Buy Recommendation-GRVY

Gravity Company, LTD. (NASDAQ–GRVY)
Valuation-$5.15
Closing price January 15, 2010-$1.68

With the rise in the markets, and the generally worse performance of most companies, it is hard to find stocks that we think are truly undervalued. Even though Gravity is a foreign stock, we think it fits the bill.

As of September 30, 2009, Gravity had $2.17 per share of cash and was slightly profitable. Our valuation is $5.15 per share so it is trading at 42% of our valuation and at 77% of cash.

Aside from being a foreign stock and relatively unknown, Gravity has been dogged by litigation. All of the material lawsuits were resolved at the end of 2009, so this “black cloud” is gone.

With excess cash, a huge market that it addresses we would be surprised if some transaction does not happen in the next 12 months—special dividend, buy-out, etc.

It the stock can get to only trading AT cash value per share, we have a 30% gain.

GRVY trades over 62,000 shares a day, so liquidity is not a huge issue.

There are about 28 million fully diluted ADR’s outstanding.

About Gravity
Based in Korea, Gravity is a developer and publisher of online games. Gravity’s principal product, Ragnarok Online(tm), is a popular online game in many markets, including Japan, Taiwan and Thailand, and is currently commercially offered in 38 markets. For more information about Gravity, please visit http://www.gravity.co.kr.

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1 Comment

  1. This is a great post Dmitry. I just had one of the ‘Doh!’ moments and ran back to correct my own site before publishing my comment. You see my own comment form did not match what I’m about to advise. I get less comments than you, so never noticed any problem. I’ve changed it now anyway so here goes.

    part time worker

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