Desert Lion Capital, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. A net return of +7.2% was delivered by the fund for the fourth quarter of 2021, bringing the total net return for 2021 to +9.6%. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Desert Lion Capital, in its Q4 2021 investor letter, mentioned Karooooo Ltd. (NASDAQ: KARO) and discussed its stance on the firm. Karooooo Ltd. is a Singapore-based software company with a $1.0 billion market capitalization. KARO delivered a -8.40% return for the past month and it closed at $32.97 per share on February 19, 2022.
Here is what Desert Lion Capital has to say about Karooooo Ltd. in its Q4 2021 investor letter:
“Karooooo is a SaaS (Software-as-a-Service) company that maximizes the value of data collected from the monitoring and tracking of mobile assets (anything from mega mining trucks to scooters, generators, and even prisoners).
The company’s reported Q3 results for the period ended November 2021 performed in line with our key metrics. Subscriber numbers are up 18% and revenue is growing at 20%. Karooooo has high revenue visibility with recurring subscription revenue accounting for 98% of the total. The GP margin was 68% and EBITDA margin 46%. Subscriber life cycle remained stable at 60 months, giving an LTV/CAS (lifetime value of subscriber divided by cost of acquiring a subscriber) of about 4.5 times.
It is clear that there is a massive total addressable market opportunity here, and Karooooo is one of the frontrunners in this “winner takes most” industry. There is a very long runway for growth and one can understand why the CEO passionately asserts that they are just getting started.
Karooooo management keeps evolving and innovating. According to CEO Zak Calisto, they are now thinking beyond connected vehicles and believe that there is significant untapped network value in the business. For example, its new vertical – an online vehicle trading platform called Carzuka – will disrupt the used vehicle market by marketing, trading, financing, and insuring used vehicles with a complete telematics tracking history. Carzuka is currently gaining traction rapidly in in beta phase and is expected to launch in Q1 2023.
Management is clearly investing ahead of the curve. The combination of economies opening post COVID lockdowns and the benefits of growth initiatives flowing through is expected to result in accelerated EPS growth from 2022 onwards. I am very excited about Karooooo’s prospects.”
Our calculations show that Karooooo Ltd. (NASDAQ: KARO) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. KARO was in 5 hedge fund portfolios at the end of the third quarter of 2021, compared to 4 funds in the previous quarter. Karooooo Ltd. (NASDAQ: KARO) delivered a -0.23% return in the past 3 months.
In November 2021, we published an article that includes KARO in the 11 Best High Dividend Stocks Under $50. You can find more than 100 investor letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
