GRIN (Grand Toys International Inc) Message Board

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Non-Tech : GRIN (Grand Toys International Inc)

GRIN 27.30

+1.1%

Dec 3 3:54 PM EST

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To: Frank who wrote (394)	9/14/1999 9:53:00 PM
From: Frank McVerry	Read Replies (1) of 495

Frank, Here is an answer to the first part of your post (I'll do the rest tomorrow - honest!) <<There are really three components relative to the cash: 1. Is the improvement of ratios Debt/Equity. 2. Reduction on interest expense. 3. Flexibilty>> I'd want to add a 4th component to your list and that is 'Elimination of currency risk'. To me this is the most important change that the cash brings. <<What would you do if you just added 13 mil to the coffers and you were already the biggest distributor in Canada?>> If I were running the company, then I'd choose the most conservative option allowable. That is, I'd replace the line-of-credit with the cash. That way, I wouldn't have either short or long term debt and no significant currency risk. The currency risk elimination would mean an immediate increase in the applicable PE multiple to apply to the business (perhaps double). Removal of interest expense and currency costs should more than make-up for the increase in shares outstanding (that's what would have happened in '98) and produces a big improvement in margins. I think this is the way the market may be valuing them now. If I were to be more aggressive, I'd use more of the cash to push ahead with the various growth initiatives (Ark/Grand Concepts/ecommerce) but really, it doesn't seem necessary, as the basic business (Furby/Poke etc) is going to produce plenty of cash flow, through the end of the year, to finance these projects. At any time of course, GRIN may appear an attractive acquisition (at 3 times cash) to some bigger companies. After all this fuss, the business is only being valued at $8 !! (Interesting thought - last month's action in GRIN was almost like an IPO of about 2 million shares at $6.79) My 2c, Frank McV

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