Transaction Capital - Bet on SA Inc

Another nifty (you will get the pun later) South African business released results on Wednesday which looked impressive considering the tough conditions. I am talking about Transaction Capital. These are the guys that own a majority stake in SA Taxi as well as various debt collecting and credit services in South Africa and Australia.

The results included a R1.7bn 25% sale of SA Taxi to Santaco, the governing structure of the taxi industry. This is a good move. They are gaining a very strategic BEE partner. As Charlie Munger so often says, "I think I've been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I've underestimated it. And never a year passes but I get some surprise that pushes my limit a little farther."

Core headline earnings per share were up 17% to 59.4 cents and the dividend increased 29% to 27c a share. On an annualised basis the share trades on 17 times earnings and a yield of 2.7%.

The share price has done very well, proving very resilient to a tough economy.



SA Taxi contributes R211 million of the R363 million core earnings. This business provides finance, insurance, retail, repair and auto parts services to the taxi market. The loan business has over 31 000 vehicles in circulation. According to their results, 69% of SA households use minibus taxis which equates to 15 million commuter trips a day. Love them or hate them, these taxis fulfil a massive role in our economy.

The debt collection business is also doing well. Because of high property prices in Australia, the country has too much debt. South Africans are also addicted to debt so the trends are moving in Transaction's favour. This business grew 18% organically.

Transaction Capital is a very well managed business. If you think the middle class in SA will grow and the urbanisation trend will continue to dominate, then this company will do well. If you like the sound of that, get in touch and we will buy you some.