortly after they began trading on the JSE. This caused a post-listing sell-off which saw the share fall to a low of 1918c on 29^th April 2024.

Once the selling stopped, the share began to rise and it has been rising ever since. Consider the chart:

The chart shows the post-listing sell-off and the subsequent upward trend. A major factor in the timing of the listing was the impending elections on 29^th May 2024 which added a significant degree of uncertainty. As it happens, the election result and the subsequent appointment of the Government of National Unity (GNU) has worked in WBC’s favour noticeably improving investor sentiment towards South Africa.

After the elections, WBC published its maiden interim results for the six months to 31^st March 2024. As expected, these results were very good with revenue increasing by 15,9% and headline earnings per share (HEPS) up 26,1%. Once the results were out, there was a second sell-off which lasted until 16^th July by those investors who had just waited for their publication in the hopes of getting a better price.

It is safe to assume that those shareholders who still hold the share are long-term investors who see the potential of this company and its ability to benefit directly from the post-election South African economy.  

The published financials revealed some interesting facts about the company. Firstly, it has debt of R1176m which is made up of R726,3m in mortgage bond finance for the various motor car show rooms which it owns and R449,7m in working capital used to finance its stock of used cars. During the six months WBC bought and sold over 80 000 used cars – which means that the 10509 parking bays which it has on its dealership floors were actively and continuously utilised. Its stock turnover shows that vehicles do not remain for long in its show rooms.

The balance sheet also shows that the company had R914m in cash, debtors of R300m and stock of R2127m – a total of R3341m to fund current liabilities of R2455m. Given the strong cash flows in the business, this makes the balance sheet very strong.

The company has been growing rapidly over the past three years. In 2021 it was selling 7000 vehicles a month and it is now selling double that number. It intends to increase sales to 23000 a month by 2028 and it has secured prime locations in the Eastern and Western Cape for new show rooms.

In our view this is an excellent blue-chip investment with a well-proven business model that will benefit directly from any improvements in the economy and the anticipated reduction in interest rates expected to begin from September this year.

We added WBC to the Winning Shares List (WBC) on 3^rd May 2024 at 2085c per share. It has already risen to 2640c – a gain of more than 25% in under three months. We expect it to continue appreciating steadily.   

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