WeBuyCars - Listing on the JSE in April
WeBuyCars (WBC) is one of the largest used-vehicle dealers in South Africa. From humble beginnings with founders Faan and Dirk van der Walt physically buying and selling cars, the company has grown substantially over the last two decades. Currently backed by 15 vehicle supermarkets, 74 buying pods, over 2 800 employees as well as ~345 professional buyers, WBC now moves in excess of 13 000 vehicles (predominantly nine years or older) through its operations per month. The company's offering includes passenger and commercial vehicles, motorcycles, trailers, caravans, and even boats.
In addition to its strong physical presence across all nine provinces (with major locations such as the Dome), the company boasts an impressive online platform, attracting roughly 58 000 visitors per day. Through this platform, individuals can request quotes on their vehicles, view (and purchase) any inventory for sale, and even partake in live auctions. These services are extended to business customers as well as other used-vehicle dealers.
Some other key offerings include finance, insurance, and vehicle tracking services, underpinned by strategic partnerships with major banks, OUTsurance, and Netstar. WBC's most notable affiliation is with Dekra, which conducts detailed inspections to determine vehicle roadworthiness in accordance with legal requirements. Through these ancillary offerings, the company can provide a more comprehensive service to the used-vehicle market.
Strategy
Improving 'more of the same' - driving the current offering
WBC has gained a reputation as an expert buyer of used vehicles. The company utilises its proprietary technology and valuation tools (incorporating big data, machine learning, and AI) to determine a fair and objective acquisition price. Together with its buying-staff expertise, it can provide reasonable quotes to sellers (in short turnaround times), which are often converted into fulfilled sales. This technology is also used to accurately price its inventory, maintaining optimal margins and efficient churn. A key feature of its data driven technology is that vehicle valuations are not necessarily static but are able to adapt to changing market fundamentals in real time.
The company has no affiliation with any individual OEMs, brands, or customers, and has no direct exposure to the import market (hence no exchange rate exposure) nor the vehicle supply chain - WeBuyCars does not sell any brand-new vehicles, neither does it engage in any maintenance or repairs of its existing fleet.
Adding to its service appeal, WBC is directly integrated with the SA road traffic management corporation (RTMC) enabling a more convenient and seamless administrative process. This ensures better record maintenance and compliance from the company's perspective, and also enables a smoother customer experience in terms of vehicle registration and change of ownership.
Expanding the product offering
With its finance offering, although the company has seen a rapid uptick in sales and improved profitability over the past three years, there is still scope for growth. Despite the high interest-rate environment, credit uptake among strained consumers (particularly for big-ticket purchases such as cars) has been reasonable. Improved borrowing terms (i.e., lower interest rates) in the next 12 to 24 months could lead to further growth in this regard, and the company is well positioned to take advantage of this.
A particular focus has also been placed on customer retention and repeat sales, with new product channels also under consideration.
In terms of its technology usage there is still room for improvement. For example, the software could be used to identify certain secondhand brands or models that are highest in demand and the company could execute its strategy accordingly. Continuous development of its tools is also an important factor, particularly in maintaining an edge over its largest competitors.
Physical Expansion
The company's largest asset is its collection of physical supermarkets in major regions across the country, which have a combined capacity of over 10 000 vehicles. Management plans to expand the company's footprint by adding further capacity of ~2 000 vehicles between FY25/26. Key to this strategy will be identifying suitable locations that can accommodate large foot-traffic, but where the market is still relatively untapped. These plans for growth are consistent with the company's targets of achieving ~23% market share and selling around 22 000 vehicles per month by FY28.
Management
WBC was founded in 2001 by brothers Faan and Dirk van der Walt. Faan remains at the helm of the operation, conducting his duties as chief executive officer (CEO). He has over 24 years' experience in the automobile industry and is a significant minority shareholder of the company. Dirk is an executive director and also a minority shareholder.
Along with its expansion over the years, the company's management structure has grown substantially. The team currently comprises:
The rest of the team includes John Mills (operations director), Bernadette Cohn (group financial manager), Janson Ponting (sales director), Richard Webber (general manager - buying), Sean Sevell (head of admin and risk) and Christiaan Steyn (head of product).
Sector considerations and competitive landscape
Used vehicles
Although new-vehicle sales in South Africa remain under pressure, the parc (consisting of both passenger and light commercial vehicles) continues to grow.
Approximately 150 000 used vehicles are registered monthly, and WBC sells around 10% to 12% of these. Market share gains have been rapid, and this is not only due to consolidation within the sector and smaller players being forced out of business, but also a notable reduction in private sellers. These individuals are instead making use of trusted platforms such as WBC (or similar aggregators) to sell their vehicles safely and conveniently, at decent prices.
Listed competitors
Locally, there are a few major companies operating in the used vehicle market, including Motus (MTH), Combined Motor Holdings (CMH) and Super Group (SPG). WBC, however, does not see these as direct competitors because they each have varying business models - including sales of new vehicles (imports and exports), long- and short-term rentals as well as after-sales maintenance and repair services. Super Group also operates in the logistics and supply-chain industries, further impacting comparability.
This is clear to see once we put some numbers into perspective:
Recently, we've also seen the likes of Weelee and Sell My Car Quick emerge onto the local landscape. Both companies serve as direct competitors to WBC. As management has noted - not all emerging competitors survive (CarTzar and Carzuka being recent examples) and heightened activity in the space is not necessarily a negative. A good example of this is the recent opening of a Weelee showroom adjacent to WBC's Midrand location that resulted in an increase in foot traffic at the WBC vehicle supermarket.
International players
The closest players to WBC internationally are Carmax and WeBuyAnyCar:
Financials
What we like about this company
What we don't like about this company
Valuation
How to gain exposure
To apply to participate in the private placement:
FNB Stockbroking and Portfolio Management (SPM) - Log onto shares.fnb.co.za. Navigate to MyAccount>Corporate Actions> Electives. Please indicate the number of shares/rand amount you would like to invest.
FNB Share Investing (SI) and Shares Zero - Send an email to shareinvesting@fnb.co.za. Please indicate your account number and rand amount you would like to invest.
The application period is very short. Applications will close on Monday 18 March at 17:00, but is subject to book builder discretion. Allocations are also subject to book builder discretion. Minimum application is R10 000.
Appendix - Background to the listing
On 13 March 2023, TCP released an extremely disappointing trading update highlighting a sharp deterioration in SA Taxi's profitability and an imminent restructuring of that business. This, along with other subsequent events, triggered a massive decline in TCP's share price from R28 at the time to a low of R3.99 in September last year.
Management opted to act, looking for ways to unlock value for shareholders while simultaneously focusing on TCP's balance sheet and the restructuring of the SA Taxi business.
On 30 January this year, TCP announced that they would unbundle “crown jewel” WeBuyCars (WBC) to shareholders, with an accompanying listing on the JSE. At the time, TCP owned 74.9% of WBC and the founders held the balance.
Prior to the listing, several steps have been, and will be, undertaken:
Finally, TCP will unbundle WBC shares to its shareholders in the ratio of ~0.30241 shares for every TCP share held.
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