Grindrod Shipping: Strong performance and shareholder returns (NASDAQ: GRIN)

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Grindrod Expedition (NASDAQ: GRIN) is a dry bulk shipping company that has seen a dramatic turnaround in profits over the past year thanks to the recovery in charter rates. The company used these profits to repay debt, giving it a healthy balance sheet, and improving shareholder returns with a new dividend policy. With the recent retirement of the company’s CEO, Grindrod could be positioning itself for acquisition, which could bode well for shareholders.

Earnings outlook

Grindrod had a strong year in 2021 with record net income from the company’s 31-vessel fleet. The company reported diluted EPS of $6.12, adjusted for discontinued operations. The company also posted strong revenue of $455 million. This was mainly due to a recovery in spot rates for dry bulk carriers, which increased significantly throughout the year.

Dry bulk prices

Grindrod Shipping March Overview

The question now is whether in the future Grindrod will be able to see such high rates needed to make a solid profit like in 2021. At the moment things look good. According to the most recent charter rate data from various sources, rates have gone from $21,911 for Handysize to $24,374 for Supra/Ultramax, as shown in Grindrod’s presentation.

Dry Bulk Charter Rates April 13

Hellenic Shipping News

Furthermore, the order book for dry bulk carriers is at an all-time low, representing only 6.8% of the world dry bulk fleet.

Order book for dry bulk transport

Grindrod Shipping March Overview

This means that unless there is a significant drop in demand, there is no impending supply boom to ruin the rate hike party. And Grindrod is particularly well positioned with its younger than average fleet with a tonnage-weighted age of 6 years between its 15 Handysize vessels and 16 Supra/Ultramax vessels. With 22 of these eco-specific vessels, the company should be able to operate its existing vessels for many years to come, even with pending environmental regulations.

Potential takeover noise

With the recent announcement of the resignation of Grindrod Shipping’s longtime CEO, there have been rumors that the company may be positioning itself for acquisition. Supposedly, the company isn’t looking for a long-term replacement for its current CEO, instead appointing its current CFO to the job. This has sparked speculation that the company may be looking to merge or be acquired at this time. An obvious suitor could be Taylor Maritime, which acquired a 26.6% stake in Grindrod over the past year. However, the two companies have roughly the same market capitalization (Taylor Maritime is worth $6 million more), which makes the terms of the deal a bit tougher, lest Taylor Maritime strike a debt deal. generous.

Such a transaction would likely benefit shareholders since an offer would likely be significantly higher than the current share price. Grindrod’s net asset value was estimated at around $30 per share in February by analyst Poe Fratt. To make any transaction attractive, the acquiring company would be wise to bid above this level, giving shareholders an advantage of over 20%.

Balance sheet

Grindrod’s balance sheet has improved significantly over the past year as the company was replete with cash. He used some of that money from higher rates to pay off his debt. This brought the company’s total debt from $329.7 million at the end of 2020 to $278.9 million at the end of 2021. Conversely, the cash balance of the company went from $41.3 million to $107.1 million. That gives the company net debt of $171 million, which is more than manageable at 1.4 times trailing earnings. The company now has a very healthy debt ratio of 0.87, a ratio below 1 which is nice to see in a shipping company.

It should also be noted that the company’s remaining debt is on a schedule that seems far from ambitious and with current rates I see no reason to be concerned about the solvency of the company.

Dividend/redemption policy

Amid the company’s skyrocketing profits, Grindrod announced a new dividend policy that aims to distribute 30% of its adjusted net profit to shareholders, primarily in the form of dividends. Over the past two quarters, that has meant a dividend of $0.72 each and a total of $11.6 million in redemptions. With earnings projected for 2022 at $5.67 per share, that dividend level is closer to 50% than 30%, suggesting we could see a reduction in payouts per quarter. Nonetheless, at 30% of projected earnings for 2022, we get a dividend of about $1.7 for the year, or a yield of 6.8%. Given that the company only announced its dividend policy in the third quarter of 2021, increased visibility into the company’s performance and payout stability in 2022 should be good news for stocks, as a rolling return current puts the company at just 2.91%, well below what the forward yield will be.


The dry bulk industry is notorious for its ups and downs and the main risk to the business is that rates will drop. As I explained earlier, I don’t think this is very likely given the tight situation on the supply side. That said, amid rising inflation and uncertainty in the economy, we could see demand start to take a bigger hit in the year ahead, which in turn could drive down charter rates as demand for raw materials that must be transported on bulk carriers declines. .

The question of future regulations on environmental emissions is also an issue that could be decisive for the future of the industry. Grindrod has built its ships to high eco-standards, but new guidelines may mean the company has to phase out the fleet or engage in renovations that could prove costly. On the other hand, if its ships stay on the safe side of the new regulations, the company will benefit from the fact that other companies will have to pull their older, less efficient ships from the water.


As previously reported, the company is trading below its net asset value of $30 per share. Grindrod has only been publicly traded since 2018, but comparing the five-year average forward price to earnings ratio of long-time peer Safe Bulkers (SB) of 11.95 to the forward price ratio on Grindrod earnings of 4.37, we see the company is trading cheap relative to earnings. I think if rates hold and the company is able to leverage them successfully over the coming year, we could see a price to earnings ratio closer to 11.95 – maybe 8 times earnings, which would put the stock at $45, for an 80% upside.


Next year should be good for Grindrod Shipping shareholders. Whether the company is acquired or simply continues to operate independently under a new dividend policy, there should be even more potential ahead. Greater visibility of the company’s higher earnings and new dividends should attract new investors to the company. Additionally, further debt reduction will leave the company in an excellent position for the future. Should the company be acquired, it should be at a significant premium to the current share price – good news for investors.

About Selena J. Killeen

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