I just want to add one comment about Karooooo/Cartrack the OEMs as a long term threat.
I think Karooooo/Cartrack should primarily be viewed as a fleet operations and data platform. The value lies in collecting, normalizing and presenting data from many different sources in one unified interface for the customer.
In practice, many fleets are mixed fleets: different vehicle brands, old and new vehicles, leased and owned vehicles, trailers, equipment, and external data may come from cargo and logistics flows. In that context, a brand-agnostic platform becomes valuable. I guess customers do not want to manage their fleet through several separate OEM portals, or change systems just because new vehicles come from a different manufacturer.
Over time, a larger share of vehicle data is likely to come directly from OEMs rather than from Cartrack’s own installed hardware. This is both a risk and an opportunity. The risk is that basic GPS, vehicle status and diagnostics become more standardized and cheaper (and that the OEMs will get better and better). The opportunity is that the total amount of available data increases, making consolidation, analytics, workflows, AI cameras, safety, insurance, maintenance and integrations even more important.
Refreshing to find a SaaS company that doesn't have overwhelming SBC. I was looking at $CCC the other day -- great business but close to 20% of sales(!) SBC. I was looking at WiseTech as well and that's over 6% of sales.
I do worry about their ability to translate what they've done in South Africa to Southeast Asia.
Vehicle theft is extremely commonplace in South Africa, so many insurance companies require you install a vehicle tracker. I'm not sure how common vehicle theft is in Southeast Asia, and thus I don't know if there is an insurance tailwind.
Furthermore, Cartrack essentially employs a private army and air force for stolen vehicle recovery in South Africa. They are going to need to build another paramilitary force in SE Asia to have the same value proposition. I'm not sure that will be allowed.
My understanding is they have a proprietary low frequency high wavelength RF network that they've built inside of South Africa, it allows them to jam the device deep into the vehicle and that makes it more hijack/tamper resistant than other telematics company's devices. They'd have to build this in SE Asia as well.
I'm long the stock too, but it's not super clear they can duplicate their South African success in other geographies.
Thank you, that was a very good interview, and one I had missed!
On replicating their South African success, I should have been a bit clearer. As I understand it, they focus on commercial customers in ASEAN, and that is also the main focus outside South Africa. The consumer business is mainly in South Africa. In the video, Unlock the Stock, Zak says something like, “Outside South Africa, we only focus on commercial business.”
The question in the video also goes into car theft being very common in South Africa and Latin America, being the markets that is most similar in that sense, not Asia, which is a different type of market.
What I mean by replicating their success is more about becoming the market leader, but for commercial customers. The “consumer business” infrastructure for theft is then not that relevant for commercial success in Asia, if I have understood things correctly. It is much more about improving business efficiency, for companies.
Really interesting read so thank you for sharing! Basic Qs but from a high level what is driving the growth today in demand for fleet management systems in South Africa and Asia and from a users perspective what is actually so differentiated about Karooooo today?
I think the core driver is the need - almost urgency - to digitalize mobile operations. Karooooo helps customers save time and fuel, which ultimately means saving money, while also improving efficiency, visibility, safety and control etc.
That said, when looking at the large multinational competitors, the product offerings are often quite similar, at least over time since they are constantly evolving. Where I think Karooooo may differ is more internally: it owns the customer, is vertically integrated and has large and growing scale advantages, and goes to different countries than most others.
On Jobstreet there are a few bad reviews, but they are all quiet old, so maybe it has improved since then.
I didn't even get that far on Ituran at my first glance. Just had a quick look. Definitely a few yellow/red flags there. I'll be crossing that off my checkout list so. Thank you for the tip.
No problem! Apart from that, Ituran does look interesting, although I really can’t own it. Maybe I should add that I’m probably somewhat tilted toward the negative side - I tend to be quite critical even of companies I own. But I think that’s part of investing: you have to be willing to own stocks despite the risks, while remaining very aware of what could go wrong. Sometimes the risks are easier to talk about, and more important to discuss, because the positives are often more obvious.
I think that's a healthy instinct to have. I have yet to find a company that doesn't have at least some small yellow flags or idiosyncrasies. Better to be aware of the full picture warts and all, than idilise a company or a CEO.
Very interesting. I had looked briefly at Ituran before and still have it on my list to come back to at some point. For me the culture part in Karoooo is a deal-breaker, but looks like a solid buisness otherwise.
Thanks. I understand that view. Do you have any other input or sources on the culture side? I’m thinking hard about that point too. I don’t like it, but I don’t personally see it as a dealbreaker - although that is obviously subjective.
On Ituran, I’d be interested to hear your view on management compensation/related party transactions. That is the dealbreaker for me there.
i held ituran during the cartrack (name) days. then both converged to the same metrics, so i sold at small profit and added +50% to cartrack. there was no premium for founder-led efforts or anything else. both were risky, as run from emerging mkts.
i had no idea that growth would sustain, nor do i now, as verdad shows likely coinflip odds based on past.
regarding abrasive founders, musk proves they can add huge value. as long as zack is clearly not an unstable public a55h0le for reasons unrelated to biz ( like musk}, he deserves some benefit of doubt.
I think Zak is strong overall and that he has genuinely created value. It is also worth remembering that he built this from scratch, which is not a small thing. If anything, he strikes me as an intelligent fanatic - someone with strong views and a clear way of operating things, in a positive sense. I beleive Karooooo is a quite unique creation.
At the same time, he may not be universally liked, which is why I tried to dig deeper into the possible negatives.
One simple explanation for the higher number of (negative) reviews could be the company’s vertical integration. That means more employees, more people leaving over time, and therefore more reviews overall. Perhaps I was a bit harsh in my post, focusing on negatives, but I prefer to invest with my eyes as open as possible. I do give him the benefit of doubt.
the interview made me feel good as a minority shareholder, but less so as a prospective hire. zack could attract talented ambitious types, but they would certainly leave once lessons absorbed.
there seems a disconnect between huge roic returns by customers, but karoooo reluctance for inflation+ price increases.
I guess the non-existent price increases could be a combination of an active choice - they see that the markets are currently in land-grab mode - along with competitive behavior and general market dynamics. Price increases maybe aren’t as common or accepted here as they are in the US. But given the customers’ ROI, there should definitely be room for some adjustments.
I just want to add one comment about Karooooo/Cartrack the OEMs as a long term threat.
I think Karooooo/Cartrack should primarily be viewed as a fleet operations and data platform. The value lies in collecting, normalizing and presenting data from many different sources in one unified interface for the customer.
In practice, many fleets are mixed fleets: different vehicle brands, old and new vehicles, leased and owned vehicles, trailers, equipment, and external data may come from cargo and logistics flows. In that context, a brand-agnostic platform becomes valuable. I guess customers do not want to manage their fleet through several separate OEM portals, or change systems just because new vehicles come from a different manufacturer.
Over time, a larger share of vehicle data is likely to come directly from OEMs rather than from Cartrack’s own installed hardware. This is both a risk and an opportunity. The risk is that basic GPS, vehicle status and diagnostics become more standardized and cheaper (and that the OEMs will get better and better). The opportunity is that the total amount of available data increases, making consolidation, analytics, workflows, AI cameras, safety, insurance, maintenance and integrations even more important.
Also, this is a very good recent interview: https://www.youtube.com/watch?v=OojoR2Id4Y0
Refreshing to find a SaaS company that doesn't have overwhelming SBC. I was looking at $CCC the other day -- great business but close to 20% of sales(!) SBC. I was looking at WiseTech as well and that's over 6% of sales.
I agree. I think Karooooo is quite unique on that point and that it is a sign of good corporate governance (at least on that aspect).
Hi Gustav,
Thanks for the write up.
You might enjoy this interview Carmen did on CNN Indonesia.
https://www.youtube.com/watch?v=PqnNBMhjg5A
I do worry about their ability to translate what they've done in South Africa to Southeast Asia.
Vehicle theft is extremely commonplace in South Africa, so many insurance companies require you install a vehicle tracker. I'm not sure how common vehicle theft is in Southeast Asia, and thus I don't know if there is an insurance tailwind.
Furthermore, Cartrack essentially employs a private army and air force for stolen vehicle recovery in South Africa. They are going to need to build another paramilitary force in SE Asia to have the same value proposition. I'm not sure that will be allowed.
My understanding is they have a proprietary low frequency high wavelength RF network that they've built inside of South Africa, it allows them to jam the device deep into the vehicle and that makes it more hijack/tamper resistant than other telematics company's devices. They'd have to build this in SE Asia as well.
I'm long the stock too, but it's not super clear they can duplicate their South African success in other geographies.
Thank you, that was a very good interview, and one I had missed!
On replicating their South African success, I should have been a bit clearer. As I understand it, they focus on commercial customers in ASEAN, and that is also the main focus outside South Africa. The consumer business is mainly in South Africa. In the video, Unlock the Stock, Zak says something like, “Outside South Africa, we only focus on commercial business.”
The question in the video also goes into car theft being very common in South Africa and Latin America, being the markets that is most similar in that sense, not Asia, which is a different type of market.
What I mean by replicating their success is more about becoming the market leader, but for commercial customers. The “consumer business” infrastructure for theft is then not that relevant for commercial success in Asia, if I have understood things correctly. It is much more about improving business efficiency, for companies.
Really interesting read so thank you for sharing! Basic Qs but from a high level what is driving the growth today in demand for fleet management systems in South Africa and Asia and from a users perspective what is actually so differentiated about Karooooo today?
I think the core driver is the need - almost urgency - to digitalize mobile operations. Karooooo helps customers save time and fuel, which ultimately means saving money, while also improving efficiency, visibility, safety and control etc.
That said, when looking at the large multinational competitors, the product offerings are often quite similar, at least over time since they are constantly evolving. Where I think Karooooo may differ is more internally: it owns the customer, is vertically integrated and has large and growing scale advantages, and goes to different countries than most others.
On Jobstreet there are a few bad reviews, but they are all quiet old, so maybe it has improved since then.
I didn't even get that far on Ituran at my first glance. Just had a quick look. Definitely a few yellow/red flags there. I'll be crossing that off my checkout list so. Thank you for the tip.
No problem! Apart from that, Ituran does look interesting, although I really can’t own it. Maybe I should add that I’m probably somewhat tilted toward the negative side - I tend to be quite critical even of companies I own. But I think that’s part of investing: you have to be willing to own stocks despite the risks, while remaining very aware of what could go wrong. Sometimes the risks are easier to talk about, and more important to discuss, because the positives are often more obvious.
I think that's a healthy instinct to have. I have yet to find a company that doesn't have at least some small yellow flags or idiosyncrasies. Better to be aware of the full picture warts and all, than idilise a company or a CEO.
Very interesting. I had looked briefly at Ituran before and still have it on my list to come back to at some point. For me the culture part in Karoooo is a deal-breaker, but looks like a solid buisness otherwise.
Thanks. I understand that view. Do you have any other input or sources on the culture side? I’m thinking hard about that point too. I don’t like it, but I don’t personally see it as a dealbreaker - although that is obviously subjective.
On Ituran, I’d be interested to hear your view on management compensation/related party transactions. That is the dealbreaker for me there.
nice post.
i held ituran during the cartrack (name) days. then both converged to the same metrics, so i sold at small profit and added +50% to cartrack. there was no premium for founder-led efforts or anything else. both were risky, as run from emerging mkts.
i had no idea that growth would sustain, nor do i now, as verdad shows likely coinflip odds based on past.
regarding abrasive founders, musk proves they can add huge value. as long as zack is clearly not an unstable public a55h0le for reasons unrelated to biz ( like musk}, he deserves some benefit of doubt.
I think Zak is strong overall and that he has genuinely created value. It is also worth remembering that he built this from scratch, which is not a small thing. If anything, he strikes me as an intelligent fanatic - someone with strong views and a clear way of operating things, in a positive sense. I beleive Karooooo is a quite unique creation.
At the same time, he may not be universally liked, which is why I tried to dig deeper into the possible negatives.
One simple explanation for the higher number of (negative) reviews could be the company’s vertical integration. That means more employees, more people leaving over time, and therefore more reviews overall. Perhaps I was a bit harsh in my post, focusing on negatives, but I prefer to invest with my eyes as open as possible. I do give him the benefit of doubt.
the interview made me feel good as a minority shareholder, but less so as a prospective hire. zack could attract talented ambitious types, but they would certainly leave once lessons absorbed.
there seems a disconnect between huge roic returns by customers, but karoooo reluctance for inflation+ price increases.
I guess the non-existent price increases could be a combination of an active choice - they see that the markets are currently in land-grab mode - along with competitive behavior and general market dynamics. Price increases maybe aren’t as common or accepted here as they are in the US. But given the customers’ ROI, there should definitely be room for some adjustments.