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Please read our latest update on Grindrod here
Background and overview of Grindrod (GND)
Grindrod, listed on the JSE Securities Exchange, is based in South Africa and is represented by subsidiaries, joint venture and associated companies in 37 countries worldwide, employing more than 7 500 skilled and dedicated people.
Grindrod has 3 major divisions: Freight Services, Shipping and Financial Services. Theyprovide operating and marketing synergies locally and internationally. In pursuing the strategy of becoming a fully integrated freight logistics and shipping service provider, Grindrod continues to invest in assets and opportunities across the four operating divisions with specific focus on dry bulk and bulk liquid commodities, containerised cargo and vehicles.
Grindrod is committed to world class maritime environmental management standards with a solid record of pollution prevention, efficient use of natural resources and generally minimizing the impact of its operations on the environment. The Grindrod group’s vision is to create sustainable returns and long-term value for shareholders.
Grindrod recognises its moral and legal responsibility to protect the health and safety of its employees or any person(s) affected by the operations within the group. Grindrod’s health and safety objectives and targets remain simple,through full compliance with applicable legislation with a target of zero incidents, within a culture of continual improvement.
Grindrod has 3 major divisions: Freight Services, Shipping and Financial Services. Theyprovide operating and marketing synergies locally and internationally. In pursuing the strategy of becoming a fully integrated freight logistics and shipping service provider, Grindrod continues to invest in assets and opportunities across the four operating divisions with specific focus on dry bulk and bulk liquid commodities, containerised cargo and vehicles.
Grindrod is committed to world class maritime environmental management standards with a solid record of pollution prevention, efficient use of natural resources and generally minimizing the impact of its operations on the environment. The Grindrod group’s vision is to create sustainable returns and long-term value for shareholders.
Grindrod recognises its moral and legal responsibility to protect the health and safety of its employees or any person(s) affected by the operations within the group. Grindrod’s health and safety objectives and targets remain simple,through full compliance with applicable legislation with a target of zero incidents, within a culture of continual improvement.
Scroll over or click on the funnel chart to get more details of GND's latest financial results (Note GND made a loss)
Financial review:
GND remained highly cash generative, even during a year in which they operated in an extremely tough environment. Dry bulk shipping rates have been under pressure, especially because of the drop in commodity prices and demand. The lagging demand has lead to an oversupply of commodities, leading to less demand for shipping of such commodities. This in turn lead to GND taking massive impairments on the value of their ships, leading to the large loss as shown by their results.
The graphic below shows the contribution of GND's major divisions to their revenue and contributions to pre tax profits.
Cash generated per share for GND amounted to close to R1.88 per share. For GND as a whole they generated close to R1.4billion in cash during the financial period in question. This shows that GND is extremely cash generative. In addition to this they are sitting on a cash pile of R8.3billion (or around R11 per share). One has to wonder if GND cannot do something productive with that amount of cash on the balance sheet. Like paying off interest bearing debt for example.
While the slump in commodity prices and the lack luster demand has had an impact on GND (if one takes the impairments on the shipping vessels out of the equation) they actually delivered a very solid performance. We like the industry they are in (hard to enter the shipping market. Barriers to entry high so competition wont be a major problem), the fact that they have a very strong balance sheet and are pretty well diversified and extremely cash generative.
While the slump in commodity prices and the lack luster demand has had an impact on GND (if one takes the impairments on the shipping vessels out of the equation) they actually delivered a very solid performance. We like the industry they are in (hard to enter the shipping market. Barriers to entry high so competition wont be a major problem), the fact that they have a very strong balance sheet and are pretty well diversified and extremely cash generative.
Valuation:
Based on GND's latest financial results, its foothold in the industry, the market they operate in, and their strong cash position and cash generation capabilities we value GND at between R14.10 and R14.20. We do feel patient investors will be well rewarded by hanging buying and hanging on to GND. The backing of big investment holding company Remgro (REM) doesn't hurt.
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.