Our opinion on the current state of GNDGrindrod (GND) is an international freight and financial services company operating in twenty-eight countries. In mid-June 2018, Grindrod unbundled and separately listed its loss-making shipping division, Grinship (GSH), which explains the significant drop in share price at that time. Post-unbundling, Grindrod has concentrated on its two core divisions: freight and financial services. The company owns strategic infrastructure such as the North-South railway line from Beitbridge to Victoria Falls and port terminals in Richards Bay, Natal, Walvis Bay, Namibia, and Maputo, positioning it advantageously in the logistics and transportation sector.
The financial services division, constituting about 30% of the business, is seen as a growth area, especially in retail banking focused on small and medium-sized enterprises. However, challenges such as the conflict in northern Mozambique and the flooding in Natal, which temporarily suspended operations at five sites, have impacted the company.
For the first half of the fiscal year ending on 30th June 2023, Grindrod reported a 32% increase in revenue and a 26% rise in headline earnings from core operations. The company's net asset value (NAV) also saw a 10% increase to 1333c per share. This performance is attributed to strong demand for Grindrod's logistics solutions, leveraging its extensive cargo terminals infrastructure and complementary logistics services.
Looking forward, Grindrod anticipates a significant increase in headline earnings per share (HEPS), projecting a rise of between 33% and 39% for the year ending 31st December 2023. The technical analysis suggests a positive outlook for the share; after completing a rising triple-bottom formation, it has embarked on a new upward trend. The recommendation to wait for an upward break through its long-term downward trendline before buying proved prudent, with the share price surging 270% from 340c to 1260c in just over three-and-a-half years since the break on 15th July 2020.
Given the recovery in the global economy and the steady increase in international trade, Grindrod is well-positioned to benefit. Despite its impressive growth, the share is still considered to offer value, indicating potential for further gains.
