GEO Investing

Calls to Action: None

Here are the stories that the GeoTeam is following today… (Please see full disclosures at bottom)

General Highlights:

  • ChinaHybrid
    • MONT to be acquired by Shanghai Pudong Science for $22.60 per share, increased from the proposal letter from 3/10/2014 of $21.50 per share.
  • U.S. News
    • ESTE and RADA both reported strong earnings reports. (reports released during the trading day yesterday)
  • GeoBargains/GeoBargains on the Radar
    • GeoBargain VRYAF to be acquired for $3.15 to $3.40 per share by Verisae.  At first glance this price range does not accurately value VRYAF shares, we are taking a closer look at the details behind the valuation of this deal.  The low end of the deal values VRYAF at an EV/Sales of 1.2.
    • Shares of GeoBargain on the radar SPCB hit a new 52 week high on the heels of strong Q1 2014 earnings and a bullish conference call.
    • Coding SUMR as a GeoBargain on the radar at $2.93 based on turnaround initiatives.
  • Pump and Dumps
    • KIRI shares dump in last two trading sessions falling over 50% as we anticipate would be the likely outcome.

For more timely information, particularly during the daily trading session, we urge our members to read our message board posts daily.

Disclosure: Long VRYAF, SPCB, will look to initiate a long position in SUMR ; Other Long Positions; Other Short Positions; Pump & Dump Positions (Password GEO2014)

Summary of general highlights:

On the Asian Front…

Montage Tech Group Ltd (NASDAQ:MONT) ($19.78) – MONT is global fabless provider of analog and mixed-signal semiconductor solutions currently addressing the home entertainment and cloud computing markets.  MONT and Shanghai Pudong Science and Technology Investment Co., Ltd. (“PDSTI”), a wholly state-owned limited liability company directly under Pudong New Area government of Shanghai, today jointly announced that they have entered into a definitive merger agreement under which PDSTI will acquire all of the outstanding Ordinary Shares of Montage for US$22.60 per Ordinary Share increasing previous offer.

On 3/10/2014 PDSTI had proposed to acquire all the outstanding shares of MONT for $21.50 per share.

On the U.S. Front…

Notable U.S. Earnings…

Stock Price** EPS Estimate Reported EPS Prior Year Reported EPS
Rada Electronics Industries Limited (NASDAQ:RADA) $1.40 n/a $0.02 -$0.13
Earthstone Energy (AMEX:ESTE) $30.17 n/a $0.64* $0.40*

* denotes non-GAAP; ** Pre-market


Viryanet Ltd. (BB:VRYAF) ($2.65) – GeoBargain VRYAF provides integrated mobile and Web-based software applications for workforce management and the automation of field service delivery in North America, Europe, the Middle East, the Asia Pacific, and South America.  VRYAF announced that it has signed a share purchase agreement, agreeing to be acquired by Verisae, Inc. (“Verisae”).  ViryaNet currently anticipates that the consideration per share payable at closing shall be in the range of $3.15 – $3.40 per share.   The price is much lower than we would have hoped and would reflect a loss from our GeoBargain coding price of $3.90.  With a trailing EV/Sales of 1.3 based on high end price range of offer, we feel that the deal undervalues VRYAF shares when one considers other takeout SaaS valuations and the changes the company is making will improve its growth profile.  We are looking into the details of the  deal’s  valuation:

  • we are looking into the fully diluted shares to see why the $18.8 million cash consideration does not equate to a higher price.  Although the company has yet to file its 2013 20-F, based on last year’s 20-F the fully diluted share count including all convertible factors would be 4.76 million equating to a price of near $4.00 per share.  Based on Q1 2014 results, it seems as if the fully diluted share count has decreased to 4.19 million vs 4.37 million in the prior year first quarter.  While we understand several factors need to be considered including severance pay, other liabilities and possible finder’s fees we will look into this matter further.
  • Management’s previously stated guidance implies remaining quarters of 2014 would produce strong financial results.   Management has stated they expect 2014 to show improvement over 2013 and with weak Q1 2014 results of a loss of $0.09, the remaining 3 quarters should be strong.
  • The takeover offer comes on the heels of a large contract announcement for VRYAF’s first “cloud” product offering, setting a stage for a new period of growth  with a product line  that could command a higher valuation than  the company’s legacy products.
  • As of latest filings, management owned less than 50% (roughly 43%) of the shares outstanding, so shareholders could fight for a higher premium. (we are looking into recent management purchases to see if this % has changed)

Supercom Ltd Ordinary Shares (NASDAQ:SPCB) ($10.06) – GeoBargain on the Radar SPCB provides electronic monitoring, identification, and security products and solutions to governments, and private and public organizations in Europe, the United States, and Israel.  Yesterday shares of SPCB hit new highs on the heels of strong Q1 2014 and a bullish conference call.  Some highlights from call:

  • Management stated Q1 is historically its weakest quarter.  So when the expected improvement in sequential quarters is combined with the revenues from new contracts that are now kicking in, the GeoTeam expects significant sequential increases in SPCB’s Q2 financial results.
  • Management stated that the recent government contract wins of over $25 million announced on 3/27/2014 will have a recurring revenue stream of about $4 million annually.
  • Reiterate strength in its pipeline.

First two bullet points were information not available in press release.

Summer Infant (NASDAQ:SUMR) ($2.93) – SUMR operates as a designer, marketer, and distributor of branded juvenile health, safety, and wellness products in North America and the United Kingdom.  We are coding SUMR as a GeoBargain on the radar at $2.93.  Reasons for tracking:

  • Turnaround play; 2013 and 2012 were challenging years for the company, specifically on the bottom line
  • The company is running a more streamlined business, with improving margins and decreased SG&A
  • Company expects the bottom line to improve on a sequential and year over year basis throughout 2014
  • Believes top line will begin to show year over year improvement in the second half of 2014.
  • Analyst EPS estimates for 2014 are $0.14.  Thus far, analyst have not increased their EPS estimates, which given management’s commentary and the fact that the company reported $0.05 in the first quarter 2014 , should imply that EPS will be much higher than these estimates.   A causal guess would imply that full year 2014 EPS would come in at around $0.25 to $0.30.
  • Applying a FPE multiple of 15 on EPS of $0.25 gives us a short term price target of $3.75


  • Low margin business
  • Management has a history of overpromising and under-delivering.

Pump and Dumps…

Kirin Intl (OOTC:KIRI) ($0.67) – KIRI is engaged in the development and operation of real estate properties in the People’s Republic of China.  In our 6/2/2014 email we stated:

“We are on the fence of establishing a short position as the company has a small float.  We will continue to track the stock for big moves in either direction.”

KIRI shares dump in last two trading sessions falling over 50%.

For more timely information, particularly during the daily trading session, we urge our members to read our message board posts daily.


The GeoTeam