OneLogix’s key business is moving vehicles around the subcontinent, taking them from port to showrooms in the DRC, Namibia, Zimbabwe, Zambia, Mozambique, South Africa and Botswana. This business is conducted under the Vehicle Delivery Services umbrella. In addition, Commercial Vehicle Delivery Services (CVDS) was established by OneLogix in 2007 to transport l arge commercial vehicles throughout Southern Africa.
The OneLogix business footprint extends further into the retail and industrial arenas, in the form of PostNet as well as OneLogix Projex in logistics and Atlas Panelbeaters. Recently, the group has acquired United Bulk, which specialises in bulk liquid transport requirements and logistics and, in June 2012, OneLogix purchased QSA, a transport-related specialised accounting software solution.
OneLogix has a history of organic growth supplemented by growth via acquisition. The company has been profitable every year since it listed over a decade ago and it is not just an accounting profit that OneLogix shows, but exceptional cash f low, which in the last three years has manifested in the form of dividends returned to shareholders. It is notable that the average ratio of operating cash f low to operating profit since 2003 has been 1.1 times; the trend in these two metrics can be seen above.
There are other attractive aspects to OneLogix. Turnover has grown 15-fold in nine years, from R70m in 2004, to in excess of R1bn today, EBIT has risen 10 times over the same period and headline earnings are more than six times greater over the 10 years, at 25c per share today. The dividend cover is 2.5 times and we are encouraged by the reasonable dividend f low, notwithstanding the need to fund growth.
The group has a reliable, stable level of profitability. Gross operating profit, which has averaged 10.3% over f ive years, has f luctuated in a narrow band from 8.9% to 12.2%, while net operating profit has moved in the 5% to 7% range, a healthy level. With a return on equity of 23% – an aspirational level for larger companies – investors can take comfort from the fact that the asset base is efficient and profitable .
he group’s debt-to-equity ratio may be elevated at just over 68%, but this is not unusual for an asset heavy business, and OneLogix can certainly accommodate the debt, as evidenced by the 7 times interest cover.
There has been only one interruption to growth in the group’s top line revenue over the past 10 years, and that coincided with the global and the South African recession of 2008/09. The signif icant aspect of OneLogix’s growth is that it is self-funding. Directors control 57.3% of the company, a factor that Cannon Asset Managers appreciates in making investment decisions: it links directors’ fortunes with our own and shows that they “eat their own cooking”.
In addition to the attractive historical valuation, what appeals to us are the earnings drivers. By way of example, last year while the world vehicle import market grew by 2%, the sub-Saharan African vehicle import market grew by 8% – effectively four times global growth.