Our opinion on the current state of TRE

Trencor (TRE) possesses a primary asset, which is a 47.78% stake in Textainer, a US-listed company specializing in renting shipping containers, particularly twenty-foot units or TEUs. It's worth noting that Trencor conducted a share buyback program, amounting to R100 million, between October 4, 2018, and December 6, 2018. However, investors have expressed dissatisfaction with Textainer's performance relative to its competitors. For instance, Triton achieved a return on equity of 16%, while Textainer only managed 1.7%.

Trencor responded to this situation by unbundling its holding of Textainer, distributing it to its shareholders, which incurred a tax liability of R17 million. Following the unbundling, the company's net asset value (NAV) per share stood at 658 cents. Despite this, the share price is currently trading at 416 cents, suggesting that the remaining assets within Trencor are not being highly valued.

In its financial results for the six months ending on June 30, 2023, Trencor reported headline earnings per share (HEPS) of 64.8 cents, a significant improvement from a loss of 0.3 cents in the previous period. The company attributed this improvement to the weakening of the South African rand against the US dollar, which resulted in an unrealized profit from the translation of US dollar deposits into South African rand, contributing 54.8 cents to both basic and headline earnings per share.

In a trading statement for the year ending on December 31, 2023, Trencor estimated that HEPS would range between 71.4 cents and 71.7 cents, a considerable increase compared to the 1.7 cents reported in the previous year. Once again, the company pointed out that the unrealized profit from the translation of US dollar deposits into South African rand played a significant role, contributing 48 cents to both basic and headline earnings per share.

Despite the performance concerns, Trencor's shares maintain a practical level of liquidity, with an average daily trading value of R624,000, making it a feasible option for investment.