We feel that the shares of GBO Inc. provide a compelling value opportunity from recent trading prices.
GBO manufactured windows and doors, primarily in 3 types: exterior doors, PVC windows and wooden windows. The company operates out of Quebec, Canada where it has 3 plants and provides jobs for 500 workers. Sales are divided as follows: 43% Quebec, 30% Ontario, 5% Atlantic Canada, 22% US.
The company recently completed the sale of 2 of their divisions for cash considerations of $12.5M. The divisions sold manufactured PVC windows. The company is now trading at ~65% of current assets after subtracting all liabilities, what we feel in this case can be used as a rough indication of liquidation value. A large portion of current assets is in cash and the cash burn rate is minimal.
In addition, if that is not compelling enough, the company announced on Oct. 7, 2009, that they would be repurchasing 15M common shares for $0.20 a share, or 46% of their outstanding shares! That compares to their last trading price of $0.17. As of now, the bid has not yet commenced.
If 46% of the outstanding shares are successfully repurchased at $0.20, which assumes tendering by majority holders, our estimate of the per share liquidation value post issuer bid would be ~$0.36.
Keep in mind that, this stock is VERY thinly traded, with public float of only about 10%. 60% of the outstanding shares are held by Fonds de solidarite des travailleurs du Quebec (FTQ). We feel that the tender is likely to come from these holdings: their position is in the “turnaround” portfolio of the FTQ. The tender offers them an exit opportunity. The other 30% is held by insiders.
Unfortunately, we have been unable as of yet to acquire shares at our limit price. The shares traded at $0.13 on January 14, 2010, and in the past few days have ticked up to $0.16 and then to $0.17. Recent trading activity suggests shares are available, however an investor should tread very carefully; especially in considering post-repurchase liquidity if they should choose to hold rather than tender.
Woopdeedoo.
SG
NOTE: No holding. This is not an offer to buy or sell securities. Do your own research.
