GNC General Discussion, page-265

I finally managed to catch up and answered most of my questions so I would like to repay the help by offering my own insights. These are just my opinions but perhaps someone might find them helpful. I would also be curious if you agree with this assessment and it's why you're currently not holding?

I'm interested in this primarily because the idea of the business is a very defensive one. We need the commodities GNC transports, as well as the oils and the biodiesel side of this is very interesting. However, when the business is viewed in this light, several issues pop up.

The first is that it trades well above this figure. Buying at these prices there's very little margin of safety and you are overpaying. But that's not always a bad thing and needs to be judged on a company by company basis.
Net tangible assets per share: $6.54 (30 September 2022: $5.99)

The next issue is debt. There's 1.7b of debt approx. and this is way too much for a defensive stock that only has about 660m in assets for property, plant and equipment. The other assets seem more prone to fluctuations that could revalue them drastically (both good and bad to be fair). It seems they won't have too many issues servicing this debt though, however this concerns me because I want a defensive and stable stock that could ride out some form of financial crisis.

The question needs to be asked what would happen in such a scenario? Correct me if I am wrong here but this could result in considerable issues if contagion hits the banking sector. What protections are there to stop these loans being called in? I would ask management but I'm not a holder and could not find information on this. So I can only comment on what I can see which is that in such a scenario the debt being called in full would be devastating for the company.

I don't want to be super bearish here, but these are just some observations and perhaps I'm wrong to view it this way, but I just don't see it as defensive enough at this price. It would need to trade well below 6 for me to consider buying a little.

Please correct me if you disagree, this is just an opinion and I'm looking in from an outside perspective so perhaps one of you has actually spoken to management about how these issues would be handled and they're not actually a big deal at all?

One very bullish point I noticed during the research would be the ability for the company to seize on Australia's energy insecurity and expand into the production of biodiesel. Given the right political climate there would possibly be some support from the government as our current energy situation is quite precarious and could be strengthened. This becomes a greater concern day by day as we head into a multipolar world.

Appreciate the discussion everyone