Questions remain
One of the key moments at last week’s Trencor AGM was when shareholder activist Chris Logan asked whether the company is not “like [underperforming retail giant] Pick n Pay five years before [CEO] Richard Brasher got there?”
Trencor chairman David Nurek assured him this was not the case, but the interaction at the AGM highlighted the marked underperformance of 49%controlled container leasing specialist Textainer against that of its listed rivals.
Textainer has produced losses in six consecutive quarters, its situation worsened by a large exposure to bankrupt shipping line Hanjin (though most of the containers involved in this debacle have been recovered).
Textainer, which is listed on the New York Stock Exchange, actually highlights its relative under-rating compared with that of its peers in a recent investment presentation.
The shares of Textainer trade at a price-to-book value of just 0.8, compared with market leader Triton’s 1.9 and smaller rival CAI’S 1.1.
Referring back to the Pick n Pay analogy, shareholders seemed fairly sure that Trencor offered good recovery value — especially following news that the Textainer stake could be unbundled to shareholders as part of an inward listing exercise on the JSE.
What remains uncertain is when Textainer will find meaningful profit traction. A critical consideration raised in the AGM was the timing and commitment to purchasing new containers. Nurek indicated that the Hanjin issue caused Textainer’s banks to adopt a more restrictive approach to funding requests. This has eased, and the firm recently managed to raise US$900M.
But the contrasting purchasing patterns between Textainer and Triton might worry some investors. In the six months to end-june 2016 Textainer acquired $225m worth of new containers, compared with Triton spending just $64m. In the six months to end-june 2017 Textainer acquired only $25m worth of new containers, compared with Triton’s $665m (more than 25 times more). With the $900m raised in June, hopefully Textainer has been more active in buying new containers in July.
As Nurek remarked: “Textainer is in business forever . . . we buy containers when they are cheap and when they are expensive. We are here to service clients.”
What seems clear is that while the current environment indicates strong upside in Textainer, the company is still likely to lag behind its peers’ profit performance.
When the ducks quack . . .
By my calculations, property group Greenbay — which plays internationally — has raised about R14bn by accelerated bookbuilds since mid-2016.
This is noteworthy because Greenbay carries a market capitalisation of R18.5bn — so, in effect, the fresh capital raised by these exercises is equivalent to about three-quarters of its JSE market value. Incredibly, consecutive Greenbay bookbuilds pitch a target amount, which is then inevitably increased markedly to meet demand from investors. The latest bookbuild, in a Sens announcement released before 8 am on August 8, proposed raising R2bn. Before 11.30 am on the same day the amount was doubled to R4bn. R4.5bn was eventually raised. The Greenbay shareholder register should be interesting to peruse at the end of August.
A small matter
Plans for former Torre Industrial and Stellar Capital Partners prime mover Charles Pettit to join Chris Seabrooke’s investment company Sabvest next month have been put on the back burner.
Officially there is mutual agreement that it is not opportune to proceed with these arrangements now, as legacy investment holdings and corporate finance mandates held by Pettit (and associates) might cause conflicts of interest in the short term. Unofficially, developments may reinforce rumours that Sabvest is interested in some of Stellar’s investments — most likely bits of Torre or security technology specialist Amecor.
With the $900m raised in June, hopefully Textainer has been more active in buying new containers in July