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ZEDA LIMITED

ZZD JSE Listed

Investment Analysis: Zeda Limited (JSE: ZZD)

Date: 9 January 2026 Share Price: ~R14.30 (1,430c) Analyst Role: Senior Equity Analyst, JSE

Step 1: Data Gathering & Source Verification

I have reviewed the most recent financial disclosures and SENS announcements, prioritizing the recently released full-year results for the period ended 30 September 2025.

  • Annual Results: Reviewed the Audited Consolidated Annual Financial Statements for the year ended 30 September 2025 (Released 25 November 2025).
  • Interim Results: Reviewed the Unaudited Interim Results for the six months ended 31 March 2025 (Released 27 May 2025).
  • SENS Activity (L12M): Key announcements include the Annual Dividend Declaration (November 2025), significant dealings in securities by directors (taking up LTIP awards in December 2025), and the successful establishment of a Domestic Medium Term Note Programme (January 2025) to diversify funding.

Data Sources:

  • Annual Results (Nov 2025): https://zeda.co.za/investors/annual-results/
  • SENS (Dividend): https://www.sharenet.co.za/v3/sens_display.php?tdate=20251125073000&seq=11

Step 2: Metric Extraction

| Metric | Value | Notes | | --- | --- | --- | | Market Cap | ~R2.71 Billion | Small-cap stock, still finding its footing post-unbundling from Barloworld. | | Dividend Yield (L12M) | ~12.66% | Massive. Total L12M dividend of 181 cents (Interim May 2025: 55c + Final Nov 2025: 126c). The payout ratio is ~50% of HEPS, signaling management's confidence in cash flow. | | Liquidity Check | Moderate | Average daily volume is generally thin but sufficient for retail investors (~R1.5m - R2m/day). Large institutional blocks trade occasionally. | | P/E Ratio | ~3.96x | Deep Value. Based on FY2025 HEPS of 361 cents. The market is pricing Zeda as if earnings are about to collapse, despite them growing 15.7% in the latest results. | | Net Asset Value (NAV) | N/A (Use RoE) | For a fleet leasing business, Return on Equity (ROE) is more pertinent than NAV. Zeda reported an ROE of 21.9%, significantly above its cost of equity. |

Step 3: Operational & Strategic Analysis

Business Overview Zeda is the leading integrated mobility solutions provider in Southern Africa, operating the Avis and Budget brands.

  • Car Rental: Short-term rental (Tourism/Corporate). High margin but volatile.
  • Leasing: Long-term fleet management (Corporate/Government). Stable, annuity income.
  • Usership Economy: Zeda is aggressively pivoting to "Subscription" models to bridge the gap between rental and ownership.

Performance Trend

  • Earnings Growth: Robust. Despite a tough economic climate, HEPS grew 15.7% to 361 cents (FY2025).
  • Margins: Expanding. Operating margin improved by 100bps to 15%. This was driven by a deliberate strategy to reduce "low margin" replacement business (insurance claims) and focus on higher-margin channels.
  • Fleet Management: A critical success factor has been the "De-fleeting" strategy. Despite used car prices softening (volumes down 14.6%), Zeda managed to maintain margins by using data-driven disposal channels (retail vs. auction).
  • Debt Profile: Net Debt to EBITDA is 1.5x, well within the covenant of 2.5x. The successful bond issuance in 2025 diversified their funding away from pure bank debt.

Sector Context

  • Interest Rates: As a highly geared business (funding a massive vehicle fleet), Zeda is a primary beneficiary of the interest rate cutting cycle that began in late 2025. Lower rates directly boost their bottom line.
  • Tourism: Inbound tourism numbers for the 2025/2026 summer season are projected to be strong, supporting the high-margin Rental division.

Step 4: The Verdict

Bull Case (Why Buy): The "Rate Cut" Rocket. Zeda is arguably the cheapest stock on the JSE relative to its growth and yield. Trading at a P/E of <4x with a dividend yield of ~12.7% is anomalous for a company with 20%+ ROE. As interest rates fall in 2026, Zeda's massive interest bill decreases, and consumer demand for car rentals increases. The market has mispriced the risk.

Bear Case (Why Sell): Residual Value Risk. Zeda's profits are highly sensitive to the price of used cars. If the used car market crashes (due to cheap Chinese imports flooding the new car market), Zeda's "profits on disposal" will vanish, and they may face write-downs on their fleet book value. Additionally, liquidity is low, making it hard to exit a large position.

Fair Value Estimate: R21.00 - R24.00 Implies a re-rating to a modest 6.0x - 6.5x P/E, which is still cheap for a quality industrial counter.

Final Rating: STRONG BUY The risk-reward skew is heavily in favor of the buyer. The dividend alone pays you handsomely to wait for the re-rating.

AI Generated Analysis Last Updated: 2026-01-14