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Non-Tech : GRIN (Grand Toys International Inc)
GRIN 27.010.0%Dec 2 3:59 PM EST
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To: Frank who wrote (394)9/15/1999 9:59:00 PM
From: Frank McVerry  Read Replies (2) of 495
 
Frank,

<<Do you feel that KIDE sales growth figures are a good match for comparision with GRIN?

This being said, an evaluation of GRIN would take two components:
1. Evaluate GRIN based on part one of business (Furby, Wrestling, etc.)
2. Add a subsidiary called Pokemon to mix (Using KIDE historical sales growth patterns
for given lines).>>

I think the easiest thing to do for sales this year is to use GRIN's own guidance.
On the radiowallstreet.com interview, I recall the CFO saying (not known for his
exaggeration) that they would do up to CAN$70M (about US$47M) for the year. He also
thought they would do this without any big expansion in staff (perhaps one or two
extra around Christmas). They've already done $17M net sales in the two quiet
quarters, so that will leave about $30M net sales in Q3 and Q4. Now gross profit
should be about $10M (possibly higher as the CAN$ has significantly recovered from
last year - this is a remaining currency risk but not a big one). SG&A in the Q3 and
Q4 is usually around 20% of net sales, so leaving an EBITDA of $4M. Now there will
not be any subtraction for interest (cash mountain in place !) and no big currency
'corrections' (possibly slight gains as in Q1 and Q2), so taking 40% for income tax
should leave them with about $2.4M in net earnings. Add on the $0.45M they already
made this year should give them an eps of about $0.82 for the year (based on all
the options being exercised ie 3.5M shares outstanding). So by year end, they should
be sitting with about $16M in cash. Subtract this from the present market cap
means the business is being valued at $23.3M ie a PE of 23.3/2.85 = 8.1 based on
my year-end earnings estimate - seems like a very low valuation by the market and
now that recent $30 doesn't look so strange.

This is all 'back-of-envelope' but likely the same calculation that many others are making,

(note '$' alone = US$ in the above. Also, need to confirm the CFO sales estimate but my
sound card stopped working... Anyone ?)

Frank McV
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