Global Sources Ltd. (Bermuda) (GSOL)

Merle A. Hinrichs

lots of cash, no debt, managing expenses well in this downturn - and positioned in one of the best consulting areas I can imagine - between mainland China and rest of world. Longterm awesome. Short term ok, but I'm ready to go thumbs up

Bottom

As with all my picks: A very attractive P/E, excellent EPS growth rate and high five year growth prospects.

trending up

This company acts as a middleman between manufacturers and large scale buyers of products. Global Sources provides a verification of the manufacturers of these products in developing economies while minimizing negatives surprises down the road for the buyers. This verification includes on going site visits of the manufacturing sites. This ensures that the purchaser may rely upon timely delivery, product consistency and general reliability of the product. Global Sources also produces trade shows. However the primary business for Global Sources is an internet application that allows for the large scale purchase of products for export and sale in the US and other nations. www.globalsources.com

gsol

Good to hold

nobrainer

The company Global Sources primary business activity is promoting business-to-business transactions. They do this by linking suppliers and buyers worldwide and primarily in China. The company’s source of revenue comes from three sources: online services, other media services, and trade shows, seminars, and exhibitions. The company’s has almost no debt and any current liabilities are largely customer advances.
A ratio analysis supplemented by a general understanding of the company’s capital structure is indicative of several things. The cash to current liabilities ratio is by no means small but is not clearly indicative of the situation. If you were to take out the customer advances in regards to CL the ratio would be very much higher (customer advances in the type of model are very common). Common equity makes up the majority of the financing for the company at 2.5 times the amount of total liabilities. The Company keeps most of its cash in treasury securities maturing in 6 months or less at an amount of nearly 156 million dollars. Another attractive variable regarding this company is its profit margin growth. The only other company to even come close is Google. The actual margin is not so close but the growth is still there.
While this is a short and extremely simplified analysis of Global Sources the business can be broken down for Peter Lynch’s fundamentals. The company is definitely a fast grower with EPS advancing at a little over 50% in the prior year. The company has an extremely large amount of cash on hands considering its small market cap of 632 million. Whether this is good or bad is up to further debate. The company also seems to occupy a niche in the industry with its business-to-business solutions and its long track record. The avg. volume traded is low when compared to its peers, and only 13 independent research providers follow the company which can be indicative of a less known company. The company’s unique business plan eliminates the use of inventories and is quite attractive. Institutional investors own 93% of the company, but this figure is very misleading. One owner, Merle Hinrichs, owns 70% of all shares outstanding!! He is the founder of the company and obviously holds a substantial interest in it. This is probably the most attractive feature of the company, as passion is a key driver of success and it is evident here.

I believe Global Sources is a desirable company to own based on two criteria: company fundamentals and valuation. The fundamentals of the company are ranked very high by many independent research providers and for good reason. The company uses a capital structure consisting of no debt and finances the company with equity. Also Global Sources has a substantial amount of cash and short-term investments, which could indicate possibilities of artificial growth in the form of acquisitions. Profit margin has grown by a total of 256% in the past 5 years and earnings per share doubled in the most recent year. Another nice thing about Global Sources is the relative small size of institutional ownership in the company at 16.58%. The chairman of the company holds a 70 % stake in the company and we believe this could be a key driver for success. This company is a top performer in regards to ratio analysis when compared to all other companies in its sector, but is especially attractive in regards to valuation.
While all other companies in this sector such as Baidu have been bought feverishly by investors pushing their market valuations to extended levels GSOL has stayed relatively flat at 20 times earning. The industry has a current valuation of 32.2 times earnings, which makes GSOL appear relatively cheap in regards to its current EPS. The most recent year saw NI and EPS double for the company, and the only year that showed signs of growth problem was 2005, which will require further analysis. Overall we believe Global Sources is an attractive investment mainly due to its growth prospects and cheap valuation when compared to the rest of its industry.

At the bottom of the bear market in October 1974 a Forbes article interviewed Buffett. Buffett, for the first time in his life, made public prediction about the stock market.

"How do you feel? Forbes asked.

"Like an oversexed guy in a whorehouse. Now is the time to invest and get rich."

Debt free with roughly 25% of its market cap in cash, Global Sources is being punished by expected gloabl and, in particular, Chinese, economic slowdown. Looks to nearing some strong technical support in the $15 zone; comfortable buying this mid-20 ROE company for longer term objective, although could easily drop a few more points over next two quarters - growth at reasonable price.

GSOL has doubled since September 2007, and has lots of room to grow - right alongside China's 11.5% annual growth just announced yesterday.

What they do:

Global Sources, Ltd., a business-to-business media company, provides information and integrated marketing services in the People's Republic of China. It engages in creating and hosting marketing Web sites that present suppliers' products and company information. The company also publishes monthly trade magazines and specialized magazines seasonally. In addition, it provides fair exhibitions, trade shows, and seminars. Global Sources offers its services to various international buyers and suppliers in various industry sectors, including computer products, electronic components, security products, electronics, garments and textiles, auto parts and accessories, telecom products, fashion accessories and supplies, and gifts and home products. The company was founded in 1970 and is based in Hamilton, Bermuda.

Buy and hold long. This one is a winner.

I am getting really good with shorting winners like CROX, but this gives me a "freebie" (perhaps!)...

how can this price be sustained? growth, schmowth, this one needs a reality check. BUT i am very interested in this one for the longer term. Patience is a virtue, eh?

Facilitator for China snd other Asian trade with the west. Lists, rates and trains Asian suppliers, enabling them to trade internationally. In business 36 years but now experiencing the surge creted by huge Chinese trade expansion. Provides online and print source in English and Chinese.

69% insider ownership. Trading at all time high. P/E of 50 is not a good time to get in with real money but watch and buy on dips. Benefit from China explosion without investing in Chinese company.

Extensive management ownership, great fundementals, 0% debt. Stock looks great and China cleaning up its act.

small cap boomer

Cup without handle breakout on volume on 5/29/07. Also broke through 2 year old resistance level on the breakout.

Stronger e-commerce company. Maybe will get acquired?