Tren­cor: Ship ahoy!

Finweek English Edition - - KILLER TRADE - Finweek: Money Mat­ters BY MOXIMA GAMA

Tr en­cor i s a n i nvest­ment hold­ing com­pany that fo­cuses on own­ing, leas­ing, man­ag­ing and re­selling marine cargo con­tain­ers world­wide, as well as re­lated fi­nanc­ing ac­tiv­i­ties.

It has t wo seg­ments: con­tainer fi­nance and con­tainer own­ing, leas­ing, man­age­ment a nd r e s e l l i ng. I t s sub­sidiaries in­clude Tex­tainer, Tren­cor Ser­vices, Tren­cor Con­tain­ers and TAC. It i s a l s o i nvolved i n c or po­rate ad­min­is­tra­tion, as well as i n t he col­lec­tion of long-term re­ceiv­ables.

Af­ter em­bark­ing on a lengthy bull trend from 2011, it dwin­dled from an all-time high at 8 475c/share in 2014 − af­ter warn­ing in­vestors of a drop in in­terim earn­ings − re­sult­ing i n a f a l l i ng- wedge pat­tern. Now that it has breached the up­per slope of t his pat­tern, Tren­cor must stil l conf i rm a pos­i­tive break­out above 7 430c/share.

Tren­cor proves to be a sound and solid long-term in­vest­ment, and is in the for­tu­nate po­si­tion of own­ing a 48.1% ben­e­fi­ciary in­ter­est the Amer­i­can-based com­pany Tex­tainer, which is the largest lessor of ship­ping con­tain­ers in the world.

Tex­tainer boomed dur­ing the peak re­ces­sion in 2009 where t rade was re­duced by 12%, re­sult­ing in ship­ping com­pa­nies stop­ping their or­ders and sub­se­quently Chi­nese con­tainer fac­to­ries shut­ting down. This opened the gap for Tex­tainer to meet a huge de­mand from over 400 of the main ship­ping lines that it had to lease to. The utilisation of its con­tain­ers went up from 88.6% at the end of 2009 to 91.8% in March 2010.

In a re­cent South Africa Freight Trans­port Re­port for the first quar­ter of 2015, Busi­ness Mon­i­tor In­ter­na­tional main­tained a cau­tiously op­ti­mistic s t a nce on South Africa’s f r eight trans­port sec­tor in 2015. Aware of risks to the min­ing sec­tor from a po­ten­tial hard land­ing in China, the re­search firm be­lieves that growth in the min­ing in­dus­try will con­tinue, which will bode well for the rail and port sec­tors.

Fur­ther, African coun­tries a re

on among the fastest-grow­ing economies i n t he world de­spite the lin­ger­ing af­ter­ef­fects of the re­ces­sion, and the ship­ping mar­ket is ex­pected to re­main buoy­ant in Africa. This is driven by the emerg­ing economies of China and In­dia, which should con­tinue to lead the de­mand as they im­port raw ma­te­ri­als out of Africa, as well as the rapid re­con­struc­tion and devel­op­ment projects t a k i ng pl ace across t he con­ti­nent. The com­pany’s neg­a­tive cor­re­la­tion to a weaker rand could fiz­zle, since it pre­dom­i­nantly does a lot of its billing in dol­lars. ev­ery Fri­day

at 1pm.

Though the rel­a­tive strength in­dex (RSI) re­sis­tance trend­line is curb­ing a pos­i­tive break­out above 7 430c/share, the for­ma­tion of ris­ing bot­toms on that chart will sig­nal an in­crease buy­ing mo­men­tum. Tren­cor has breached the up­per slope of its fall­ing-wedge pat­tern, and once the RSI de­fies re­sis­tance, we ex­pect Tren­cor to re­turn to its pre­vi­ous bull trend (above the black dashed line) and as­sume grad­ual up­ward mo­men­tum to­wards the 11 500c/share long-term tar­get (one to three years).

Likely sce­nario:

Fail­ure to re­sume its pre­vi­ous bull trend by en­coun­ter­ing ma­jor re­sis­tance at 7 430c/ share could re­sult in a pull­back to ei­ther the black bold trend­line or the 5 475c/ share sup­port level.

Alt er­na­tive sce­nario:

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