Cheap Stock Valuation Update GRVY

I was reviewing the previous stock valuation of GRVY again and I noticed I made many errors in the balance sheet numbers by not double checking. This is the second time this year I’ve made a silly mistake like this.

This is especially the case when dealing with ADR’s because the currency conversions may not be accurate, so it’s vital to double check. Even more so if it’s a small cap. Definitely not a good start and I’m not pleased with my carelessness at all.

But here’s an updated version of the balance sheet to calculate NNWC.

As you can see, the initial $1.71 NNWC value from the original post was off. The correct number is $1.36 so the current price is a little higher than the NNWC.

Now I clearly made a mistake in my calculation but I’m not selling. I still believe the upside has much greater potential compared to the downside risk. The company is generating tiny profits from its business, but what I like most is that revenue from royalties is increasing. If Ragnarok Online 2 is launched in the first half of 2010 as stated in the annual report, then the catalyst to unlock the value is just around the corner.

Also refer to the new company snapshot I created to help with the analysis.
GRVY Stock Snapshot


I own GRVY at the time of writing.

  • SEC filing for reference regarding Ragnarok 2:

    Under Item 3D:
    “we currently intend to launch Ragnarok Online II in the first half of 2010”

    4B under Product Listings also says this.
    .-= Ankit Gupta´s last blog ..Authentidate Shares On The Move =-.

  • SHM

    Hey Jae,

    Curious, I just checked the number for NCAV for Gravy, I get 53 Million dollars bringing the Per Share value down to 1.91.

    I’m getting 2009/09 10-Q for this on AdvFN. Total Current Asset is $71.9m minus $18.9m Total Liability. Thats makes NCAV equal $53 Million dollars. Yours currently shows $56.77 million dollars.

    Are you using a different formula or site?



  • Roberto

    What is the launch flops? Isn’t there a 50/50 chance that it may succeed as well as flop? Wouldn’t this be an speculative decision?

  • Zehua

    I bought last month at $1.40. MMORPG’s sequel game have never succeeded in the past. But RO II is going to be launched so many years apart from RO, so let’s see if it can succeed this time. The concern is that RO II has been postponed ever since 2007. We don’t know if it is really going to be launched this year.

  • tk

    if the launch flops so what? they have other games/revenue streams, and tons of cash sitting in the bank (net net value higher than market cap.) RO still makes money as well.

    the big risk here is management.

    lots of upside here, not much downside (especially from where i got in quite awhile back, thanks manual of ideas and their downside protection report.)

  • @ Ankit,

    I wish ADR’s submitted quarterly reports as well. Would help so much more because for all I know, we could be working with really old numbers.

    @ SHM,
    Make sure you check the numbers on the SEC and not just advfn.
    Besides the NCAV I have is wrong. I didn’t bother changing that, only the NNWC.

    @ Roberto,
    Without Ragnarok 2, the company is increasing revenues in all its areas. Sales, royalties, mobile gaming is increasing. So the decision isn’t based on whether Ragnarok 2 succeeds or flops. That is just a catalyst to bring exposure. It would only be speculative, if I was betting that the intrinsic value is based purely on a successful launch of Rag 2.

    @ Zehua,
    Yea I agree to some degree but they’ve had 3 years to fix things. 3 years to change a project is a complete overhaul so I would expect the game to be on a whole new level.

    @ tk,
    Right. Upside far outweighs the downside.

  • Can you clarify why you made the changes? Gravity’s SEC filing shows $55.1 million of cash an equivalents and $7.3 million of short-term financial instruments as of 9/30/09. Source is 6-K filed 11/19/09.

  • Tim, looks like you caught me with my pants down because you are darn right.
    Seems like I was looking at the wrong reports all this time and the original numbers are correct.

    Thanks. Does provide more breathing room as well.

  • Eric

    So I can learn from your mistake, where were you getting your second round of numbers for the update?


  • Tom

    Either way, this company is still valued between $3-6

  • Eric,

    I was looking at the 20-F.

    But Tom has a point. The company is worth more than what it is and comparing the stock price to the intrinsic value, it is very cheap.

  • Michael

    Hi Jae,

    I just recently came across your blog and I have enjoyed going back and reading through your posts – excellent analysis and insights! With regard to GRVY, I was wondering if at the current price (1.90 to 2.00 range) you view that as an adequate entry point? I posted the comment here because I didn’t see a GRVY discussion on the forum.
    Thanks Jae and kudos again on your blog!

  • Hi Michael,

    We do in fact have a posting for GRVY in the forum

    As for entry price, I am never in the position to recommend entry points. All I can say is that I am currently up about 20% and I see the value of GRVY being at least $3.50 if the company improves even just slightly.

    The current price is still below NCAV and GRVY has more cash than AR or receivables.

  • Michael

    Thanks Jae!

Ready to try Old School Value?