GDA now trading at NTA - Heads you win, tails you dont lose much.

With 132.1m share on issue, at the current 36.5c share price this gives a market capitalisation of $48m. This is equal to the currently Net Tangible Assets (NTA) on the balance sheet. NTA being the approximation for the liquidation value of the company. In reality, per a liquidation scenario, there would be some discounts to applied the PPE value in order to sell them, however when a firms equity value is trading at NTA, this is an objective measure that the stock is good value, especially one with hard assets, such as GDA. The NTA doesn't take into account the Gage Roads intangible brand value (with the only intangibles recognised on BS due to the Matso's acquisiton, which appears to be going well and hasnt yet been impaired), with $30m+ having been spent on brand marketing over the years, which is expensed through the P/L.

The half year trading upate this week or next should provide a decent update. The AGM statement was strong and runs against the recent weakness in the share price. Would hope to see a continuation of the positive narrative in relation to subsiding inflation, growth in own brands, strong cashflow from the A-Shed and new Matso's development. It has been a tough couple of years to be a brewer given they are disproportionately affected by inflation, but hopefully they are now through the rough patch.

With the Eumundi development now complete there should only be $2-3m of sustaining capex spend this year (unless new capital projects pop up). With inflation having subsided and margins somewhat restored, this should hopefully allow for some stronger cashflows in CY24.

The share price does not reflect, IMO, the strategic nature of the installed brewery capital base in Palmyra (and to a lesser extend the distribution facility in Jandikot). GDA's brewing facility is by far the largest brewing facility in WA (c21m litres), and would be a strategic asset for CUB or Lion Nathan, given the majority of their product is brewed on the East Coast and is required to be trucked over, or contract brewing is required in WA, of which there are no other facilities of size. To build out a new brewing facility of the same capacity must cost $40-50m on its own, plus the administration burden of finding people to set it up and run. WA is becoming a larger consumer market, with a strong state economy and has wealthy consumers. In a world where transportation will become increasingly costlier with fuel prices and increasing sensitivity to CO2 emissions, an already installed asset base in WA would make sense to these larger beer producers. It is worth noting that freight rates from West to East are cheaper, than East-West, given trucks are often returning to the East Coast with empty trailers (https://djfreight.com.au/price-guide/), so its not as much of an issue that GDA does not have a large East Brewing facility.

In an industry where there are low barriers to entry, having a large existing installed production base is as good as a moat you will get.

With recent headwinds subsiding and the stock trading at NTA values - IMO its Heads you win, tails you dont lose much.