Grindrod – calmer seas ahead?

Finweek English Edition - - KILLER TRADE - BY MOXIMA GAMA

Af­ter plum­met­ing in June 2014 from its all-time high at 2 805c/share to lev­els last tested in 2012 at 1 200c/ share, ship­ping and lo­gis­tics group Grindrod is f in­ally show­ing signs of a po­ten­tial re­cov­ery. The steep down­side was quite un­usual given Grindrod’s pop­u­lar­ity among in­vestors, but the group was neg­a­tively a f fected by eco­nomic con­di­tions, with chal­lenges in­clud­ing low com­mod­ity prices that af­fected vol­umes han­dled by its ship­ping and rail busi­nesses and a de­layed re­cov­ery in the bulk ship­ping mar­ket.

Grindrod, which was es­tab­lished more than a cen­tury ago, en­gages in ship­ping, trad­ing, f inan­cial ser­vices a nd f r e i ght s e r v i c e s busi nes s e s world­wide, with a pres­ence i n 43 coun­tries. Its Freight Ser­vice di­vi­sion of­fers freight lo­gis­tics ser­vices such as ware­hous­ing and stor­age, clear­ing and for­ward­ing, road trans­porta­tion, rail so­lu­tions and sea freight and op­er­ates ter­mi­nals and ports.

Last year Grindrod, whose trucks, t rains and ves­sels haul ev­ery­thing from coal to fuel and ve­hi­cles, raised R2.4bn via the is­sue of new shares to fund the ex­pan­sion of its Mozam­bi­can and do­mes­tic ter­mi­nals. While it man­aged to grow head­line earn­ings in the six months to end June by 2% to R327.9m, HEPS was down 16% to 43.6c com­pared to the cor­re­spond­ing pe­riod in 2014, given the larger num­ber of shares in is­sue. De­spite the slug­gish earn­ings growth, the in­terim div­i­dend was main­tained at 13.6c/share.

The group warned that global dry­bulk seaborne trade is likely to grow sig­nif icantly slower than pre­vi­ously ex­pected, mainly due to the slow­down in emerg­ing economies, par­tic­u­larly China. Dur­ing the three years be­tween 2015 and 2017 dry-bulk trade is likely to grow by an av­er­age of 3.6% a year, it said.

Grindrod warned that com­mod­ity prices at un­prof­itable lev­els for min­ers wil l i mpact vol­umes t hrough it s ter­mi­nals, but that it is well po­si­tioned to take ad­van­tage of an im­prove­ment in the global econ­omy.

In June, Grindrod opened a new R200m t rans­port hub i n Den­ver, Gaut­eng, which in­cludes un­der­cover ware­hous­ing, a con­tainer stack­ing area, min­ing min­eral yards and trans­port fa­cil­i­ties. It plans to de­velop the rail sid­ing at the fa­cilit y by De­cem­ber, which will al­low it to move con­tainer vol­umes from road to rail and re­duce costs.

Other ma­jor projects in­clude the dredg­ing and ex­pan­sion of the Ma­tola ter­mi­nal near Ma­puto in Mozam­bique, ex­pand­ing the Richards Bay ter­mi­nal, a liq­uid-bulk ter­mi­nal stor­age fa­cil­ity at the port of Ngqura in the Eastern Cape and a crude oil ter­mi­nal at Sal­danha.

Grindrod has pulled back from a mega over­bought po­si­tion and could fall back to the 1 290c/share level. Sup­port re­tained there would present a good buy­ing op­por­tu­nity as Grindrod em­barked on the ascending phase of a bot­tom­ing-up pat­tern with up­side po­ten­tial to the 1 710c/share prior high. A pos­i­tive break­out of the bear trend would be con­firmed above 1 935c/share - stay long.

POS­SI­BLE SCE­NARIO:

A re­ver­sal be­low 1 235c/share would mark de­feat and ex­tend the steeper bear trend to the 980c/share lev­els.

AL­TER­NA­TIVE SCE­NARIO:

R12.39 - R25

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