Photo by Hythe Eye

GRP released their FY 2010 results on August 20, 2010 (the company has a June 30 year-end). Suffice to say that there were no major surprises; either negative or positive, but the prevailing sentiment from me is that the Company can do more to either increase their dividend or to reinvest the cash which is just piling up. There was not much articulated about how the cash will be utilized or how the business would be grown beyond what it is now; so it was quite a disappointment for me. I will go through the usual review and analysis which will be kept brief as this is a simple company to analyze; but I will focus at the end on what I’d expect from the Company in FY 2011 and how I hope it can communicate better to shareholders.

Financial Analysis

Profit & Loss Statement

Revenue was essentially flat, rising just 1.4% from S$25.3 million to S$25.6 million; and was mainly due to the weakness in Hoses and Marine as well as the PVC pipes division (in China). Cost of goods sold, however, increased by 6.2%, which resulted in gross profit falling by 6% from S$10 million to S$9.4 million. Gross margin fell from 39.6% to 36.7% mainly due to exchange differences in the Measuring Instruments division (so I understand it is unlikely to persist). Other revenues consisted of rental revenue from their property at 1 Bukit Batok Street, which terminated in April 2010. Henceforth, from April 2010, GRP will no longer enjoy rental income. This was a factor which I had accounted for initially when investing in GRP; and more will be said on this in the review of the Cash Flow Statement section, which is key to this investment as it is a yield play.

Profit for the year actually dipped only 3.1% due to the reduction in distribution costs by 5.7% and decrease in administrative expenses by 14.2%. These two items helped to mitigate the impact of lower gross margin and lower revenues by blunting their impact; and allowing net profit to remain flat. Read more…