Concern as share price stumbles

Looking past improved operational performance, there remains a worry around increased competition

Shares in seaborne logistics hub Trencor took a serious beating last week. At one point the shares plunged more than 10% to reach an intraday low of R30.

They settled at R33, 15% down on the R39 reached on May 8 and well off the 12-month high of R52 registered in December.

As its mainstay investment Trencor holds a 48% stake in container-leasing firm Textainer, which is listed on the New York Stock Exchange.

The share-price plunge ironically coincided with Trencor releasing a NAV calculation for the end of December. That calculation pencilled in a value of R7.3bn for the Textainer stake, equivalent to R41.35/share. But there is also a R1bn value accorded to specialist container group

TAC (worth R5.67/share), cash of R1.01bn (R6.19/share) and other assets worth R1.95m.

Trencor’s end-december NAV was about R54/share, considerably higher than the company’s average share price over the past 16 months.

What really appears to have sent shudders through the shareholder body was the release of Textainer’s first-quarter results for the 2018 financial year, despite the executive commentary on the first-quarter performance reflecting a bright and breezy tone.

Lease rental income increased 3% to US$120M and net income came in 9% higher at $18.7m. Utilisation averages improved slightly to 97.8%, and new containers worth $428m had been either ordered or received.

We are heading into the traditional peak season with great momentum and are well positioned to accommodate the growth and needs of our customers Philip Brewer

In his commentary, Textainer CEO Philip Brewer said Textainer’s performance continued to benefit from steady investment in new containers and favourable market conditions.

He added: “Though the first quarter is traditionally our industry’s weakest quarter, fundamentals remained strong. New container prices and lease yields are stable at attractive levels.”

Brewer noted that Textainer has been taking advantage of attractive market conditions by continuing its planned investment in new containers.

Of the $428m-worth of new containers, most are already on lease or committed to be picked up by the end of June.

More encouraging was Brewer’s disclosure that the average rental rate for these new containers is significantly above the average rental rate of Textainer’s existing fleet.

“We are heading into the traditional peak