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He called it the “easiest money” he ever made.
He was 88 years old when he said that.
Now regular investors can use this investment strategy to pull in large sums of money.
Where Transnet fails – this company profits
Onelogix (JSE: OLG) is a niche logistics company that’s on the verge of making it big time…
The company started out with a small vehicle transport business. It would transport cars from the Durban harbour to dealerships in Gauteng.
Then in 2015 it invested R130 million in the Umlaas Road facility. A 14hectare logistics hub with space to store 4,500 cars before they are transported across the country. This gave it a foot in the door to becoming the largest vehicle transport company in South Africa.
After a car is imported into SA it goes to this facility. Onelogix VDS (Vehicle Delivery Services) clears, inspects and then delivers the vehicles nationwide.
If Transnet was able to do its job properly – the demand for services from Onelogix would be much lower.
But as we know – Transnet is doing a dismal job…
And that brings me to Onelogix’s latest project – Umlaas Road Phase 2.
In 2018 Onelogix sold the Umlaas Road facility for R240 million – making a 90% return on the initial investment. It immediately signed a contract to continue leasing this facility.
But the company has bigger plans in mind.
You see, it just announced it now plans on building a much bigger logistics facility.
It has purchased 40 hectares of land for R43 million next to its old Umlaas Road facility.
It started construction on the facility in April 2019 – with a planned 11,000 car parking bays and 1,500 truck parking bays.
The facility will also include office, driver accommodation and fuel facilities.
And it won’t be exclusively used for the vehicle delivery business either. Onelogix’ other logistics businesses will also use these facilities.
What’s more – the Umlaas interchange in the area is being upgraded and a railway line is planned to connect the Umlaas site with Transnet’s railways.
Once this new logistics hub is online the money will roll in
Plans were initially to complete the project by mid-to-end 2020. But the lockdown and slowdown in construction has changed the timeline somewhat.
According to management the company can fill 8,000 of the 11,000 bays it plans for the facility from day one! That in itself means a near doubling of current capacity. With the entire Umlaas Road facility able to house more than 20,000 vehicles.
Effectively this investment could double Onelogix’ VDS business in the next two years.
And with VDS being responsible for nearly half of the company’s income this is a big deal.
What’s more – Onelogix has signed a further deal to sell Umlaas Road phase 2 to the same company that bought phase 1. It will then sign a long term lease agreement with the company – and at the end of the 10 year lease – it will receive a further amount of 30% or R120 million (whichever is the largest).
This allows Onelogix to pay off most of its debt – but remain with the benefit of the properties (and some upside potential in the long run) without incurring the risk of further debt or the hassle of having to manage a property portfolio that isn’t core to its business.
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Car sales are picking up again – so this company’s set for a big recovery
Looking at the chart you can see that April showed a massive contraction. May improved, and June took car sales back up to a decent level again. What’s also important here is that car sales continued improving every month since. While September car sales are still well below 2019 car sales levels, they have jumped significantly again and I am confident that by next year this time they could be back to normal again.
This means that Onelogix is about to see a huge recovery – following the earnings hit and nearly 40% drop in share price it has experienced in the past year.
Here’s to unleashing real value
Editor, Red Hot Penny Shares