SA vehicle supplies should normalise by June next year - Motus CEO

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Anthony Geard of Investec Corporate & Institutional Banking, regards the stock of Motus is "deeply undervalued".
Anthony Geard of Investec Corporate & Institutional Banking, regards the stock of Motus is "deeply undervalued".
Motus
  • Globally, the automotive industry is challenged by manufacturing, supply chain and operational disruptions resulting in vehicle shortages.
  • Locally, availability is likely to normalise by June next year, in the view of the CEO of JSE-listed automotive group Motus.
  • Motus announced its annual results this week, reporting improved profitability and healthy cash generation, despite the challenging operating environment.
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The availability of vehicles in SA will likely start normalising by June next year, which should satisfy pent-up demand and normalise inventory levels, Osman Arbee, CEO of JSE-listed automotive group Motus, said on Thursday. 

Globally, the automotive industry has faced manufacturing, supply chain and operational disruptions, which resulted in vehicle shortages, as well as production, freight and logistics cost increases above inflation. 

Motus announced its results for the financial year to the end of June 2022, reporting improved profitability and healthy cash generation, despite the challenging operating environment.

Operating profit increased by 31% to R5 029 million; profit before tax increased by 56% to R4 473 million; headline earnings per share grew by 72% to 2 025 cents per share; and a total dividend was declared of 710 cents per share, up 71%.

A total dividend of 710 cents per share was declared.

The increase in operating profits is due to the recovery in the automotive and car rental sectors, coupled with increased margins achieved due to inventory shortages and disciplined cost management, according to Arbee.

Buying down

But consumers are still tightening their belts. "The trend of consumers "buying down" when it comes to vehicles started three years ago - just before the Covid-19 pandemic. Prices were going up and consumers were feeling fragile. The pandemic exacerbated this even further. Consumers are not buying down because they want to," says Arbee.

"We have good entry-level and medium SUVs and are well-priced. That has allowed us to grow our market share and we expect it to continue. Motus remains focused on deepening its competitiveness and relevance across the automotive value chain, driving organic growth through optimisation and innovation, and leveraging existing capabilities and networks."

Zaid Paruk, portfolio manager and analyst at Aeon Investment Management, says Motus can be satisfied with its results. 

"Many of Motus' brands are linked to Asian original equipment manufacturers (OEMs), which do not appear to be as affected by the global chip shortage. However, according to Motus, the outlook for pre-owned vehicle prices has begun to moderate, but volumes remain strong. The standout recovery from car rental was ahead of market forecasts," commented Paruk.

According to Anthony Geard of Investec Corporate & Institutional Banking, the stock of Motus is "deeply undervalued". 

"Company guidance points to EPS above R20/share this year and growth after that. Return on earnings of more than 20% and cash conversion of more than 100% on average during the past five years, are exceptional. It has delivered more earnings growth than any other industrial services company," says Geard.

"The management is superb, and the integrated business model is a real strength. MTH is the top pick across my coverage."

Motus shares closed 0.74% up at R116.86 on Thursday.

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