GREAT BUY, BUT HOLD­ING OFF

Finweek English Edition - - SIMON SAYS -

Grindrod con­tin­ues to drift lower, trad­ing at 12-month lows and well be­low its stated net as­set value (NAV) a share of some R22.27. About a quar­ter of that NAV are “ships, prop­erty, ter­mi­nals, ve­hi­cles and equip­ment”, mean­ing that the stock is trad­ing at around NAV ex­clud­ing those as­sets, so you get them for free when buy­ing Grindrod right now. Yet an­other quar­ter of the NAV is pretty much cash. So on the sur­face the stock looks like a buy, but I am not and here’s why: Grindrod is pretty much a com­mod­ity play and if one is bear­ish on com­mod­ity prices (as I am), then there re­ally is no com­pelling rea­son to buy the stock. Sure, it is cheap on al­most ev­ery met­ric, but the ques­tion is, when will the stock start to rerate higher? We may well see a bounce as we did last year, but it faded fairly quickly and a longer-term re­cov­ery is still some way off as we wait for the up­ward move in the com­mod­ity cy­cle.

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