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Grindrod Shipping: Shifting To Longer-Term Value Play

Nov. 02, 2021 11:45 AM ETGrindrod Shipping Holdings Ltd. (GRIN)9 Comments


  • I still hold GRIN and have suffered losses. But still believe in the stock, just shifting my focus to a longer investment horizon.
  • GRIN falls in line with the Baltic Exchange Dry Index. But the stock has become indecently undervalued with a P/E ratio of 2.26x and an EV/EBITDA of 2.33x.
  • Grindrod Shipping has a fairly young fleet - this is undoubtedly one of the company's key competitive advantages compared to other representatives of this sector.
  • I expect a) a post-report rebound in GRIN's quotes and b) upcoming revisions over the next quarter.
  • Anyway, I continue to hold GRIN, but I no longer consider it a medium-term swing trading idea - it's a longer-term value play.

Tugboat Masters Guide Ships Through Major Australian Port

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Instead of an investment thesis

If you have been reading my articles for a while, then most likely you remember that I was very bullish on certain companies, in particular on Grindrod Shipping Holdings (NASDAQ:

This article was written by

Oakoff Investments profile picture

Oakoff Investments is a personal portfolio manager and a quantitative research analyst with 5 years helping readers find a reasonable balance between growth and value by sharing proprietary Wall Street information.

He leads the investing group Beyond the Wall Investing with features that include: a fundamentals-based portfolio, weekly analysis on insights from institutional investors, regular alerts for short-term trade ideas based on technical signals, ticker feedback by request from readers, and community chat. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of GRIN either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (9)

Nazim Macbeth profile picture
@Oakoff Investments

I'm analyzing GRIN's cash flow based on their latest financial results:


Est. Average Cash Flow From Operations: $ 166,582,000.00 (includes drydocking and vessel capex)
Minus Debt Service: $ (27,000,000.00)
Minus Principal Payments on Lease Liabilities: $ (32,486,000.00)

Est. Annual Free Cash Flow = $ 107,096,000.00

This is a 37% yield of FCF on todays market price. If they continue this performance, they will generate more than today's market cap in free cash flow in three years. The economics look extraordinary, but why the extreme mispricing? Why so much doubt regarding the future prospects of the business?

To GRIN's credit, their management team is aggressively buying back shares at a deep discounts to intrinsic value.

Your thoughts would be greatly appreciated.
@Nazim Macbeth the whole sector is trading as if the world would collapse tomorrow. On top of that, a Singaporean company listed in south Africa, with more complex balance sheet....
Having said so, if things get nasty, grindrod has more costs than competitors
How many shares do you own?
Appreciate your article.
I feel the recent movements in the overall Baltic Dry Index (with the large spike early October mainly due to Capesize rates) can be misleading.
Grindrod only has Handisize and Supramax/Ultramax ships hence the BSI (Baltic Exchange Supramax Index) and BHSI (Baltic Exchange Handisize Index) are more comparable. Whilst both have greatly increased this year (and now decreased) they are much "flatter" than the composite BDI. Currently published rates are still very profitable for GRIN.

With its recent quarterly data GRIN has been publishing its expected TCE rates for the next quarter as well as their acheviement in the prior qtr. This supports apocalyt's view below that much/most of their revenue is committed in advance and that Q4 will also be a huge quarter.

Grindrod should at least go into 2022 with a Net Book Value of $20 per share and meaningful dividends.
The Q3 analyst number is probably in the right ballpark. I get approximately the same. There is no way for Q4 to be 64% lower though. Much of Q4 should have been fixed already before the FFAs and spot rates started going down.

Even if I assume they get the current FFA rates for November and December, the Q4 still comes to approximately $2.35 EPS. I think they are likely to be on par with Q3 or possibly higher depending on how much they had time to fix, since GRIN generally outperforms in a weakening market.

If the current FFAs for 2022 are correct, the earnings for 2022 are not going to be very high though.

Thanks for the article.
@apocalyt if the FFAs are correct (16k, 17k for supramax...), we wont get 2 USD EPS per quarter, but we could still get around 1 USD. the expectations behind the price grindrod trades today are lower than the FFA, which by itself looks quite conservative...
@Jamon87 1 USD per quarter looks much too high at 17k rates to me. Me excel model gives around $0.25 EPS per quarter at that rate. Maybe a bit more after debt levels have been reduced and costs come down. The break even for owned ships after debt repayment is around 11k for owned ships and 14k for long term charter-ins. The drop from around 35 to 17 causes a huge decrease in profits.

I expect 2022 to average better than 17k though unless we get a global recession. The order book is very low and demand predictions look promising.
@apocalyt You are right, 1 USD per quarter is what I get as operational cash flow. Basically EPS + depreciation (i compute leases as debt, so lease expenses are depreciated). Eventually my point is that the current price of grindrod assumes rates no better than FFA in the future, so any upside on the rates is upside for shareholders
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