Thoughts on GRIN
Hi Kevin,
As promised, here is my latest take on the GRIN situation.
<<I did promise a return visit this month, but I would guess you're probably
not too pleased with your GRIN investment right now, so I'll not tarry.>>
Even though I only left part of my profit in GRIN, after last
August's run-up, the fall since Christmas has been unpleasant
(and overdone ?).
<< Looks like that $14M year-end cash position you and I went
back and forth over never did materialize for you.>>
Careful here ! My $14M estimate was based on a FULL exercise
of the available options and $11M was my actual prediction. Even
though they had record-equalling full-year revenue (thanks mainly
to Furby), the Christmas quarter was disappointing with only $10M
sales (I was expecting about $14M) and this messed-up my $3M profit
prediction. I've only seen their earnings press release so far and
am curious to see the inventory/receivables/collectables situation.
I'm also surprised with the foreign exchange loss - my impression
was that the C$ was in recovery during '99.
IMO, the market is valuing GRIN's basic business (thin-margin
Canadian distribution) at $0 and simply giving some speculative
value to their new acquisitions and their much-improved
financial status, which is almost entirely due to last year's
option exercise and the availability of their much bigger
line-of-credit ($17M and no LTD). This should give them the kind
of 'room for maneuver' they are going to need, in order to have
some chance of making the new acquisitions successful. I don't
think this 40 year-old business is about to go bust. Their basic
business seems to keep staff/management comfortably in a job
but clearly earnings are very spotty and the new initiatives will
increase their risk exposure.
Yes, certainly, there is a lot more risk going forward because of
the new US initiatives (look at the share price a few years ago
when they last tried the US market - good for a while but eventually
a disaster, bankruptcy and reverse split!). Let's hope they have
learned from the School of Hard Knocks. I am going to hold my
remaining position - at these prices, I view it as a kind-of non-expiring
call option but I won't add until I can get some feel for the new
businesses.
<<But now this year their big thing is something called Bean Bag Bears?
Doesn't look to me like GRIN will be seeing double digits this year.>>
I don't recall you predicting the runs to double digits in
'98 and '99 on this board, so I take your prediction for 2000
with a pinch of salt ;)
PS 'Fraid I have no clue on Dragonball.
Happy trading,
Frank McV |
