Share

Wrong gear?

JD Group’s planned acquisition of Unitrans Auto – the car dealership division currently housed in the Steinhoff stable – is being touted as income-stream diversifying and revenue enhancing by group management. However, there’s some concern in the market that JD Group may be biting off more than it can chew by acquiring a business so radically different from its core expertise.

Unitrans Auto is a well-managed business comprising of 82 dealerships selling brands such as Volkswagen SA, Toyota and General Motors. JD Group will pay R3bn for Unitrans Auto – based on an earnings multiple of 11,37 times.

Investec analyst Sarine Barnard says the synergy will come from JD Group’s expertise in providing credit to its current customer base, which will also be extended to vehicle buyers.

Cadiz Securities says this view may be a touch overly optimistic, given the fact that car deal values are substantially higher than the average furniture buy. “We believe this increases the risk of these new transactions to JD. The banks that rejected those applications may have better data on credit behaviour for those elevated levels of debt than JD does.”

Cadiz Holdings [JSE:CDZ] also found a close correlation between furniture/appliance sales growth and vehicle sales growth, based on Statistics SA and National Association of Automobile Manufacturers SA data for a period of just less than two years, indicating these businesses together won’t provide sufficient cyclical variation to JD Group’s income stream.

A further concern is that vehicle dealerships aren’t an easy business to run. Industry members – including Bidvest CEO Brian Joffe – have frequently complained about the exorbitant costs associated with maintaining dealerships at the high levels demanded by vehicle suppliers.
We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.2%
Rand - Pound
23.89
+0.0%
Rand - Euro
20.44
+0.1%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.1%
Platinum
908.75
+1.3%
Palladium
1,014.28
+1.3%
Gold
2,219.42
+1.1%
Silver
24.83
+0.8%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders