GRP Ltd (Singapore) – How much is this thinly traded stock worth?

Brief Background:

GRP Ltd is a Singapore listed company established back in 1977 as a supplier/manufacturer of high-quality hose and fittings for the marine, oil and industrial sectors. Its current business activities consist of three main categories: 1) Hose and Marine, 2) Measuring Instruments/Metrology and 3) Property Development

1) Hose and Marine

The Hose and Marine segment serves the onshore, offshore, marine, pharmaceutical and petrochemical markets – including engineering works and hose management services such as the design and manufacture of hose fittings and couplings

2) Measuring Instrument

The Measuring Instrument business was acquired by GRP back in 1993, which distributes measuring products to a wide range of industries including machine makers, biomedical, oil and gas, institutional, laboratory and electronic OEM.

3) Property Development

GRP started venturing into the property development sector in 2013 and acquired Starland Holdings Limited back in FY2016 with a 83.17% stake.

 

Potential short term under-valued investment?

The reason why I took notice of GRP Ltd was because it was trading at a steep discount compared to the amount of cash it is holding. As you can see from below, the net cash per share of GRP Ltd is $0.274 while the current share price is only $0.123.

Cash  and bank balances $55,128,000
Borrowings $2,010,000
Net Cash $53,118,000
Number of ordinary shares 193,701,610
Net Cash Per Share $0.27422

 

However, that is not all as there is a potential catalyst heading into August, which is the end of GRP’s FY2019. Starland Holdings Ltd, which is mentioned above, recently declared a dividend of $0.03 per share. Starland and GRP both started paying dividend during their last financial year, albeit at a rate of $0.005  per share only. Hence there is a high chance that GRP would pay a similar amount of dividend at $0.02 per share.

 

After accounting for the possible dividend pay-out and taking a 40% margin of safety, I came to an intrinsic value of $0.152 for GRP Ltd. The reason for the high margin of safety is due to the high illiquidity of the stock which is a key risk in investing in GRP.

 

Another key risk is that GRP’s two main business, mainly the hose and marine as well as the measuring instrument segment, has been on the decline over the years as shown below:

GRP Ltd

Furthermore, there is no major ongoing property development projects and GRP is still selling of its remaining properties.

 

In conclusion, the key risks and opportunities of GRP Ltd is :
Opportunities Risks
Undervalued based on net cash per share Core operations in Hose and Marine & Measuring Instruments on the decline
Potential $0.02 dividend pay-out representing a  16.2% yield No major property developments in the next few years to contribute to earnings
  Stock is highly illiquid

 

As always, do your own due diligence (DYODD) and this is not a recommendation to buy or sell the stock.

Note: The author is vested.

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1 Response

  1. May 15, 2019

    […] I wrote about GRP Ltd back in April, its share price has gone up from 0.123 SGD to 0.16 SGD (Price taken on 15 May 2019, 11:05 […]

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