FINANCIAL services company Transaction Capital is researching opportunities to lend to taxi cab operators as part of its organic growth strategy.
The company says it has excess capital of R800m for acquisitions, but will build the business organically and will not buy assets for the sake of growing its portfolio.
"The one thing that we are looking at is sedan taxis.... We will also look at some new geographies. We will start considering it now," said CEO David Hurwitz after the release of the group’s results for the six months to March. However, he said expansion to other countries was a long-term strategy.
Transaction Capital’s operations are based in SA. Through SA Taxi, the company offers credit to the taxi industry and this forms part of the asset-backed lending business. The asset-lending business also has a refurbishing unit for repossessed minibuses.
The group’s other segment is risk services, including Rand Trust, which provides working capital and commercial debtor management to small and medium enterprises; MBD, which undertakes debt collection, and data and analytical services; and Principa, which focuses on the consumer credit lifecycle. The risk business also buys loan books from other credit providers and collects the debt.
On Tuesday Transaction Capital adjusted its future earnings growth upwards to the 20% band from the mid-teens level, which it previously offered as a guide.
The company grew headline earnings per share by 22% to 31.1c in the six months under review.
Mr Hurwitz said the new growth guide was based on organic growth in the existing business.
One of the organic initiatives that Transaction Capital has rolled out is a bakkie finance offering aimed at funding small and medium enterprises.
This has evolved from a pilot to a full-service offering in the group’s asset-backed lending division.
Following from this, Transaction Capital has now launched another bakkie finance pilot aimed at funding ordinary consumers who want to use the vehicles for their household needs. It is allocating R60m for this.
Commenting on the excess capital that the company has and acquisitions it had considered, Mr Hurwitz said: "We repaid some expensive debt with R150m and then we bought books (loan books) for R109m.
"It leaves us with R800m for acquisitive activities."
Transaction Capital’s asset-backed lending division reported that headline earnings grew 31% to R97m, with the credit loss ratio being reduced to 5.1% from 5.6% thanks to its refurbishing capability and its decision to finance only high-end minibuses.
The risk services business posted a 20% rise in headline earnings to R61m.
"These are a very good quality of numbers. All the (matrices) are moving in the right way and the taxi business is derisking. Management is incrementally putting capital where it is logical to put it," Keith McLachlan, a fund manager at AlphaWealth, said on Tuesday.
Transaction Capital shares ended the session 0.77% higher at R9.12 on Tuesday.