Transaction Capital | Paying a growth premium
Transaction Capital (TCP) reported 18% HEPS growth despite a challenging economy. SA Taxi and TCRS have generated a five-year CAGR of 21% and 29% respectively. We believe SA Taxi's vertically integrated business model supports high margins. Aggressive book buying (R1.2bn in FY '19) supported TCRS's growth. Despite the defensive nature of the operations, any improvement in SA economic growth would support an acceleration in TCRS's collections revenue. The Group has excess capital of R950m, which we expect to be invested into opportunities within SA and global debt collection. Despite the Group's growth prospects, we believe TCP trades at a premium rating. In our view, the share is fairly valued at current levels.Transaction Capital Limited is a South Africa-based investment holding company. The Company operates as a non-deposit taking financial services company. The Company's segments include SA Taxi, Transaction Capital Risk Services, and Group executive office. The Company operates in two principal areas: SA Taxi and Transaction Capital Risk Services. SA Taxi is a vertically integrated taxi platform utilizing specialist capabilities and data to deploy developmental credit and allied business services to manage small-and medium-sized enterprises (SMEs).It has designed its own insurance products that it sells through its own insurance cell captive entity. Transaction Capital risk services division is a provider of customer management and capital solutions through a platform, enabling its clients to mitigate risk through their customer engagement lifecycle. It provides a range of services to SMEs, which include property and trade financing, as well as invoice discounting.
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