Our opinion on the current state of MTH

Motus (MTH) was unbundled from Imperial (IPL) and separately listed on the JSE on 22-11-2018. It is a company that owns motor dealerships in South Africa, the UK and Australia. The company has four divisions - import and distribution, retail and rental, motor-related and financial services and aftermarket parts. It imports and sells more than 80 000 vehicles per annum and runs 356 dealerships and 134 rental outlets for Tempest and Europcar. It offers vehicle finance and fleet management in South Africa with 730 000 clients. It retails parts and accessories for older vehicles through 720 franchised outlets. Altogether it has a 20% share of the South African retail vehicle market, selling roughly 100 000 vehicles per annum. It is the importer of Hyundai, Kia, Mitsubishi and Renault. The CEO, Osman Arbee, said that the company plans to pay generous dividends because of its strong cash flows. The company generates 65% of its turnover in South Africa and 93% of its operating profit. On 1st October 2021 the company announced that it had acquired FAI Automotive in the UK for R550m. In its results for the year to 30th June 2023 the company reported revenue up 16% and headline earnings per share (HEPS) up 1%. The company said, "New vehicle sales have been exceeding expectations even with ongoing increases in the total cost of ownership. New vehicles retailed increased by 10,4% for the 12 months to 30 June 2023, to ~541 000 vehicles. Motus achieved ~19,8% retail market share for the 12 month-period. Management’s forecast for vehicle sales for the 12 months to 31 December 2023 is between 520 000 to 540 000 vehicles." In an operational update on 18th January 2024 the company said, "We expect to deliver double-digit revenue growth and stable operating profit for the six months to 31 December 2023, compared to the period ended 31 December 2022." Technically, the share fell from its listing price of R95 to around R34 following COVID-19, at which level it formed an "island". It has broken up out of that island formation and entered a strong new upward trend. It is on a P:E of 5,23 - which makes it reasonably priced in our estimation. We see this as a very well-established blue-chip share that is to some extent dependent on the state of the economy and the level of consumer spending. We think it will turn out to be a good investment, especially as the economy improves and provided the loadshedding problem can be contained.