Grand Power Logistics Reports Excellent Q2 2014 Results

GPW.V CURRENT PRICE: $0.065

GPW.V TARGET PRICE: $0.42

UPSIDE POTENTIAL: 546%

SHARES OUTSTANDING: 75,461,278

MARKET CAP: $4,904,983

WORKING CAPITAL: $2,900,000

August 29, 2014 — Grand Power Logistics Group Inc. (GPW.V) reported its Q2 results on SEDAR on Friday. From the MD&A:

Sales revenue for the three months ended June 30, 2014 increased by $7,066,266 (52.67%) to $20,481,130 from $13,414,864 in 2013 . The increase in sales revenue is primarily due to the unexpected improvement in air freight business in the Corporations Hong Kong division and the increase in ocean freight business. Gross profit for the three months ended June 30, 2014 increased by 71.77% to $1,707,677 compared to $994,145 in 2013 . and gross profit margin increased to 8.34% compared to 7.41% for 2013. The increase in gross profit is primarily due to the increase in revenue.

The income from operations for the three months ended June 30, 2014 increased by 162.3% to $378,570 compared to a loss of $607,229 for 2013 . The improvement is primarily due to a higher gross profit and a decrease in general operating expenses. General operating expenses for the three months ended June 30, 2014 decreased by 17.00% to $1,329,107 compared to $1,601,374 in 2013 despite the significant increase in sales revenue. The decrease in corporate operating expenses was primarily due to the decrease in general and administrative expenses as the Corporation continues to reduce its overhead expenses.

The net loss for the three months ended June 30, 2014 was $87,188 compared to a net profit of $485,959 in 2013. The net loss attributable to the owners of the Corporation for the three months ended June 30, 2014 was $87,191 compared to a net profit of $480,115 in 2013. The decrease in net profit was principally due to the decrease of the Companys share of equity value in associated companies in the amount of $416,881. Without accounted for this equity value, the Company would have a net profit of $329,693 .

The company showed strong growth in revenue and operating profit. The bottom line was negatively impacted thanks to the loss in equity value in its associated companies, which has traditionally been a positive mover for the company. Posted below are the last eight quarters of financial results from Page 6 of GPW’s MD&A so we get a good sense of where they have been headed.

We can see that Q2 2014 is the second highest period for revenue out of the last eight quarters and the best when it comes to gross profit so the company has been on the right track. Even when ignoring the very good revenue growth for the past three quarters, GPW is clearly quite undervalued. The market cap is $4.9 million and the share price is 6.5 cents. The last four quarters have seen over $73 million in gross revenue with an EPS of 2.1 cents. GPW’s price to earnings ratio is only 3 and the price to sales ratio is a minuscule 0.07, easily one of the lowest on the TSX, especially for a company with a positive working capital and good revenue growth.

Year over year revenue growth has been a strong 21.7% and annual gross profits were $5.6M compared to $4.6M in the previous four quarters for a growth rate of 22.7%. With these types of results we should expect a target P/E ratio of at least 20, or 42 cents a share. 42 cents per share would result in a market cap of $31.7M or a very low 0.43 price to sales ratio.

As a comparison, Fireswirl Technologies (FSW.V) has achieved $49.1M in revenue for the past four quarters with a $9.6M market cap so that company has a very low price to sales ratio of only 0.2 but that’s still three times higher than GPW’s price to sales ratio. FSW continues to have net losses and has a revenue growth rate of 30.1% for Q2 2014 and 17.9% for the first half of 2014, inferior to GPW’s 52.7% growth rate for Q2 and 40.6% for the first half of 2014. GPW is a highly undervalued stock to watch for the remainder of 2014.

Management appears to agree that the stock price is undervalued as one member purchased 300K shares over the summer at 6.5 cents according to CanadianInsider :