Transaction Capital’s share price continued to sell-off yesterday, falling 13.2% to R12.67, with the market capitalisation now down by R11.7 billion since Monday.
On that day the share price opened at R28.13, but the price fell sharply after the group, which controls the WeBuyCars used vehicle operation, the SA Taxi vehicle financing operation and international business outsourcing solutions group Nutum, released a trading statement warning core earnings per share for the six months to March 31 were expected to fall by more than 20%, but no more than 50%, compared to 2022’s first half.
The share price may also have been affected by the group on the same day refuting speculation in the press and among some shareholders about CEO David Hurwitz’s sale of his shares in the company in December to cover debt covenants in a trust. The group said the shares were sold in line with the procedure and Hurwitz had sold no other shares.
The share elicited much commentary on Twitter yesterday, with for instance David Shapiro (@davidshapiro66) tweeting: “The sell-off... is not slowing down. The share is down a further 10% on strong volumes – R100m in first hour. Of course someone has the faith to buy the shares. But the urgency of the selling is deeply concerning. Surely the JSE should ask questions.”
The sell-off of Transaction Capital is not slowing down. The share is down a further 10% on strong volumes - R100m in first hour. Of course someone has the faith to buy the shares. But the urgency of the selling is deeply concerning. Surely the JSE should ask questions.
Johann Biermann (@JohannBiermann1) tweeted: “Long-term holders of Transaction Capital got used to seeing returns of 25% per year. Now they are performing in line with Money Market funds.”
Long term holders of Transaction Capital got used to seeing returns of 25% per year.
— Johann Biermann 🇿🇦 (@JohannBiermann1) March 16, 2023
Now they are performing in line with Money Market funds. pic.twitter.com/fNd9P1v0r2
Smalltalkdaily Research (@smalltalkdaily) tweeted: “Was asked earlier (given my Dec 6th AVOID on Transaction Capital….would I be a buyer on TCP ? My answer: no not yet. Confidence smashed, sentiment shaken & (stuff) going on in background will make it messy for a while. I’d wait.”
Was asked earlier (given my Dec 6th AVOID on $JSETCP Transaction Capital on @BusinessDayTV extended interview)...would I be a buyer on #TCP ?
— Smalltalkdaily Research (@smalltalkdaily) March 16, 2023
My answer : no net yet
Confidence smashed, sentiment shaken & (stuff) going on in background will make it messy for a while
I'd wait pic.twitter.com/2NHR0ARqjT
With regard to the lower earnings forecast, the group said on Monday some of its operations were being badly impacted by macroeconomic headwinds.
Nutun was on track to grow earnings at its historical levels driven by increased acquisition and collection of non-performing loan portfolios, and a broader range of digitally driven customer experience management services.
But WeBuyCars saw margin pressure in the first quarter, and its earnings were expected to decline at half-year, also considering its earnings were extraordinarily high in the first quarter of 2022. The division “continues to gain market share and increase vehicles bought and sold,” the group said.
SA Taxi was being impacted by taxi market activity, unexpectedly, not yet recovering to pre-Covid levels.
“The industry’s profitability remains stressed due to stubbornly elevated fuel prices, vehicle price increases, sharp interest rate hikes, low commuter volumes and the lack of corresponding fare increases. Record levels of load shedding are adversely impacting economic activity, with a further negative knock-on effect on commuter activity,” the group said.
Load shedding also increased traffic density, causing longer commute times, resulting in less trips by taxi operators.
“We are confident the group’s swift response in rebasing this business will give it the operational, financial and strategic flexibility to recover and grow,” Hurwitz said in the trading statement.
Meanwhile. embattled shareholders might draw some confidence by the group announcing yesterday WeBuyCars CEO Adriaan van der Walt had bought shares in the group.
BUSINESS REPORT