In yesterday's email we mentioned that we listened to $AETI's first quarter 2013 conference call.  Our main goal for participating in the call was to determine if EPS estimates for the 2nd, 3rd, and 4th quarters of 2013 of around $0.08 are too conservative, since the first quarter benefited from the completion of a large order.  After listening to the conference call, we have determined that both revenues and EPS will be substantial for the remaining 2013 quarters when compared to the first quarter.  Thus, analyst 2013 financial estimates are way too conservative.

As predicted, today analysts raised AETI's 2013 EPS estimates to $0.66 from the previous $0.30 estimate.  The company now has a GeoPowerRanking (GPR) of 6.  We had a brief interview with AETI management slightly over a year ago.  We will re-attempt to interview management.  With that in mind, based off of recent positive developments we are now coding AETI as a GeoBargain at $6.25. 

China Information (NASDAQ:CNIT) ($1.98) -  On April 11, 2013 we published some due diligence findings on Perfect World Co (NASDAQ:PWRD). Part of our bullish thesis was based on the fact that FOSUN, a company with a good track record of investing in U.S. listed Chinese companies, has taken a large stake in PWRD shares. Upon further due diligence we noticed that FOSUN has also taken a stake in shares of CNIT. Through a 13G filed on February 13^th 2012 FOSUN disclosed that it holds a 9.49% stake in CNIT (5.2 million shares). FOSUN disclosed its initial ownership in CNIT through the ownership of 4.3 million shares on June 20^th 2012. While we have not performed any due diligence on CNIT we will establish a small position in its shares, on the FOSUN’s coattails. From a fundamental point of view CNIT has reported losses and lackluster revenue growth for several quarters. CNIT management claims that it is in the midst of restructuring operations to put the company on the path of growth. CNIT's tangible book value is $5.50. Investors should keep in mind the CNIT shares have spiked several times since March, only to see shares pull back.

In its recent letter to shareholders Revolution Lighting (NASDAQ:RVLT) management had some bullish commentary regarding fiscal 2013

The early trends for 2013 are encouraging and we expect to see significant gains in topline growth and profitability for the year

To see full shareholder letter, please go here.

Fosun increases stake in Perfect World Co (NASDAQ:PWRD)

A 13D/A filed today shows Fosun International increasing its stake in PWRD to 13.17%.

Our note to members from 4/11/2013:

Perfect World Co (NASDAQ:PWRD) - A 13D/A filed today shows Fosun International has increased its stake in PWRD to 12.12%.  Fosun has purchased 9 million shares in the last three months.  This is the third increase from the original 13D filed on July 6, 2012 where Fosun reported a 8.3% stake.  Fosun has invested in several other ChinaHybrid stocks that have had going private proposals, Lj Intl (NASDAQ:JADE) ($1.93), Tongjitang Chinese Medi Co Ads (NYSE:TCM), and Focus Media Holdings (NASDAQ:FMCN) ($26.73) are three examples:

    Tongjitang Chinese Medi Co Ads (NYSE:TCM) went private at $4.50.
    Lj Intl (NASDAQ:JADE) proposed at $2.00.
    Focus Media Holdings (NASDAQ:FMCN) has a going private offer for $27.50.

Ex-GeoSpecial Coleman Cable (NASDAQ:CCIX) has risen sharply from the mid $9 range in January 2013 to a high of $15.40 on 3/26/2013 on the heels of strong earnings it its fiscal 2012 third and fourth quarters.  The challenge the company has faced in the past is that it offers a wide range of EPS guidance.  However, it is possible that declining copper prices may benefit the company and possibly help narrow the range of EPS guidance. Excerpt from the 10-K:

Our agreements with our suppliers generally require us to pay market price for raw materials at the time of purchase. As a result, volatility in these prices, particularly copper prices, can result in significant fluctuations in our cost of goods sold. If the cost of raw materials increase and we are unable to increase the prices of our products, or offset those cost increases with cost savings in other parts of our business, our profitability will be reduced. As a result, increases in the price of copper and other raw materials may affect our profitability if we cannot effectively pass these price increases on to our customers. In addition, we pay the freight costs on certain customer orders. In the event that freight costs increase substantially due to fuel surcharges or otherwise our profitability may decline.

Archon (OOTC:ARHN) - Apparently the second largest shareholder of the company has proposed to purchased the company in all cash transaction for $17.50 per share.  It seems that the market has not fully digested this development as the stock is selling well below the $17.50 buyout offer.  We do not know if there are details to the transaction that is causing the stock to sell below the $17.50 buyout offer.

Thanks Joe, we sold our trade this morning mainly because of commentary in 10- regarding 2013 loan volume. 

 The mortgage loan volume in 2012 was higher than in 2011 primarily due to an increase in market share. The increase in market share was attributed to an expansion of the retail loan operations of SecurityNational Mortgage.  SecurityNational Mortgage anticipates the loan volume for 2013 to be approximately $125,000,000 to $240,000,000 per month range which was comparable to the per month range in 2012.

 

Still lots of value but will have to look into further if overall growth will be in the cards.

We are now moving Mer Telemanagement (NASDAQ:MTSL) from the GeoBargain list to the GeoBargain on the radar list as we perform more due diligence on the company’s prospects for 2013. While the company could report as much as $0.80 in earnings for 2013, comments in the company’s 20-F filed mid day yesterday implies that 2013 revenue growth will only slightly increase from the 2012 level of $13.1 million.   It seems that the company it is not comfortable baking in additional revenue from new customers that are needed to replace the anticipated loss in revenue from the loss of an MVNO customer, Simple Mobile that will occur in 2014.   In order to replace Simple Mobile revenue ($3.6 million) the company will have to obtain a significant amount of customers; especially when considering the terms of  a relationship with a new customer that typically calls for revenues of $500,000 that can span over a 3 year period. Although it is possible that a new customer can exceed these contracted values and that MTSL could land a larger customer, these are unknown outcomes we are not willing to bear at this time given statements made in the 2012 20F.  Overall we believe there are much better investment opportunities that we can choose from.   Please note, yesterday a bullish Seeking Alpha article on MTSL stated “If MTSL were to not grow revenue at all in 2013, the EPS run rate would be $0.80. Additionally, if there was not any growth in 2014, the EPS run rate would still be $0.60.”  We believe this theory is flawed due to the favorable margins in the MVNO business, we believe a 25% loss (coming from MVNO business) in revenues will be more impactful to the bottom line.

MTSL was coded a GeoBargain on 1/22/2013 at $3.55 and removed on 3/20/2013 at $2.86 representing a loss of 19%.

We are removing Mer Telemanagement (NASDAQ:MTSL) from the GeoBargain list at $2.86 based on commentary from 20F, filed this afternoon:

The increase in revenues from products and services in 2012 is primarily attributable to the revenues from our agreement with Simple Mobile.  We expect that our revenues will increase slightly in 2013.

Suntech Power Holdings Co (NYSE:STP) Declares Bankruptcy:

(Reuters) - China-based solar panel maker Suntech Power Holdings, one of the world's largest solar panel manufacturers by capacity, declared bankruptcy on Wednesday, state news agency Xinhua said.

Creditor banks of Suntech, based in Wuxi in eastern China, have jointly filed an application to Wuxi Intermediate People's Court for bankruptcy reorganisation of the firm, Xinhua said.

"Bankruptcy reorganization will be carried out for Suntech, given that it is unable to repay maturing debt," the report said.

The company, which has a New York stock listing and was valued at $16 billion at its peak, declined to comment when contacted by Reuters.

On Monday, Suntech said that it had defaulted on $541 million of its bonds due on Friday, triggering cross-defaults on loans from International Finance Corp and Chinese lenders.

Despite billions of dollars in subsidies, Suntech and other solar industry manufacturers have been haemorrhaging cash, hit by trade disputes and a global panel glut that has caused prices to collapse and hammered their once high-flying stock prices over the past two years. (Reporting by Sui-Lee Wee and Kevin Yao in Beijing and Swetha Gopinath in Bangalore; Editing by Elaine Hardcastle)

On 3/8/2012 we added Issuer Direct (OTCCB:ISDR) to our 52 week high screen when the stock was trading at $3.00.  Our note:

The company offers compliance services to public companies. They have developed a cloud computing based product and are benefiting from the requirements of public companies to file SEC documents in a new format called XBRL. We would expect some seasonality in the quarters, but it appears that the company reported a breakout EPS 2011 4th quarter of $0.21. We do not believe the market has calculated this non-gaap EPS number. We must interview the company to determine if it is on the cusp of reporting consistent quarterly EPS growth.

The stock is hitting highs again on the strength of a strong fourth quarter 2012 and bullish commentary.  After further due diligence we are coding ISDR a GeoBargain at $4.75.  Investors should note that the stock is very illiquid and has wide bid/ask spread.

Sigmatron Intl (NASDAQ:SGMA) - We will track this stock since it participates in the electronic manufacturing services (EMS) industry and competes with similar companies we have tracked over the last few years (ie. KTCC, SMTX).  EMS stocks have delivered inconsistent financial results over the last several quarters due to trepidation by capital intensive customers that are holding back orders as they wait for a final resolution of the fiscal cliff. We certainly do not think SGMA is a slam dunk, but the recent developments make the story worth tracking. Points to consider: 1.) Increased insider buying activity. 2.) Completed an acquisition. 3.) Additional new customers.  We should point out that after 12 quarters of revenue levels ranging between $30-$39 million, revenues for the 2 most recent quarters came in at around $50 million.  We will eagerly wait for the release of the company's 3rd quarter 2013  financial results. We plan to initiate a small long shot gamble in the stock ahead of earnings.

Al Intl (OOTC:JCOF) -  Completed a reverse merger in July of 2011, but only recently registered its shares. Company conducts a multi-level marketing operation selling coffee and nutritional products. The company reported revenues of $40 million in 2011 compared to $25 million in 2010, and logged in $56 million in revenues for the first 9 months of 2012. Company is breaking even and has 386 million outstanding shares.

Sealand Natural Resources Inc (OTCCB:SLNR) - Completed a reverse merger with a company that manufactures, markets, and sells new-age beverages, organic medical raw materials, nutraceutical supplements and health food. We are tracking this company because it appears they may attempt to ride the medical marijuana hype that is pumping shares of many similarly focused companies.

Network Cn Inc Common (OTCCB:NWCN) - NWCN shares recently reached a new 52 week high on the heels of news issued on January 2013 that it entered into an agreement "Shanghai Changfeng International Sourcing & Investment Co., Ltd."" to operate the advertising area of the "Shanghai International Sourcing Center Base" ("the Base") in Shanghai.  The company claims that this development will produce $6 million in revenues in 2013 compared to the recent revenue run rate of around $2 million. Given the recent success that the pump and dump crowd has accomplished in the China penny stock space we will track the story.
 

Foreclosure Solution (OTCCB:FCLS)

Just completed a reverse merger in order to ride the marijuana hype that several pump and dump penny stocks have enjoyed. What is interesting is that the company has purchased its hemp assets from a publicly traded pump and dump stock, MJNA, for $35 million in either cash or stock.  The CEO of FCLS owns 37 million shares of MJNA.  FCLS has a tiny float with 99% of the stock closely held, which is similar to the scenario of the marijuana stock MDBX, which saw its shares rise from $1 to $215 in a matter of days.  FCLS is an interesting pump and dump play since its plan of operation includes the sale of nutritional products that use legal extracts from hemp.  This is certainly an interesting story when we consider the negative due diligence findings published in an expose by Infitialis on 2/15/2013.

Us Tungsten (OOTC:USTU) has been pumping from around the $0.25 level in early January.  The first promotional email we noticed was from 2/10/2013.  Here is a promotional letter from today trying to ride the Warren Buffet name.  We may look to short the stock if shares break the $1.00 level.  We are currently performing more due diligence.

We added B- Scada (OOTC:MOBS) to our 52 week high screen on 2/13/2013:

MOBS develops software to help companies gather and analyze data.  The company’s revenues have risen from $81,000 in 2008 to $1.1 million in 2012. Quarterly financials have been inconsistent, with revenues ranging from $100,000 to $400,000 and quarterly EPS stuck at about break even. The company claims that it is about to enter a new period of growth due to a pipeline of customers ready to use their products. Commentary in the company’s 10k is upbeat. We will certainly interview. Appears as if the company wants to raise some money, please note the company's shareholder equity is negative.

We like were the company is headed and will code as a GeoBargain on the radar at $0.20 as we work through valuation scenarios.

On 10/21/2011 we added Fusion Pharm (OOTC:FSPM) to our Speculative Screen with the following note:

Flat chart. Watch to see if this company attracts "hype" as the plight to legalize marijuana moves forward. Looks like a start up company with no real operations. Website is still underdeveloped.

The stock did not do much since being added to our screen, but now that hype in the marijuana industry is back in favor we are once again putting FSPM back on our watch list. For the nine months ended September 2012 the company reported revenues of $750 thousand vs $132 thousand in the prior year period and net income of $417 thousand or $0.15 per share vs a loss in the prior year. 

To our knowledge it is the only cannabis stock generating revenues and net income. The company will need to raise money to fully execute its business plan and should be noted that the company did not generate any revenues in the third quarter.

We have only performed minimal due diligence in this name.

We have added Tranzbyte (OOTC:ERBB) to our Speculative/Pump and dump screen since the company joins MWIP,HEMP, MJNA and MDBX that are all riding the legalization of marijuana hype. ERBB has the smallest market cap of all the listed marijuana stocks we are tracking at around $12 million.

Commtouch Software (NASDAQ:CTCH)

The company provides "Internet security and cloud-based services for vendors and service providers, increasing the value and profitability of our customers' solutions by protecting billions of Internet transactions on a daily basis."  The CTCH customer list includes some of the biggest names in the industry, including Google, Microsoft, and Netgear, as well as a slew of others.  The company has consistently grown annual revenues for the past 5 years. However, revenue and EPS growth in its most recent third quarter 2012 release were slightly down when compared to those of the previous year. This seems to be a temporary situation. What was striking to us, though, was the extremely bullish commentary by management with regard to the third quarter 2012 release.  Management stated, "...over the last two quarters we have successfully secured more new business wins than the preceding 12 months combined and our new bookings have more than doubled year-to-date...this multiple-year backlog includes committed revenue and major upside for the company...while our third quarter financial results are not yet reflecting the positive impact of the sharp rise in new bookings due to the nature of our subscription based revenue model and the way those contracts ramp, we are making excellent progress with regards to setting the stage for growth and improved profitability in 2013."  The company recently broke out of a flat line chart pattern and we are attempting to interview management to learn more about the story.

Musclepharm Corp Common (OOTC:MSLP)

The company became public via a reverse merger in February 2010 and is well known for its Muscle Milk product.  The company has aggressively grown revenues over the last several years but is still losing money. On 11/26/2012 the company announced a 1-for-850 reverse split.  Now that the company effected the reverse split and has a higher trading stock price, the company is seeking a listing on a more established trading market.  News flow on this name has been scant at best the last few years, but we believe once it gets on a major exchange news flow will begin to increase.  Because of the popularity of the muscle milk product, we will monitor for any hype news.

Bloomberg reports extension is for four months.  Please see article for details.

Shares are marked up in pre-market trading.  Sources have informed us that its contract with Google has been extended.  We will issue an update when available.

On Monday, January 28, 2013, China Central Television Channel One (CCTV-1), the largest national Chinese government-runnews network, aired a special investigative report titled “Investigation of the Truth Behind Longwei Petrochemical” verifying our findings on the Longwei Petroleum (LPH) fraud.

Read the latest update here!

Despite the drop of 34% in today's trading session, we are adding to our short position in Echo Automotive (OTCCB:ECAU). We believe the stock should gravitate back to below the $1.00 per share area.