Tuesday, September 16, 2008 0 comments ++[ CLICK TO COMMENT ]++

Added to Watch List: Globaltrans (LSE: GLTR)

One of the my flaws as an investor is that I get interested in challenging stuff. Wish I simply invested to make money. Oh well. Anyway, here is a risky idea to consider: Russian rail companies. My view is that railways have good potential in developing countries since roads/trucking or airlines are not well developed in those countries. Here is an article talking about the potential for Russian rails. I think the private rails have a chance taking market share away from the state monopoly (assuming they don't start a battle with the politicians.)

I came across Globaltrans, which is the largest privately owned rail operator. It is listed on the London Stock Exchange under the symbol GLTR. You can access the English investor relations site and check out the presentation for key facts.

The risk with Russia is political risk. Who knows if this company is going to be attacked by the government but the pricing is starting to account for the risk. Very rough numbers seem to indicate that P/Es based on 2006 earnings would be around 20 and 13 based on 2007 earnings. Globaltrans is heavily dependent on commodity shipments and its business may deteriorate if commodities go into a long correction. So seemingly low P/Es may be reflecting cyclically peak valuations. However, there should be a floor since the commodities will be needed and have to be shipped one way or another. The question is the price, and hence the trough earnings. If the market continues to sell off and hits a trailing P/E of around 3 or 4 (maybe unlikely) it is worth looking at it.

The whole Russian market is off quite a bit and so is this stock. The stock had an IPO in June so there isn't enough stock price information. There is a possibility of continued sell off so one can wait for the right opportunity (assuming you decide it is a worthy investment.)

On another note, Japanese stocks have sold off quite a lot lately and one may also want to look there. I just looked at some that I was tracking (like Yaskawa, Toyota Industries, Mazda, Suzuki, and Seiko) and they are trading near 2004 prices.

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