The head of one of SA’s fastest growing small- to mid-cap companies has lauded its recent listing in the US as trading volumes and its market value have soared.
Earlier in 2021, shareholders in vehicle recovery and fleet management group Cartrack approved a plan to roll the company into its founder’s investment vehicle, Karooooo.
The complex deal was done to open up Karooooo to larger pools of capital on offer in the US market. On listing on the Nasdaq, the group raised $33.8m (R482m).
Karooooo, headquartered in Singapore, is positioning itself as a leading global mobility software-as-a-service (SaaS) platform that provides real-time data analytics to the transport and logistics sectors.
“I think the reception has been good but we need to build our awareness and this takes a bit of time,” Zak Calisto, founder and CEO of the group, said in an interview with Business Day.
“Since we moved there, our trading volumes have improved substantially, but I think it’s going to take us a good 18 months to get where we want to be.”
Since listing on the Nasdaq, the stock’s trading has shot up. Over the last two months, trading volumes have gone as high as R1bn a day. Before the US listing, about R400m worth of Cartrack stock was traded in a year.
Just before the listing, Cartrack — now worth R17bn — had a market capitalisation of R14.6bn.
In addition to higher trading volumes, Karooooo has also improved its valuation metrics. These include the price-to-earnings ratio (P/E), which measures its current share price relative to per share earnings. The ratio is often used to value companies.
Chris Logan, of Opportune Investments, said: “It’s difficult to be precise on this as the market started pricing in a Nasdaq move long before it happened, but two years ago a thinly traded Cartrack was trading on a P/E of 15 vs its current P/E of 36.” That would mean the company’s P/E rating has more than doubled with the move.
Logan noted that Mix Telematics — which is listed on both the New York Stock Exchange and JSE — trades at a far lower P/E of 17.7, reflecting slower growth and lower profitability. “Very good software as a service means companies can sustain very high P/E ratings, an example being Salesforce on a P/E of 50 times.”
Logan said the move to the Nasdaq has also allowed Karoooo to raise money far more cheaply, “allowing it to accelerate its investment in future growth in terms of sales, marketing and research as just demonstrated over the last year”.
“The Nasdaq listing has provided far greater coverage by international analysts, greater ability to attract top staff and potentially far greater ability to do value-accretive mergers and acquisitions.”
Karooooo is not the only SA company to turn to international listings as a way to escape a market where technology firms are generally regarded as being undervalued.
Former Altron subsidiary Bytes, a software, security and cloud services specialist, listed on the London Stock Exchange in December with a secondary inward listing on the JSE after a demerger that created R13bn in value for Altron’s shareholders.
Altron had argued that the true value of the UK business was not fully reflected in its share price. Since the listing, the company’s stock is up almost 28%, its market capitalisation having grown to R20.6bn.
Earlier this week, Karooooo reported that it had had 1.06-million subscribers in SA for the first quarter of 2022, up 23% compared to the first quarter of 2021. The group said based on its estimates, it is the largest and fastest growing enterprise mobility SaaS provider for commercial fleets in SA.
Before Covid-19, Cartrack achieved compound annual growth in its subscriber base of 22% a year for the five years ending February 2020. It grew subscribers 16% in its year to end-February, with Covid-19 restrictions weighing on new car sales in the year.
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