GRP Limited

[Musicwhiz]

I'm the "lucky" buyer. Been looking at below 20c for many months. Queued for 30 lots but get 10 partial filled. Never expect to get it as the sell price is at 23c this morning.

I will buy more if there is willing seller.

Wow! I am surprised and very pleased to learn that the buyer was someone from this forum. Congrats on your good purchase, which will give you a yield in excess of 10%!

So does this mean I can try to queue at 18c to buy tomorrow? Haha!

[Drizzt]

i gonna queue at 19 cents to best musicwhiz

[axt]

Have to thanks you guys esp. MW & Drizzt for their analysis work done on GRP. This will form a small part of my total portfolio mainly for the 10% yield.

IMO, 19c is a safe price as NAV is approx 19c.

This morning it is selling at 23c again. Waiting for any willing seller at 19c.

Ok have to get back to my boring rat race for the next 8 hours or so.

Cheers!

[cif5000]

Just need to make sure the cash is actually there or else it will be the same s-chip story all over again?

If you like, you may consider this as a half-s-chip.

[ichiran]

Performed a DCF analysis on GRP using the following assumptions :

1. Terminal Value up to 10yrs
2. Discount Rate (WACC) 10%
3. Zero Cash Flow Growth

Intrinsic Value came up to $0.6875.

If this is the case, does it matter whether we buy GRP at $0.23 or $0.19 , though quite obviously ceteris paribus, we will want to buy at the lower price! [/align]

[level13]

Performed a DCF analysis on GRP using the following assumptions :

1. Terminal Value up to 10yrs
2. Discount Rate (WACC) 10%
3. Zero Cash Flow Growth

Intrinsic Value came up to $0.6875.

Ichiran,
I checked on the DCF which you provided (same assumptions) and the value i got was $0.20.

1. Terminal Value up to 10yrs
2. Discount Rate (WACC) 10%
3. Cash Flow constant at $4.2 million and no Growth

Based on the cash backing of $0.10 per share currently. Its intrinsic value ought to be $0.30. Not sure how the intrinsic value should be $0.68. Maybe you can explain.

[dydx]

An Intrinsic Value estimate of $0.6875/share, multiplied by the 139.407m issued shares, will give a derived value of $95.84m for the entire company. This, quite obviously, is too high if we compare it with the current scale and profit/cash flow generation of the underlying operating businesses, even though GRP has a large and growing cash reserve.....
http://info.sgx.com/webcoranncatth.nsf/V...5003802C4/$file/GRP-YearEndAnnouncement30Jun2010.pdf?openelement

I would bet that if an offer at around $0.30/share is ever made, even some of the big shareholders may sell. Apart from the regular $0.02/share yearly dividends and the large cash reserve, we have to also bear in mind that -

1. Starting from Apr10 this year, there will be no more recognition of rental differential from, and deferred income from the sale of. the Bukit Batok factory building (sold 3 years ago).

2. While the 2 core businesses of hose and measuring instruments distribution are well-established, there are the usual competition from other players and mild cyclicality in demand, moderating their recurrent profitability.

The current management and controlling shareholders hold the key to growing shareholders' value by deploying GRP's cash reserve for an accretive new business or acquisition, or just distributing a portion of it back to shareholders if they don't have any good new business idea, but they have so far chosen to just keep the status quo.

[ichiran]

Hi Level 13,

appreciate if you can clarify how you derived the $4.2m cash flow. Cos the 2010 AR reflect the net cash flow as less than $4m.

I think I made a mistake in my one of the formulae cells in my spreadsheet. After having rectified this, my results are close to yours at $0.1936. Thanks for pointing out my mistake.

[level13]

Hi Level 13,

appreciate if you can clarify how you derived the $4.2m cash flow. Cos the 2010 AR reflect the net cash flow as less than $4m.

I think I made a mistake in my one of the formulae cells in my spreadsheet. After having rectified this, my results are close to yours at $0.1936. Thanks for pointing out my mistake.

I got the $4.2 million from the net cash from operating activities (found in the cash flow statement in the latest earnings report released through SGX in Aug). No worries, we are here to learn and countercheck on the figures.

Dydx is right to point out that moving forward, there will no longer be any rental income. As such, the cash flow will be reduced and subsequently the intrinsic value will drop too.

[dydx]

Just checked my bank account and noted a credit from GRP's $0.01/share Final dividend for FY10 (ended 30Jun10). I thought it is a nice thing to have to start a new week!