Abu Dhabi listed fleet operator Easy Lease rides on profit growth
Last two years have seen solid revenue and profit number gains
For the week ended April 22, DFM was lower by 0.28 per cent, while ADX declined 0.49 per cent.
The top gainers for the week were Ras Al Khaimah White Cement (24.24 per cent), Commercial Bank International (14.92 per cent), National General Insurance (14.88 per cent), Abu Dhabi National Takaful (14.75 percent), Dubai Refreshment Company (10.14 per cent) and Al Ramz Corporation Investment and Development (7.25 per cent).
EasyLease is a leading name in motorcycle rentals, with a fleet of over 11,000 bikes. It renders turnkey, ready-to-go leasing solutions for fleet needs for anyone who needs it. The core value proposition is its full-service, all-in lease offering, whereby clients pay as they go. Its primary customers are food and restaurant businesses, delivery and logistics companies.
The very nature of its business makes it unique among listed companies. Customers benefit from not having to incur fixed costs on their motorcycle fleets and even on their maintenance and other overheads. For example, a restaurant can focus on its core business of providing better quality food rather than worrying about bike maintenance.
Fully kitted
Moreover, Easy Lease offers complete kits for delivery staff. They include corporate branding for helmets, carrier bags and boxes to safety equipment, and even GPS-tracking capabilities for advanced fleet management. And if there is a breakdown, the Easy Lease workshop gives round-the-clock emergency assistance. If maintenance takes more than three hours, motorcycle replacements are offered on the spot so that the client doesn't face any business interruptions.
It is indeed evident that the company provides invaluable services. Financials of Easy Lease are also a testimony to its value proposition. Revenue has grown sharply from Dh34.2 million in 2018 to Dh87.7 million in 2020. Similarly, profits witnessed a 221 per cent jump from Dh7.8 million to Dh25.1 million.
Gearing economies of scale
The profit margins rose from 22.9 per cent to 28.6 per cent, which suggests benefits of economies of scale are starting to kick in. The company has been able to keep overhead costs under check as it offers only two motorcycle models, from Bajaj and Honda. This product offering gives it better bargaining power with suppliers and reduces complexity as well.
From a shareholder perspective, the most significant advantage for the company is its economies of scale. For Easy Lease, the per-unit fixed cost comes down while the service and personnel cost might be relatively stable. This cost advantage will help it capture more market share.
Many companies will try to outsource this simple - but necessary - service. Easy Lease, which has a Dh701 million market cap, might be the best one for the investor to ride this trend.