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GAI Global Tech Appliances: what happened to GAI stock? Why is GAI less expensive than the cash it owns? November 3, 2006

Posted by deminvest in China stock, GAI Global Tech Appliances, growth stock, investment, stock I own, stocks.
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GAI is an amazing cheap company:   its stock costs only $ 3.27 and yet it has $3.70 per share in cash… They also hold real estate worth $2.60.

 The reason why this company is so cheap is that it is posting losses lately. Their main problems were:

 1)      price of plastic went up because of oil prices so their costs increased, but they could not increase prices to customers 
2)     
their LCD business was a flop. As soon as they were able to produce LCD products for LCD screens, the price of those products had gone so far down that they had to shut that business unit itself and stop LCD production.

I will buy this stock because I think it is a bargain and because I think the company will solve both those problems. Actually problem 2) was solve already by shutting the business unit. Problem 1) is easy to solve. They have will raise prices a little bit. They will not enjoy another year of 76% growth in sales, but they can go back into positive earnings.

 

   Based in Hong Kong, Global-Tech Appliances Inc. is a holding company that owns subsidiaries that manufacture and market a wide range of consumer electrical products worldwide. These products include floor care products and small but commonplace household appliances such as breadmakers, coffeemakers, espresso machines, deep fryers and food processors. It makes beauty products; hair dryers, roller sets, curling irons. Also travel products such as voltage converters, and garment-care products. These products are marketed to customers under the Black & Decker, Proctor-Silex, and Sharper Image brand names, among others.

Net sales for the fiscal year ending March 31, 2006 were $73.8 million, up 76%, compared to $41.9 million in the prior fiscal year. However, the company reported that gross profit margins in its core business of floor care and kitchen appliance products will continue to remain adversely impacted by increases in material costs such as plastics. As a result, GAI is lowering fixed costs with measures such as reducing its work force.

The comapny is also pushing R&D in areas where it sees promise. Its compact camera module components, used primarily in cellular phones, are growing in net sales, and therefore GAI is expanding the business and has formed an R&D team in Taiwan to push product development capabilities. This business segment is expected to give a boost to financial performance. GAI is also marketing a line of digital imaging products and anticipate that this new product category will soon become a growing part of its overall business.

While the core business of household products has been adversely hit by rising price of materials, GAI is pushing into new product initiatives that afford the company the potential to go significantly higher over the next 6-12 months.

Comments»

1. deminvest - November 3, 2006

#@[]][#!!!! 2 hours ago I bought 30 GAI stocks at $3,37 each, they are already 2,37% lower at $3,29!

2. gaimax - November 4, 2006

Where does Hilary get the figure “$2.60 per share” in real estate?

3. deminvest - November 4, 2006

no clue. Maybe on the Company’s annual audited financial statements:

http://www.global-webpage.com/

4. gaimax - November 5, 2006

I checked the website and the audited financial statements–still no clue where that $2.60 comes from.

5. deminvest - November 6, 2006

I think I got it:
on this page:
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BA8D3CFA0%2DBE13%2D449F%2D8D0E%2DF6BD4A1C4A57%7D&siteid=mktw&sid=102957&symb=
look for the:
GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
and you will find:
Property, plant and equipment, net — this year: 24,164,775 — last year: 27,779,778
if you divide that figure for the number of Shares Outstanding: 12.22M
you get about $ 2 value of property on the balance sheet. That should be a value based on the price of purchase of real estate and equipment. From that we should take out the price of equipment, which we don’t know, to find the price of real estate as it was bought. Real estate price has gone up steeply in China, so that number of $2.6 per share makes lots sense, although of course we cannot be sure it is correct.


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