Grindrod: now that’s a terminal growth rate

Grindrod is up nearly 80% this year, finally showing some love to the patient value investors who have been waiting for it to behave in the way that the financial models suggested it would. That entire return has come in the past six months, making it one of the best places you could’ve invested your money this year.

The group has released a pre-close presentation covering the first five months of 2022. If you’ve ever prepared a discounted cash flow valuation, you’ll know what a terminal growth rate is. Grindrod offers a different kind of terminal and is growing at pace.

Ironically, the general decay of local infrastructure is doing wonders for Grindrod. The port volumes at Maputo are flying and the port is now able to receive and load bigger vessels than before.

Overall, Grindrod’s port volumes grew by 26% year-on-year. The drybulk terminals grew volumes by 47%, a particularly strong result considering the 20-day suspension of the vessel loading activity at Matola (in Maputo) in April after damage to the berth infrastructure. The Maputo Car Terminal grew volumes by 51% against the prior period.

A bet on Grindrod at the moment is essentially a bet against Transnet. When you put it like that, these numbers make more sense don’t you think?

In the logistics side of the business, the shipping and container depot recovered strongly from the severe floods. I’ll never forget reading the announcement about how it was a priority to retrieve containers that had been swept away. Those were truly shocking scenes.

Grindrod managed to resume operations just two weeks after the infrastructure rehabilitation had commenced. Interim insurance proceeds have offset the related asset impairments, so Grindrod came through a terrible time with great strength.

In the rail business, Grindrod sent another three locomotives to the Tonkolili iron ore mine in Sierra Leone, taking the total fleet there to 11 locomotives.

As a final note on the logistics segment, the Northern Mozambique graphite operations and the clearing and forwarding business delivered results that Grindrod seems to be happy with.

Grindrod Bank is in the process of being sold to African Bank, in a deal that was announced just last month. African Bank looks to be acquiring a solid business, with stable advances and deposits up by 7% during the period. There’s large surplus liquidity, which would be appealing to the envisaged new owner.

There are more businesses being sold, like the Marine Fuels operation that Grindrod is working with management and the co-shareholder to try and exit. In the private equity book, the medical investment was sold for R150 million which helped with the recent value unlock.

The major remaining asset is the property portfolio in KwaZulu-Natal, which has sadly been through a terrible time that can’t have done wonders for the value. People tend to have short memories though, so Grindrod will hopefully find a way to extract value from them.

If nothing else, Grindrod is proof that good things can come to those who wait. You just need a strong stomach to survive growth investors laughing and calling you a boomer. It’s clear who had the last laugh this year!