THREATS TO THE VAL­U­A­TION

Finweek English Edition - - INVESTMENT -

The com­pany, and other road freight busi­nesses, com­pete di­rectly with the likes of Transnet in mov­ing cars be­tween man­u­fac­tur­ing plants and ports. By the com­pany’s cal­cu­la­tion, 30%- 40% of the coun­try’s mo­tor­car in­ven­tory over the last 15 years has been shipped by rail. If this were to in­crease, it would present a ma­te­rial threat to the busi­ness model of OneLogix.

The more new cars that are sold do­mes­ti­cally, the bet­ter busi­ness is for OneLogix. Re­ported mar­ket sales by Naamsa (Na­tional As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers of South Africa), the mo­tor man­u­fac­tur­ing in­dus­try body, saw ve­hi­cle sales (ex­clud­ing busses) ris­ing by ap­prox­i­mately 3% in 2013, but re­ported ve­hi­cles sales for Jan­uary 2014 were some 7% lower than the same pe­riod last year. This has led some man­u­fac­tur­ers to fore­cast a de­cline in ve­hi­cles sales for 2014, which will act as a head­wind for the com­pany. Earn­ings growth will have to rely on the com­pany win­ning mar­ket share (or ac­quir­ing it), as cost sav­ings in the cur­rent en­vi­ron­ment look highly un­likely.

What will sup­port earn­ings is the fact that the com­pany bought back 10% of its is­sued share cap­i­tal from its BEE part­ners (af­ter the close of the re­port­ing pe­riod). The shares have sub­se­quently been can­celled, which means fewer shares for the fu­ture cal­cu­la­tion of HEPS go­ing for­ward, but the com­pany will lose points on its BEE rat­ing. This can’t per­sist for long.

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