Analysts bullish about transport shares

Imperial stock has surged more than 100% to about R83 from R40.10, the low point it hit in March. Grindrod has risen over 80% to about R18 from R9.80 in December last year.

Cavan Osborne, an analyst at Old Mutual Investment Group, said this week that though a lot of good news was priced into the these shares, “there might still be value left on the table”.

Investors' bullishness seems to indicate that the fundamentals are turning in favour of transport and logistics firms because of improving economic prospects, stabilising car sales and recovering volumes.

Other transport companies' share prices have spiked as well. Value Group is up 30% at about R3.50, while Cargo Carriers has gained 27% to about R8.15. Super Group, which has seen its share price plummet over 80% to about 60c, is an exception to this bullish trend.

The surge in transport shares is in line with gains on the broader equity market, which bottomed out in March. John Thompson, an analyst at Investec Asset Management, said share prices across the transport sector were expected to remain volatile but would trend higher as investors continued to discount normalised profitability.

Thompson said the key question then was which company would be the first to achieve this cyclical milestone, adding that his bets were on Imperial.

He said Imperial's share price had turned up aggressively because investors had bought into the group's restructuring story. They were anticipating cash flows and profits over the next few reporting periods to push higher.

Imperial has largely finished its rationalisation. In September last year, Imperial sold Tourvest and offloaded its aviation division for R852m. Despite the pending sale of Imperial Bank, Imperial has unbundled the leasing and capital equipment group Eqstra.

Source: Business Day

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