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Non-Tech : GRIN (Grand Toys International Inc) -- Ignore unavailable to you. Want to Upgrade?

To: Lucky888 who wrote (445)	11/9/1999 9:44:00 PM
From: Frank McVerry	Read Replies (2) \| Respond to of 495

My thoughts on the 3Q earnings report A couple of surprises for me in this report. Net sales came in more or less as I expected, based on the previous management guidance and it now looks like an all-time record of around US$45M is achievable by year-end. Gross profit was way above my estimate, seemingly due to the high margin Intex toys (perhaps the humdrum stuff like inflatables and character-stamped stationery and candy is where the real profits lie, rather than the gee-whiz high tech toys ?). I suspect the improving Canadian dollar may also be helping here, as GRIN gets effectively better pricing each time they restock with the likes of Furby. The remaining surprise was the percentage number for SG&A (operating expenses) but even though the 3Q percentage was high, the percentage for the first 9 months of '99 is lower than '98. There was no itemization for foreign exchange gain/loss so perhaps this has been merged into the other numbers. EPS ? Well, you pick your favorite weighted average number and do the calculation. The cash position is building nicely and I continue to believe they will have cash of about $4 per share available by year end (options plus net profits plus depreciation) - a very pleasant situation for them as they are used to running the business from net cash flows. This will help protect them from any negative currency movements, save them interest payments and of course is the 'fuel' for propelling their future expansion and acquisition activities. CONCLUSIONS This latest report shows the company's health is good and they remain on target to achieve the revenues outlined by management several months ago and more important for shareholders, the revenues are being accompanied with strong net profits. Of course, we are still looking at the 'old' GRIN here and my feeling is that the market's valuation is now in transition from 'value' stock pricing to 'growth' stock pricing. Management has given us some ideas of their growth ambitions of 100% top-line growth and certainly, given their micro-cap status, this can be achieved much more easily than, say, much larger cap stocks in this sector. I think they have the right ingredients here...management with 40 years experience in the toy business and a knack (at least for the period I've owned them) to be positioned in the 'hot' areas. It will be some time before we see whether this growth is building, and my own guess is we will not hear much about new initiatives until after the 4Q earnings, next February. In the meantime, we can look forward to good 4Q sales, now about to be boosted by the Pokemon products, as they start to become available. As these Pokemon items are not seasonal (stationery and candy), they should continue to sell well into Q1 and beyond - remember Furby is definitely more seasonal, yet it still pushed their Q1 and Q2 sales to record levels this year. Still, very helpful as Pokemon will be, that alone will not create the 'new' growing GRIN and I await with interest, management's plans for spending the cash and building the business. Definitely just my 2c, Frank McV