Our opinion on the current state of ZEDA(ZZD)Zeda is a car rental company unbundled and spun out of Barloworld, with a fleet of 250,000 vehicles and 14 dealerships around South Africa. It holds the license for the Avis brand in South Africa. The company is 55 years old and listed on the JSE on 13th December 2022, with Ramasela Ganda as its CEO.
In its results for the six months to 31st March 2024, the company reported revenue up 19%, while headline earnings per share (HEPS) decreased by 15.8%. The company said, "Despite the challenging trading conditions, the EBITDA margin and Operating margin remained strong at 34.0% and 15.0% respectively, underpinned by a healthy and diversified mix of product offerings from both the rental and leasing businesses. The Net debt to EBITDA ratio improved from 1.6x in March 2023 to 1.5x in March 2024."
By November 2023, the share was showing signs of a new upward trend and trading on a P:E of 3.12, which looks like very good value. The company is benefiting from the problems at Transnet, which have caused many mines to transport their goods to port by road. Zeda has a fleet of rental trucks that have been impacted by the truck attacks on the N3 highway.
Given the current trading conditions and Zeda's strong margins, the company appears to be well-positioned despite the challenges. The low P:E ratio suggests that the share is undervalued, making it potentially attractive for investors. However, the risks associated with the transportation sector, including the recent truck attacks, should be carefully considered.
Investors should monitor Zeda's ability to maintain its margins and manage its debt while navigating the ongoing challenges in the transportation sector. If the upward trend continues and the company can capitalize on the issues faced by Transnet, Zeda may present a compelling investment opportunity.
