Centurion Motor Exchange Business Plan — Investment Thesis

Why disciplined sourcing and stock turn rather than pricing drive the return, and what must hold for it to work.

Section 2 of 28

Investment Thesis

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Seven arguments support the investment; three conditions must hold for it to succeed

The investment case rests on a structurally resilient demand pool, an under-served price band, controllable unit economics and a funding structure that limits capital at risk until the model is proven. Each argument below is supported by evidence elsewhere in this document.

Table 2.1: Core investment arguments

#	Argument	Evidence	Where
1	A large, growing and resilient demand pool	Used-car units +8% and value +9% in H1 2026 despite a rate hike; AutoTrader dealer-network volumes alone annualise to c. 390,000 vehicles.	S6, S7
2	An under-served price band	Scale traders average c. R148k per vehicle; franchised approved-used concentrates higher. The R150k–R450k band combines deep demand with weak assurance.	S9
3	Controllable unit economics	Gross profit of R36.4k per unit, 26% from F&I; margins are set at purchase, which management controls.	S10
4	Low break-even and fast payback of operating losses	Site 1 is EBITDA-positive from month 6; break-even is c. 46 units a month against 58 planned.	S19
5	Self-liquidating asset base	Up to R51m of vehicle stock is realisable within weeks; 80% is funded by a matched floor-plan.	S19, S20
6	Capital is staged against evidence	Only R18m of the R30m equity is committed at close; Site 2 funding depends on Site 1 milestones.	S20
7	A replicable site format	A standard 4,000–4,500 m² site with a 60–90 unit display and a common operating system can be rolled out to further Gauteng corridors after FY32.	S14

Why this business, why this market, why now

Why this business?

Vehicle retail is a trading business with transparent economics: margin is made at purchase, protected by reconditioning discipline and released by stock turn. These are operational skills, not proprietary technology, and they reward experienced operators with tight processes.

Why this market?

Gauteng holds more than a third of the national vehicle parc and the Centurion–Midrand N1 corridor sits between South Africa’s two largest metros, with a dense, employed, credit-active population and high through-traffic visibility.

Why now?

New-car prices, higher borrowing costs and rising fuel prices are pushing buyers toward value, while cheap new Asian imports are resetting used values in the entry band. Price recalibration favours new entrants that buy stock at today’s values rather than incumbents carrying stock bought at yesterday’s.

Why will this company win?

It does not need to beat WeBuyCars on price or franchised dealers on brand. It needs to be the most trusted option in one corridor and one price band, and to convert that trust into repeat customers, referrals and trade-in stock.

What must be true, and what could cause the thesis to fail

Table 2.2: Critical success conditions and failure triggers

Condition	Base assumption	Failure trigger	Early-warning indicator
Retail volume ramps on schedule	58 units/month at Site 1 in FY29	< 46 units/month sustained for 3 months	Weekly leads, test drives and conversion rate
Trading spread holds	14.0% before reconditioning	< 12.5% for two consecutive quarters	Gross profit per unit by buyer and by source
Stock turns	45 days’ cover	> 20% of stock older than 90 days	Daily aged-stock report
Finance is available to buyers	65% finance penetration	Approval rate < 50% across banks	Submission-to-approval ratio by bank
Site 2 opens only on evidence	Opens March 2029 if milestones met	Opening without meeting milestones	Board milestone test in December 2028

The single most important insight from the model is that this is a volume-and-spread business with thin margins. A 10% volume shortfall or a one-percentage-point loss of trading spread each removes R4.3–4.5m from FY32 EBITDA, more than a quarter of the base case. Financing terms, by contrast, barely move the result. Management attention, reporting and incentives are therefore built around buying discipline, stock turn and conversion (Sections 12, 13 and 24).