The ratings on the group primarily reflect the strengths and weaknesses of its three major subsidiaries, SA Taxi, TCRSH and We Buy Cars.
Further rating support is derived from the NOHC’s (non-operating holding company), Transaction Capital Limited, net ungeared and highly liquid balance sheet, the absence of regulatory structural subordination, and the diversification benefits from different business lines of subsidiaries.
GCR views Transaction Capital as a conglomerate that typically seeks to acquire capital light businesses, bolt-on or yield enhancing opportunities. Cross selling of their existing products and services within such new acquisitions are an essential component.
The group had increased its stake in We Buy Cars by 25.0% in September ’21 to 74.2%. The high profitability of We Buy Cars and additional capital injection would further advance We Buy Cars market presence (c.7% vehicles sold) to an even larger proportion of the South Africa market. We Buy Cars has a well-established internet presence, however the planned rollout of new branches across various provinces should assist in turning stock. The used vehicle market has proved itself a defensive sector especially considering the number of new vehicles sold.
The group’s holding of TCRSH and SA Taxi remained unchanged.
GCR calculated the overall risk score of Transaction Capital by weighing each of the respective Rating Factors of the three operating entities by the revenue contributions from each entity. This ratings approach would translate to a degree of ratings volatility given the variability of revenue streams from the respective entities.
CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCRâ€™S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCRâ€™S OPINIONS INCLUDED IN GCRâ€™S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCRâ€™S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCRâ€™S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCRâ€™S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCRâ€™S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.
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