Grindrod – calmer seas ahead?
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.
A reversal below 1 235c/share would mark defeat and extend the steeper bear trend to the 980c/share levels.
R12.39 - R25