Global Sources Ltd. (NASDAQ:GSOL) has cash, an activist, and buys back stock

Tobias CarlisleStocksLeave a Comment

Global Sources Ltd. (NASDAQ:GSOL) at $5.64 trades on a extremely discounted acquirer’s multiple of 4.2, making it the third cheapest stock in the All Investable Screener. It’s a Hong-Kong based business-to-business media company that facilitates trade from Greater China to the world, which likely goes some way to explaining the discount. If the accounts can be believed, it holds around more than $90 million in cash and equivalents. Gabelli and GAMCO have filed 13Ds as recently as October last year, paying up to $7.55 for the stock. GSOL has bought back stock at $9.
Here’s long only, deep value, long-term horizon, contrarian investor ‘s take:

Summary

  • Global Sources has a history of rewarding shareholders.
  • Global Sources has no debt, EBITDA margins of >15%, and ROIC of 9.5%.
  • On a book value basis, Global Sources has a 63% upside.

Valuation

Originally, I found this stock after screening for these specifications on Charles Schwab:-ROE of company is highest 25% of industry-Price/Sales of stock is lowest 25% of industry-Price/Earnings of stock is lowest 25% of industry-Stock is 0-20% above 52-week lowsAfter Global Sources sparked my interest, I looked into the company more and was shocked when I found out that the company has no debt and a return on invested capital of 9.5%. As of December 2014, the company had $314,011,000 in assets including cash ($90,233,000) factoring out depreciation ($13,061,000). Total liabilities minus deferred income (assuming that the company attains these earnings) is $44,068,000. Subtracting liabilities from assets we come to $269,088,000. Dividing this number by the 30.22mm shares outstanding to get the book value, the number comes out to be $8.90. As of writing this article, the company’s shares trade at $5.45, therefore the book value per share represents a 63% upside in the stock price.

Click here to read more: Global Sources: 63% Upside And No Catalysts Necessary – Global Sources Ltd. (NASDAQ:GSOL)

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