Update and Re-valuation of GRP Ltd

Since 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 AM). Hence, I would be doing and update and re-valuation of GRP Ltd today.

In my previous article, I identify a catalyst coming up in August which is the potential dividend of around 0.02 SGD per share, since its subsidiary Starland Holdings Ltd (83.17% owned by GRP Ltd) paid out a dividend of 0.03 SGD per share.

A quick look at Starland Holdings recent AGM presentation shows this:

Starland Holdings AGM presentation slides

Starland Holdings is planning to distribute more cash back to its shareholders, which bodes well for GRP Ltd. This is because there is a highly likelihood of GRP Ltd doing the same thing.

Another Catalyst and re-valuation of GRP Ltd

I missed out on a important catalyst for GRP Ltd in my previous article – that is the share buy-back mandate they have put into place. In fact, GRP Ltd has been conducting share buybacks from 0.13 SGD all the way to 0.155 SGD recently. This shows that the management feels GRP Ltd is currently undervalued and is also a good sign of them returning value to shareholders.

More importantly, the share buy-back also mitigates one of the key risk i identified before – which is the illiquidity of the stock. I used a 40% margin of safety initially because of this reason to derive a valuation of 0.152 SGD for GRP Ltd. However, with the share buy-back in place, the stocks are more liquid now and therefore I believe a 20% margin of safety would be more appropriate. The intrinsic value of GRP Ltd will then be 0.20 SGD as shown below, representing an upside of 25% given the current share price.

Net Cash Per Share $0.27422
  Less Possible Dividend Pay-out of $0.02 $0.25422
Intrinsic value after applying 20% Margin of Safety $0.20

Conclusion

GRP Ltd is a net-net investment play with a potential catalyst heading into August, and I feel that the market is severely undervaluing as GRP Ltd is a small-cap company which is not known to many people. In fact, on SGX’s website itself, if you were to search for announcements on GRP Ltd, they actually lump Q&M Dental (another SGX-listed company) together with GRP Ltd. I initially thought that Q&M Dental was under GRP Ltd for that reason. I believe that GRP is still undervalued and further upside after rising from 0.123 SGD to 0.16 SGD, with the company doing share buy-back and the potential dividend payouts in the future.

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.

-Jack

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