Grand Banks

Grand Banks: ($0.28) Upcoming 4QFY14 result holds key to Watch-list exit Market Insight reiterates its value call on Grand Banks. Recall, Grand Banks obtained shareholders' approval to acquire Australian yacht maker Palm Beach Motor Yacht earlier this week. The acquisition is expected to be completed by mid-Aug and Grand Banks will be able to tap Palm Beach’s manufacturing processes and technology to further improve production efficiencies, as well as expand beyond its product line of three existing yacht series. Upon consolidation, Grand Banks' order book will surge nearly three-fold to ~$29.2m. Based on 9MFY14 figures, revenue of the enlarged group will rise by 25% to ~$34.1m and net profit will jump more than four-fold to ~$1m. Separately, we highlight that majority shareholder, Exa Limited, linked to Genting Bhd chairman and CEO Lim Kok Tay and his son Lim Keong Hui, has been acquiring shares over the market on three separate occasions this year. Exa now owns a 26.43% stake in Grand Banks, up from 22.76% at the start of 2014. Going forward, a positive 4QFY14 result, estimated to be out end-Aug, holds the key to the group’s exit from the SGX Watch-list. Under SGX rules, a company stands to be delisted, if it fails to meet the profitability conditions required to be removed from the Watch-list after two fiscal years of getting onto the list. Having already made a small pre-tax profit in 9MFY14, Grand Banks will meet the criteria for removal from the Watch-list if it can just breakeven in the fourth quarter. Given the group’s focus on cost management in recent quarters, we believe such a scenario is more likely than not, and could lead to a potential re-rating of the counter. At the current price, Grand Banks is attractively valued at ~1x P/B, supported by a net cash of $0.134/share.