Ex-Japanese Cars on Zim Roads will need some tyres!

SHORT VIEW by BATANAI MATSIKA

There has been a significant growth in the number of motor vehicles in Zimbabwe over the past years. Numbers from the Central Vehicle Registry (CVR) show that the total number of vehicles and motor cycles registered in Zimbabwe have increased from 828 395 in 2009, 1,2 million in 2014 to over 1,4 million currently.

Of the over 1,4 million vehicle population, second-hand vehicles constitute between 35 percent and 50 percent. However, these numbers do not show an accurate picture of the vehicle fleet given the deficiencies in the vehicle registration database.

The numbers have been boosted by an increase in the importation of secondhand vehicles, mainly from Japan. According to trade data for July 2018, Japanese imports constituted 4,0 percent of total imports.

Other car imports come from South Africa and the UK. In 2016, the cost of second-hand vehicles in terms of foreign currency was USD240,3m according to the Zimbabwe National Statistics Agency (Zimstat).

Zimbabwe’s market for new vehicles has shrunk over the years from the highest levels of over 20 000 units per year in 1997 to less than 3 154 in 2017. Motorists have favoured second-hand vehicle imports due to the affordable prices which on average range between $3 000 to $7 000 in total to import into the country whereas new vehicles of the same make range from $10 000 to $D20 000.

An important observation is that these ex-Japanese cars that are on the Zimbabwean roads will not only require some spare parts but will also need some tyres. At a recently held National Tyres Services Limited (NTS) AGM, management gave a trading update stating that the company is now on a solid footing after it implemented a turnaround strategy over the past 2 years.

NTS (market capitalisation of $2,8m) is engaged in reprocessing and the retailing of tyres. The company is a retailer of new tyres and tubes (imported and locally manufactured). It’s other main activity is re-lugging of agriculture and earth moving tyres and the procurement of truck tyres for the Zimbabwe Transport Industry.

The company’s products include Dunlop, Firestone, Bridgestone, Yokohama, Pirelli, Bandag, Regal and Comforser. Its products offer passenger, sport utility vehicle (SUV)/4×4, light truck, trucks and bus, off the road, agriculture, application specific and light truck tires.

The company offers services, which include wheel alignment, wheel balancing, product support and tubes. NTS has approximately 13 retail outlets situated throughout the country with over two of these being located in Harare.

Management indicated that sales from April – June 2018 increased 21 percent on the back of strong demand. The company expects to register sales growth of 15 percent for the full year. There is also an intention to increase the number of branches from the current 13 given the growing demand.

The business has also invested in ICT projects that are set to improve customer care and control. All in all, the outlook is positive and this is definitely one interesting penny stock to keep your eyes on!

Author – Batanai Matsika
Head of Research – Akribos Research Services
+263 78 358 4745
batanai@akriboscapital.com

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