Grindrod Shipping operates a fleet of owned and long-term and short-term chartered-in drybulk vessels predominantly in the handysize and supramax/ultramax segments. The drybulk business, which operates under the brand “Island View Shipping” (“IVS”), includes a Core Fleet of 31 vessels consisting of 15 handysize drybulk carriers and 16 supramax/ultramax drybulk carriers. The Company also owns one medium range product tanker on bareboat charter. The Company is based in Singapore, with offices in London, Durban, Tokyo, Cape Town and Rotterdam. Grindrod Shipping is listed on NASDAQ under the ticker “GRIN” and on the JSE under the ticker “GSH”.
Michael Heim, CFA, Senior Research Analyst, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Grindrod Shipping Holdings Ltd. has entered into an agreement to sell its shares for $26 per share. Under the agreement with Taylor Maritime Investment Limited, Grindrod shareholders will receive $21 per share in cash plus a special dividend of $5 per share. The takeover terms match a proposal by Taylor Maritime announced on August 29, 2022. The offer is conditional upon Taylor receiving enough shares tendered so as to own more than 50% of the voting rights of Grindrod. With almost 40% of the common stock held by insiders, we believe the transaction will be completed as outlined.
The shares of GRIN now trade near the takeover offer prompting us to downgrade the shares. The share of GRIN rose approximately 25% from the pre-offering price of $20.50 per share and are now trading near $25.50 per share. We believe the current stock price appropriately reflects present value of the offering price and the time needed to close the transaction. As such, we are lowering our rating on the shares of GRIN to Market Perform from Outperform.
This Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Any Rail Strike Would Surely Cause Transitory Inflation
There is something I taught myself years ago as a young trader on Wall Street. I appreciate this “skill” less and less as the years go on, but it has served me well. When news breaks, my mind shifts to asking, “for what sectors is this bullish and for what sectors is this bearish?” No attachment except money movement. There will be time for personal involvement with the event after the market closes. The news of a train strike that may begin on Friday is a good example. My investor mind was quick to try and determine what companies would benefit and also which could be hurt. I have no control over whether or not it happens, but I may be able to add to portfolio returns from it. Meanwhile, at home, I’m stocking up on a few of the items often shipped by rail.
Below is some helpful information about this segment of the freight and shipping industry.
Background
Rail workers may go out on strike as early as Friday, September 16.
In the U.S. the Rail network runs almost 140,000 miles. Freight rail is an $80-billion industry operated by seven Class I railroads (railroads with operating revenues of $490 million or more), and 22 regional and 584 local/short line railroads.
More than 167,000 are employed across the U.S. It’s a safer and often more efficient means of shipping as it uses less energy and rides on a more cost-effective and safer infrastructure than trucking.
Heavy freight such as coal, lumber, metals, and liquids going long distances are likely to travel by rail or some combination of truck, rail, water, or pipeline. The rail network accounts for approximately 28% percent of U.S. freight movement by ton-miles (the distance and weight freight travels). So, by weight, 28% of what is shipped within the U.S. may get stalled in the event of a strike. This would significantly add to any supply chain issues currently being experienced.
Unlike roadways, U.S. freight railroads are owned by private organizations that are responsible for their own maintenance and improvements.
What Would be Impacted
In all, 52 percent of rail freight cars carry bulk commodities such as agriculture and energy products, automobiles and components, construction materials, chemicals, equipment, food, metals, minerals, paper, and pulp. The remaining 48 percent onboard is generally being shipped in packaging that allows it to easily be moved onboard a plane, van, or other non-bulk carrier.
Source: Federal Railroad Administration
A rail strike would stop a high percentage of the transportation of food, lumber, coal, oil and other goods across the U.S.
Current Status
Rail stocks like Union Pacific ($UNP) and CSX ($CSX) are underperforming the market this week as rail workers’ unions continue to negotiate for higher pay and benefits. The unionized workers have the legal go-ahead to strike at the end of the week if no agreement is reached. This could impact all major U.S. railroads and cripple the supply chain on many raw materials until the dispute is settled. An immediate but temporary impact would be material shortages that would push prices up, largely at the producer level. These shortages should be resolved when the strike ends as increased price pressures should come back down. But the short-lived inflation will be additive to final goods prices for a period of time.
Eight of 12 labor unions have reached tentative agreements with railroad carriers. However, there are still disagreements over vacation, sick days, and attendance policies.
A “cooling off” period expires Friday, at which time workers can strike.
A freight rail shutdown would be expected to cost the U.S. economy around $2 billion per day, according to the Association of American Railroads. It would especially hit the energy sector hard as rail is the number one mode of transportation used by coal producers, according to the Energy Information Administration (EIA).
Take Away
A rail strike would hit multiple sectors as it could stop the transportation of food, lumber, coal, and other goods across the country. Much of what is shipped by train can’t easily be shipped by the already overburdened trucking industry.
A strike, if any, would put upward pressure on lumber, energy, and food prices. Assuming the strike gets resolved, these transit-related higher price pressures should prove to be transitory. As individuals, whether or not there is a strike is beyond our ability to change. If there is an industry sector or company that stands to improve earnings or a sector that may suffer losses, there should be no investor guilt in positioning investments in a way where the investor may prosper.
STAMFORD, Conn., Sept. 13, 2022 (GLOBE NEWSWIRE) — Eagle Bulk Shipping Inc. (NASDAQ: EGLE) (“Eagle Bulk,” “Eagle” or the “Company”), one of the world’s largest owner-operators within the midsize drybulk vessel segment, today announced that it has expanded its fleet with the purchase of a high-specification 2015-built scrubber-fitted Ultramax bulkcarrier for USD 27.5 million.
The vessel, which was constructed at Imabari Shipbuilding Co., Ltd. in Japan, will be renamed the M/V Tokyo Eagle and deliver to the Company during the fourth quarter of 2022.
As previously disclosed, the Company closed on the sale of the M/V Cardinal (2004-built non-scrubber fitted Supramax) in August 2022. The vessel was sold for USD 15.8 million and delivered just prior to her statutory drydock due date.
Following these transactions, Eagle’s fleet will total 53 ships (91% scrubber-fitted) with an average age of 9.5 years. Since the Company commenced its vessel renewal and growth program, it has executed 51 S&P transactions, acquiring 30 modern vessels and divesting 21 of its oldest and least efficient ships. These sale and purchase transactions have enabled the Company to grow, while vastly improving overall fleet makeup; in terms of maintaining an attractive age profile, increasing cargo capacity per vessel, and reducing emissions on a per deadweight ton basis.
About Eagle Bulk Shipping Inc. Eagle Bulk Shipping Inc. (“Eagle” or the “Company”) is a U.S. based fully integrated, shipowner-operator providing global transportation solutions to a diverse group of customers including miners, producers, traders, and end users. Headquartered in Stamford, Connecticut, with offices in Singapore and Copenhagen, Eagle focuses exclusively on the versatile midsize drybulk vessel segment and owns one of the largest fleets of Supramax/Ultramax vessels in the world. The Company performs all management services in-house (including: strategic, commercial, operational, technical, and administrative) and employs an active management approach to fleet trading with the objective of optimizing revenue performance and maximizing earnings on a risk-managed basis. For further information, please visit our website: www.eagleships.com.
