Cartrack: Bright lights, big city

It’s one thing to witness the JSE’s struggling laggards quietly quit the bourse; another to watch one of the few successful small caps wade off. But Cartrack — whose shares have rallied a steamy 461% over five years — is now intent on a primary Nasdaq listing, with a secondary inward JSE presence for shareholders who opt to stay invested in the business under a scheme of arrangement announced last week. The FM spoke to CEO Zak Calisto.

A Nasdaq listing will clearly give you global clout, but it comes with a lot of strictures, like quarterly reporting. Critics argue that it drives all sorts of perverse corporate behaviour, including chronic short-termism. Are you prepared for this? Is it worth it?

ZC: When a professional CEO runs a business, his mindset is very much around his bonus, and long term is three years. I run the business irrespective of quarters, half-years, full years, I take a long-term view.

Even when we listed seven years ago, in 2014, we didn’t require much effort to adjust to the JSE rules and regulations; it did require a solid company secretary for us to remain informed of all the requirements, and I think going to Nasdaq is going to be a similar experience. It’s going to make us stronger and allow greater participation from an international investor community. Currently 75% of the minority shareholders are non-SA.

Raising capital presupposes that you sell down your personal stake — and you could have done that on the JSE, surely? Hasn’t Karoo’s huge holding and the lack of free float as a result been a problem?

ZC: If you look at our share price, compared to our international peers and even our SA peers, we’ve been severely undervalued for years and it’s perhaps only in the past 18 months that we’ve started being understood by the shareholder community. Despite the recent run on our share price, we still trade at a substantial discount to our peers. That’s the reason I’ve never sold down — what would I do with the proceeds of the sale? Go and buy other shares that are correctly valued and sell mine that are undervalued? It doesn’t make sense. I’ve had lots of offers from funds wanting to buy my shares at R20, R30, but why would I sell? I believe in what we are doing and I see a great opportunity for continued sustainable growth. I would only sell at fair value as currently I have all my eggs in one basket, but not at such a large discount.

How does this listing help you to grow internationally?

ZC: Singapore is our research & development hub and our launchpad into Asia. The listing will give us exposure to the international shareholder community and allow us access to the international capital markets.

If we went to the market in SA and said we want R2bn to try to raise cash, we’d probably raise that at an unfair share price. This will allow us to raise cash at a fairer valuation.

Cartrack has been able to produce consistent growth where MiX Telematics seems to be stumbling and Netstar is stalling. How?

ZC: We’ve done no acquisitions, so it’s all been organic growth. Our management have been with us for a long time, and I think culturally we have an owner mindset. I never understood this until recently. We’re agile and focused on the key aspects of the future of what we are building.

I have tremendous respect for all our competitors and there are ample opportunities for everyone.

Talk though is that there’s huge staff turnover at Cartrack. Is that the case?

ZC: We are a demanding team; we don’t settle. I’ll ask you a question: when you interview people, how do you know in the interview when someone is good? I always tell people that an interview is a meet and greet; the real interview is if you come in and start working with us — then we quickly work out if this person is aligned with us. If yes, we invest in that person and groom them to the level we need. Our level of integrity, sense of urgency and attention to detail are not suitable for all candidates.

Do you think that’s the difference between owner-managed companies and others?

ZC: You must remember that most professional CEOs are running their own income statement and CV. Sadly, in many cases, the company’s long-term prospects don’t align with the short-and medium-term targets that drive CEO packages. I worry if I’m making the right or wrong decision.

A lot of SA businesses flounder when they set their sights overseas — where do you see opportunity?

ZC: In Asia it’s very fragmented and it’s taken us about five years to understand the market. I like the culture and the people.

In SA we’re expecting double-digit growth for the foreseeable future, especially with all the new tech that we’re going to bring to the market. Despite the international focus, we will remain focused on building our SA business and will be bringing to SA substantial technology benefits.