Rental car industry titan Hertz (NYSE:HTZ), as well as CAR Inc.’s (0699.HK) Chairman Lu, have both sold almost all of their CAR Inc. shares prior to Q1 2016.
After comparing CAR Inc. to its peer and shareholder, Hertz, we believe the company is using a questionable depreciation method to help boost its bottom line.
Skyrocketing related party transactions between CAR Inc. and UCAR, its biggest customer, raise additional red flags about CAR Inc.’s business operations.
Our on-the-ground due diligence, which covered up to 70% of UCAR’s business, indicates UCAR’s daily rides may have dropped by about 30% in the last 6 months
CAR Inc.’s gloomy business outlook and the deterioration of UCAR’s business both lead us to believe that CAR Inc. is a sell.
Car Inc. off cliffCAR Inc. (0699.HK) is a car rental company based in China that we believe is demonstrating several red flags to the market. Our on-the-ground due diligence in China indicates to us that the company’s largest customer – a related party called UCAR who comprised 40% of CAR Inc.’s revenue for the first half of 2016 – is experiencing a significant sequential decline in the second half of 2016.
We intend to point out numerous reasons for concern regarding CAR Inc., including a declining workforce and declining business from its main customer. In addition to this, we’ll point out growing related party transactions and lower profitability, as well as use of a questionable depreciation method, which we believe is not in line with the industry standard and is being gamed in order to boost the company’s operating income and net income.
We are also going to point out that Hertz, a titan in the rental car industry and formerly one of CAR Inc.’s largest shareholders, as well as CAR Inc.’s Chairman Lu both sold nearly all of their respective stakes in CAR Inc. by Q1 2016. We believe this is cause for immediate alarm. Hertz could know the rental car industry better than any company on the planet and could reasonably be the first to recognize a deterioration of business or other negative factors that would call for selling out of an investment in a fellow rental company.