Calls to Action: None

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

General Highlights:

  • ChinaHybrid
    • TSL  announced it was selected to supply 23MW of PV modules to Linuo Solar Power
  • Tier 1 Pink
    • Adding UFMG to our Tier 1 screen, EPS for for nine months ended for fiscal 2014 increased 100% to $1.96.
  • Speculative
    • CCNI: Stock is trading near 52-week high.  Insiders have been buying aggressively, recent management commentary from  Q1 2014 release implies that the company is in the best position it has been in in some time.
    • We are taking a closer lookAYSI, stock is trading at 52 week highs and seems to be selling at low valuations on P/E, EV/sales, EV/EBITDA and price to book.  Please reference recent Seeking Alpha article for more color on the story.
    • BMRAis back on our radar due to a recent contract win with a large pharmaceutical company; expanded distribution channel and expanded product line.
    • WELXdespite history of losing money insiders have been aggressively buying stock, even as the stock is at new highs.
    • DIXIcompleted a  reverse merger with established restaurant operator of 12 Capriotti’s Sandwich Shops.
    • INBP: after experiencing losses every year between 2007 and 2013 the company has introduced new products and has implemented cost containment measures that has finally allowed the company to achieve profitability. It still has a long way to go to maintain profitability.

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

Disclosure: No positions; Other Long Positions; Other Short Positions; Pump & Dump Positions (Password GEO2014)

Summary of general highlights:

On the Asian Front…

Trina Solar (NYSE:TSL) ($11.81) – a global leader in photovoltaic (“PV”) modules, solutions, and services, today  announced it was selected to supply 23MW of PV modules to Linuo Solar Power Co., Ltd. (“Linuo Power”)’s distributed generation (“DG”) solar project located in China’s Shandong province. The project will utilize 92,000 Trina Solar TSM-250PC05A modules and cover 500,000 square meters of roof top. It is expected to produce 2990 kWH of electricity annually and mitigate 28,674 tons of CO2emissions. The Company expects shipments to be completed by the end of June 2014.

“We are delighted to have been selected as one of the key module suppliers to provide PV modules to Linuo Power’s DG solar project,” said Mr. Zhiguo Zhu, President of Trina Solar’s Module Business Unit. “This is testimony to Trina Solar’s ability to provide our customers with high quality products. This year the Chinese Government announced a target of 8GW of DG solar project installations and we believe there is significant potential for Trina to capitalize on the growth opportunities in the DG market segment in the second half of 2014.”

Tier One Pinks…

Universal Mfg. Co. (NBB:UFMG) ($14.50) – UFMG re-manufactures and distributes electric fuel pumps, brake calipers, transfer cases, and transfer case shift motors for the automotive industry in the United States.  The company also manufactures mobile hydraulic equipment, including explosion proof manlifts, steel scissor and track drive lifts, mining lifts, electrically insulated manlifts, high capacity manlifts, cleanroom manlifts, pedestal manlifts, machinery carts, and electric cranes.  Reasons for tracking:

  • Since 2006 sales have steadily increased from 8.3 million to 23.6 million
  • The company has not achieved impressive EPS growth since 2002. Disappointing EPS results culminated with a loss in 2012. in response to this performance the company Brought in a new management team to put them back on track for growth in sales and earnings.
  • Quote from 2012 shareholder letter:

“Another core characteristic of UMC generally, is that we are not competing in a sprint; we are in business for the long haul. Rocket top line growth is not healthy if it is not profitable; at the same time, making immediate profits at the expense of a foundation for long term growth is not a recipe for long term success. Time and effort has been spent this past year building a framework and structure that permits substantial growth and earnings for a long time.”

  • Since the end of fiscal 2012 financial results have steadily progressed.Specifically, year over year sales and earnings have increased for 7 straight qtrs

EPS non-GAAP

Fiscal Quarter 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year
October
REV $6.0 $5.7 $3.9
EPS $0.23 $0.22 ($0.10)
January
REV $7.9 $6.7 $4.5
EPS $0.88 $0.19 $0.17
April
REV $8.0 $6.8 $3.5
EPS $1.10 $0.57 ($0.26)
July
REV Tbd $4.5 $4.1
EPS Tbd $0.09 ($0.08)
Totals
REV $23.7 $10.0
EPS $1.07 ($0.27)
  • The 2013 year end shareholder letter also echos positive sentiment

“The year just completed was the first full year for new management at each operation. Andy Schmitt at ReTech and Phil Sprio at Man Lift have each provided great leadership. Much improvement was achieved at each operation and yet much more remains to be done.”

“We have made great progress; we had a good not great year, we grew sales, we grew profits and we improved our processes and structure. One year does not make a success story and nobody on our team is satisfied with what we have achieved. The good news is that we are in a better position to generate more sales, perform more efficiently and continue to grow both revenues and profits in the future”

  • The company has streamlined operations which has lead to increased operating margins.  the company is also increasing marketing efforts and introducing new and existing  products into new markets.

Caveats:

  • Company is impacted by timing of large orders
  • Backlog can be volatile

Speculative…

Command Center (OOTC:CCNI) ($0.54) – CCNI operates on-demand labor stores in the United States. It provides short term, unskilled, and semi-skilled temporary employees for manual labor, light industrial, and skilled trade applications. We are adding CCNI on our speculative screen today. The company is trading on its new 52-week high, and the insiders are still aggressively purchasing the stock through the open market.  After 2 years of revenue declines 2007 and 2008, the company has consistently grown revenues from 2009 to present. However, consistently strong eps has not been in the cards. But the company has reported 4 profitable quarters in a row(albeit minimal).  Bullish commentary from management in its first quarter 2014 release:

“In the first quarter of 2014, we maintained our positive earnings trajectory and recorded our highest profitable first quarter in company history,” said Bubba Sandford. “Changes we implemented in 2013 shortly after I joined the company are now establishing a clear path to increased profitability and we believe the company has a solid foundation for growth in 2014. Our ability to generate $0.01 in EPS during a seasonally weak quarter industry wide clearly demonstrates the leverage in our operating model and commitment to focus more on higher-margin business.”

CEO recently purchased100 thousand shares at open market prices ($0.46 avg) . We will attempt to interview management.  The shares outstanding is slightly higher than we like (65 million, we generally look for 50 million or less), but we will actively track to see if the company completes any share restructuring efforts.

Alloy Steel Intl (OOTC:AYSI) ($1.20) – AYSI manufactures and distributes Arcoplate, a wear-resistant alloy overlay wear plate produced through a patented process. The company is trading near its 52-week  high and its valuation multiples such as P/E, EV/Sales, EV/EBITDA, and price to book value, are low.  According to the recent Seeking Alpha article on 05/20/2014.  Highlights from article:

  • Alloy Steel International was tremendously cheap at 0.7 times EV/EBITDA.
  • Yet, it had a major problem: nepotism.
  • That’s what makes yesterday’s death of its founder so relevant. The death of the founder increases the likelihood of the company being sold or being managed neutrally towards minority interests.
  • Either way, it’s likely that the death of the founder is going to make the share price trade several times higher in the next few months.

The company is trading at a P/E 3.2, EV/EBITDA of 0.7, 0.8 times Price to Book Value, and 1 times of EV/Net Income.

Biomerica (OTCCB:BMRA)($0.95) -BMRA develops, manufactures, and markets medical diagnostic product for the early detection and monitoring of chronic diseases and medical conditions. We first added BMRA to our speculative screen on 10/29/2012 when the stock was trading at $0.83.  Stock had brief run over $1, but has been relatively stagnant over the last two years.  Please see our note from 10/29/2012 here.

BMRA is now back on our radar due to expanded distribution channel and expanded product line as well as a recent contract win with a large pharmaceutical company.

6/4/2014:

announced that it received two new China CFDA approvals for its Parathyroid Hormone (PTH) and Calcitonin products…The products will be distributed through a new China distribution channel unrelated to Biomerica’s current distribution channel in China. Biomerica’s new distributor for these is one of the top 3 leading Vitamin D test suppliers in China.

4/15/2014: Q3 results

“While we are pleased that we returned to profitability, we are more excited about the progress we have made in expanding our distribution through a relationship with a large multinational pharmaceutical company (over $40 billion in sales and over 70,000 employees) and product registrations both of which should contribute to our financial progress”

1/14/2014 :
announced it will supply two of its point of care products to a multinational pharmaceutical company for distribution in one European country with the possibility of expanding into multiple other countries throughout Europe.”

Dixie Foods Intl (OOTC:DIXI)($0.90)

DIXI operates as a fast casual restaurant. It operates sandwich shops in Dallas-Fort Worth, Texas; Orange, San Diego, and Southern Los Angeles counties in California; and Las Vegas, Nevada. The company also develops and operates Papa’s John’s in Fresno, Sacramento, and Central Valley trade areas.

  • On 06/11/2014 the company issued a press release for the completion of a reverse merger. After the reverse merger, the company has acquired KCI Investments which currently operates two franchise brands: Capriotti’s Sandwich Shops (12) and Papa John’s (in process).
  • Company will have sense of legitimacy due to the fact that it runs well known restaurants.
  • Committed to aggressive growth strategy with the Papa John’s franchise, where it plans to open 24 locations in the next two years.
  • Additionally, KCI Investments recently signed an agreement in principal with celebrity chef Alex Stratta to jointly develop, open and operate various restaurant and other food-service concepts.  Stratta was the first “Iron Chef”, having played the role of Iron Chef Italian on the television show Iron Chef USA, and has been nicknamed the “Italian Scallion”.

Caveats:

  • Already has 40 million shares outstanding, meaning the capital structure could end up having a lot of outstanding shares as the company implements its growth strategy.
  • Financials of reverse merge company have not been disclosed yet.
  • This could turn into a pump and dump candidate.

Integrated Biopharma, Inc. (BB:INBP)($0.25) – INBP is engaged in manufacturing, distributing, marketing and sales of vitamins, nutritional supplements and herbal products.

  • After continuous losses between 2007 and 2013, the company has turned profitable (EPS of $0.01 as of 9 months ended FY 2014 on a 5% increase in sales to $25.5 million).
  • Investors may not be paying attention to the story since the company has lost money in its FY 2014 Q3 on reduced sales due to product shipment delays caused by inclimate weather.

“Our financial performance in the three months ended March 31, 2014 was negatively impacted by the inclement weather in the northeast of the United States during January and February 2014.”

  • Investors are probably better served to look at first two quarters 2014 results.

Comments from Q3 2014:

“We continue to focus on our core businesses and maintaining our cost structure in line with our sales.  In our branded product segment, we continue to maintain and strengthen the relationships developed in the fiscal year ended June 30, 2013, which were focused primarily in the international markets of Canada, Mexico and Asia.  We are also developing new products, including branded products for solid dosage, which will be manufactured by MDC and sold using our AgroLabs brand. We believe that this will increase sales and further leverage our fixed manufacturing and selling costs in each of these segments as we diversify our branded product offerings to our existing and prospective customers.”

We plan on interviewing management to see if these operational gains can continue.

Caveats:

  • Legal issues with large shareholder who was part of a past financing
  • Dilution issues (10 million shares)
  • Negative equity and negative working capital

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