Trencor to sit tight with its R1.1bn cash pile
Specialist investment group Trencor will sit on its R1.1bn cash pile for the next 12 to 15 months.
The company appears to be playing it safe ahead of a muchanticipated unbundling of its main asset: the New York Stock Exchange-listed container leasing group Textainer.
Trencor’s cash pile — at the end of 2017 — was equivalent to around R6.19 per share, which has increased speculation that Trencor could weigh up paying out a special dividend or embarking on an aggressive share buy-back exercise.
Trencor’s share price is trading at around R32.60, having lost more than 30% of its value in the past six months.
Writing in the latest annual report, CEO Hennie van der Merwe said Trencor’s board reckoned it prudent to preserve cash resources.
He did, however, indicate that there might be an opportunity for Trencor to invest in main Textainer or TAC to assist with funding growth opportunities for these entities.
On Monday, Van der Merwe said the board discussed the possibility of a special dividend. “We decided that it was prudent to retain the cash for cover for any outstanding aspects that might be associated with the effort to unbundle Textainer.”
He said the timeframe for the unbundling of Textainer — to be coupled to an inward secondary listing on the JSE — was between 12 and 15 months.
The bulk of Trencor’s value resides in its 48% stake in Textainer, which was valued at almost R7.3bn as at the end of 2017. The group also owns marine container specialist TAC (valued at R1bn) and other assets worth R273m.
The intrinsic value of the Textainer stake at current prices is between R32 and R33 a share — roughly Trencor’s ruling share price. Market watchers believed considerable value could be unlocked at Trencor — which trades at a more than 25% discount to its intrinsic value — by unbundling the undervalued Textainer stake.
Neil Brown, the co-head of Electus, said it was frustrating that it had taken so long with the Textainer unbundling. “It has taken eight years since this process started with the Mobile [Trencor’s old parent company] unbundling of Trencor shares.”
Brown argued there was no reason for Trencor to exist if Textainer was unbundled and secured an inward secondary listing on the JSE together with all the cash.
“The Trencor head office costs … directors and staff costs could be zero if Textainer was unbundled and all cash was also paid out to shareholders.”
Brown said he would not like to see Trencor spend any of its cash pile unless it was used to buy back Trencor shares.
The unbundling plans for Textainer follow efforts to relieve recent accounting headaches for Trencor that have delayed the publication of audited financial results and put the company under threat of suspension on the JSE.