Global Diversified Industries Inc (GDIV)

[mike306oh]

***Company Valuation. Opinion

Not as good as I expected, but in the construction industry things are always slow in the winter Q. The revenue it's still over $2.1M, and EPS positive again.

I like better the analysis of financial condition, and forward looking statements, included in the Mgmt discussion. A few things:

* OS: 158,303,273 now, as compared to 145,699,429 the same time last year. Not much increase considering the stock incentives that the company provides to his (150+) employees.

* Despite a small drop in the 4Q revenue compared to 05, "Total revenues increased to $11,516,163 in the nine months ended January 31, 2006 from $5,836,234 in the nine months ended January 31, 2005."

* "As of January 31, 2006, the Company had a working capital surplus of $3,105,349. Net income was $493,834 for the nine months ended January 31, 2005." (Note: this might be a typo: the net income should refers to the 9 months ending 06).

Valuation Note:

The Price/Sales it's about 0.77 right now, which it's ridiculously low for an EPS positive company, that is experiencing an explosive Y over Y growth:

http://finance.yahoo.com/q/ks?s=GDVI.OB

For this kind of a OTC:BB company, the P/S ratio should be at least 10. This is in agreement with the valuation analysis based on Price/Earnings below.

Assuming the same "rate," as above, the 10-K should report a net income for the whole 2005 year of $658,445 (493K x 4/3). This should be higher however, as the spring Q should be a lot better. Regardless, even assuming the above net income, the EPS for 2005 should be at least 0.0416 (compared to today's 0.075 PPS). The Price/Earnings for the average costruction industry it's 18.5. From the above, here it's only 0.075/0.0416, or 1.803. Hence, IMO, with the company numbers, the capitalization should go up by a factor of at least 10, given the good growth potential. So, sometimes after the 10-K, the PPS should go up accordingly, or to a conservative value of $0.75/share.

Usually, the Price/Earnings based valuation above applies to large caps, where the Y over Y growth rate is usually a lot smaller. For a fast growth potential small cap, the Price/Earnings ratio could (and many times it does) go to over 100.

Opinion:

* this is a must keep company, IMO

* if you must sell some shares, don't do it in a rush

* You may wish to keep the bulk of your shares to at least after the 10-K, IMO

Best to all,

Mike