Trencor: Ship ahoy!
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
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).
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: