kat,
Good questions. Here are some responses:
<<2. I read that GRIN's strategy is to diversify via acquisitions by moving beyond DISTRIBUTION of toys. They say MANUFACTURING is next and this might go beyond toys. Also, E-COMMERCE.
3. What in the world is GRIN up to?>>
For me, DIVERSITY=STRENGTH/INDEPENDENCE. Diversifying out of the toy
sector clearly helps their seasonal earnings variation and this already seems to be
working ... check out their non-toy sales over the past few years - it's been nothing
until 1998 when it suddenly jumps to 9% of sales (from their new Grand Concepts
business). That looks like a very good start. By independence, I mean that their
moves into the non-toy and manufacturing areas will mean they are less beholding
to the likes of HAS. The particular manufacturing they have acquired (ARK) looks
very promising in terms of high profit margins and it allows them to distribute
globally, not just in Canada.
<<b. Currently, GRIN does NOT manufacture any products.>>
Their ARK acquisition does manufacturing of the 3D puzzles as well as giving
GRIN distribution rights.
<<4. Where is GRIN headed?>>
On the road that leads to excellent 1999 earnings (helped by Furby and its spin-
offs etc) , new profit margins from manufacturing ARK puzzles (as well as big
margins for distributing same), further non-toy distribution gains ( >9% of sales ? )
and a bright, shiny new e-commerce site (I hope !!).
<<b. Since the principals are seasoned gentlemen who would surely love to take their equity and retire, is GRIN getting spruced up for a buyout???>>
I've always considered a buyout a possibilty though it's not the reason I own them
and I hope it's not something that GRIN management are primarily seeking - the
growth possibilities seem much greater if they stay independent, rather than
becoming (say) HAS's Canadian distribution center.
<<c. I don't believe the nonsense about manufacturing and moving beyond toys.
5. What do you think? Do you see this as a good deal for shareholders?>>
Without the manufacturing/non-toy/ecommerce, GRIN would remain a profitable
little Canadian toy distributor and destined to trade in the $5 to $10 range forever.
The success of one or more of these other three strategies will move them to higher
valuations.
Just my 2c,
Frank |
