Grindrod is plying the east coast

The trading statement - saying EPS and headline EPS are expected to increase by 25%-35% and 15%-25% respectively - has caught the attention of the market.

But in the case of Grindrod, perhaps the share price should be ignored. It's probably the ultimate long-term investment.

"Grindrod is a different share. Most of the assets are not generating money; it's just how shipping markets work," says Peter Armitage, CEO of Anchor Capital He agrees the investment is one for the long term. "Shipping is cyclical, probably the most perfectly complex market in the world. Grindrod is a long-term play, it's not a punter's share."

Where does this leave investors? At least with some time to think as Grindrod contemplates its next move. Events in the current financial year - full-year results to December are due for release on February 27 - have largely been trading-based, including acquisitions and disposals. This is likely to continue but with possible new developments on the land side.

Much centres on trading partner Vitol, the commodities trader similar in size to Glencore with an emphasis on oil trading and shipping. It's a natural partner for Grindrod. The two have established Leopard Tankers, for which four new oil tankers have been commissioned, each displacing 51000t and costing about US38m.

That's a clear indication that Grindrod and Vitol plan to ply the East African coast, with trading based on shared interests in Mozambique (see graphic). Nearly a year ago Grindrod sold 50% of Cockett Marine Oil to Vitol for an undisclosed amount.

Explaining the earlier discrepancy between the May 2012 trading statement, warning interim HEPS would be down 10%-20%, and the actual interim result, which showed HEPS up by 25%, Grindrod CEO Alan Olivier says it was "largely accounting conventions" reflecting disposals, impairments and joint ventures.

Grindrod, virtually ungeared and with a cash injection of R2bn from major shareholder Remgro, has the space to make more infrastructure investments with Vitol. Expect the two to move into Botswana and then further up the east coast of Africa.

Source: Financial Mail