Greystone Logistics is a manufacturer of plastic pallets. The market for plastic pallets is expected to continue to grow due to the advantages of plastic pallets over wooden pallets.

The business is not great due to high CAPEX requirements to grow and limited barriers to entry. At the same time I think there is a first mover advantage. Once a company uses a certain plastic pallet type in their logistic ecosystem and it works fine, I don’t think they will switch easily to save costs (it is only a small part of their cost base in most cases).

After years of anticipated growth it is finally there. Combined with recent projects to improve operational efficiencies this has resulted in a huge improvement to the bottom line. The CEO, W. Kruger, owns ~33% of shares and continues to buy shares in the open market, indicating his believe in bright future prospects.

Right now you can buy the following:

• ~10m market cap, ~32m enterprise value (high debt)
• Fast growing company with some operating leverage
• LTM net earnings of 1.3m, last Q net earnings of 0.8m, next Q expected to be better

A large part of the debt is secured by the owner/operator W. Kruger which reduces the chance of a bankruptcy in case of a temporary setback.

If the company manages to continue recent growth and further improves operations the company seems cheap at the current share price. Insider buying makes me believe this is a likely scenario. If things turn south, there is no downside protection.