Call(s) to Action: Coding IIN and ICCC as GeoBargain on the radars; will look to nibble at shares and look to interview management to confirm our optimism.
- ICCC ($4.65) – Coding as a GBR based on strong Q1 2014 results, bullish management commentary and potential FDA approval for new product.
- IIN ($8.80) – Coding as a GBR based on strong Q1 2014 results (including best quarterly revenue performance in 5 years), restructuring plan paying off, and bullish outlook by management
Here are the stories that the GeoTeam is following today… (Please see full disclosures at bottom)
- ChinaHybrids
- XNET (IPO) – XNET, one of the top 10 largest Chinese internet companies priced 7.3 million shares at $12.00, above expected range of $9.00 to $11.00. Shares began began trading today on the NASDAQ.
- LIWA (halted) – NASDAQ to delist the company’s securities. LIWA has until end of day today to appeal. Please recall on 4/30/3014 we issued our investor alert stating LIWA is in a serious debt crisis and its chairman Zhu Jianhua is being investigated by local police.
- SINO ($2.26) – Announced private placement. Sold 200,000 shares near current market prices.
- STV ($4.48) – Announced reorganization of corporate structure and management team.
- Pump and Dumps
- MJMD ($0.55) – Closed out are short position, locking in small gains and moving on to other opportunities.
For more timely information, particularly during the daily trading session, we urge our members to read our message board posts daily.
Disclosure: Short LIWA ; Other Long Positions; Other Short Positions; Pump & Dump Positions (Password GEO2014)
Summary of general highlights:
On the Asian Front…
Lihua Intl (NASDAQ:LIWA) ($2.08) (halted) – NASDAQ will delist the company’s securities, and the deadline for LIWA to appeal is the end of today (06/24/2014). Please recall on 4/30/3014 we issued our investor alert stating LIWA is in a serious debt crisis and its chairman Zhu Jianhua is being investigated by local police.
Sino-Global Shpping (NASDAQ:SINO) ($2.26) – an international shipping agency and logistic services provider, today announced that the Company has sold 200,000 shares of its common stock to Crystal Spring Holdings Limited, a company owned by Mr. Deming Wang, a citizen of PRC (the “Buyer”) at a price per share equal to a 5% discount (the “Offering Price”) to the five-day period ended June 12, 2014. Upon issuance of the shares of common stock to the Buyer, the Company will have 5,103,841 common shares issued and outstanding.
China Digital Tv Holdings (NYSE:STV) ($4.48) – the leading provider of conditional access (“CA”) systems and comprehensive services to China’s expanding digital television market, today announced plans to conduct an internal reorganization (the “Reorganization”), as a result of which it will have legal ownership of Beijing Novel-Super Digital TV Technology Co., Ltd. (“Beijing N-S Digital TV”), the variable interest entity which it currently controls through contractual arrangements in China (the “VIE structure”), and plans to adjust the Company’s senior management team.
On June 13, 2014, China Digital TV announced its plan to inject its CA, Network Broadcasting Platform and Video on Demand (“VOD”) businesses into Shanghai Tongda Venture Capital Co., Ltd. (“Tongda Venture”) (Stock Code: 600647) (“the Restructuring”) in exchange for a controlling stake in, and RMB1.15 billion in cash from, Tongda Venture. The Restructuring is ongoing.
China IPO’s Set to Begin Trading…
Xunlei Limited (Unknown:XNET) – today announced the pricing of its initial public offering of 7,315,000 American Depositary Shares (“ADSs”) at an offering price of $12 per ADS. Each ADS represents five common shares. The Company’s ADSs are expected to begin trading on the NASDAQ Global Select Market on June 24, 2014 (US Eastern Time) under the ticker symbol “XNET.” Xunlei’s initial public offering consists of 7,315,000 ADSs. In addition, the underwriters have been granted a 30-day option to purchase up to an additional 1,097,250 ADSs.
On the U.S. Front…
GeoBargain/Specials…
Immucell (NASDAQ:ICCC) ($4.65) – ICCC develops, acquires, manufactures, and sells products that enhance animal health and productivity in the dairy and beef industries in the United States and internationally. We are coding ICCC as a GeoBargain on the radar at $4.65. Reasons for tracking:
- After several years of around $4 million in annual revenues the company started breaking out in 2011; more importantly, non-GAAP EPS has improved 9 of the last 11 quarters with highest level of EPS reported in Q1 2014.
|
Fiscal Quarter |
2014 Fiscal Year | 2013 Fiscal Year | 2012 Fiscal Year | 2011 Fiscal Year |
| March | ||||
| REV | $2.1 | $1.8 | $1.7 | $1.6 |
| EPS | $0.13 | $0.07 | $0.05 | -$0.01 |
| June | ||||
| REV | TBA | $1.4 | $1.2 | $1.2 |
| EPS | TBA | $0.00 | $0.01 | -$0.08 |
| September | ||||
| REV | TBA | $1.2 | $1.1 | $1.0 |
| EPS | TBA | $0.02 | -$0.02 | -$0.04 |
| December | ||||
| REV | TBA | $1.6 | $1.4 | $1.3 |
| EPS | TBA | -$0.04 | $0.00 | $0.00 |
| Totals | ||||
| REV | $6.0 | $5.4 | $5.1 | |
| EPS | $0.06 | $0.04 | -$0.12 |
- Q1 2014 continued this trend with revenues of $2.0 million (highest in company’s history) and non-GAAP EPS of $0.13 which was more than all of fiscal 2013. While Q1 is generally the strongest quarter for the company, management commentary suggest remaining quarters in 2014 will show growth.
“We are experiencing positive sales momentum, which I expect will continue to result in continued revenue growth throughout 2014.”
- Investors looking at GAAP earnings are overlooking several one time expenses that were incurred to set the stage for growth.
“Product development expenses of $594,000 during the three-month period ended March 31, 2014 were comprised of $412,000 in connection with the installation of its pharmaceutical-grade Nisin production capability (which management considers to be non-recurring, infrequent and unusual expenses) and $182,000 in connection with other product development expenses.”
- Significant progress made towards Company’s objective of achieving New Animal Drug Application (NADA) approval and test marketing of Mast Out® by early 2016.
- Investors will likely agree that emphasis on improving food safety and productivity for dairy and beef industries has been a growing trend. A healthy global food supply is an improving concern for regulators. The FDA Food Safety Modernization Act (FSMA), is the most sweeping reform of our food safety laws in more than 70 years, was signed into law by President Obama on January 4, 2011. It aims to ensure the U.S. food supply is safe by shifting the focus from responding to contamination to preventing it.
Caveats:
- Two customers accounted for 83% of revenues in 2013
- Mast Out product is still in very early stages, while progressing towards its goals of achieving new animal drug application approval and test marketing, that is not anticipated to occur to early 2016
- Seasonality is an issue, Q1 is generally strongest quarter for the company. We need to determine if they can maintain profitability in remaining quarters.
We will attempt to interview management.
Intricon (NASDAQ:IIN) ($8.80) – IIN designs, develops, engineers, and manufactures body-worn devices in the United States and internationally. Specifically product categories include, hearing devices/instruments, sensors and flow restrictors that monitor and control the flow of fluid in an intravenous infusion system and audio headsets used in emergency response fields as well as head-worn devices used by performers and support staff in the music and stage performance markets. We are coding IIN as a GeoBargain on the radar at $8.80. Reasons for tracking:
- After a temporary revenue breakout in 2007, revenue growth failed to materialize over the last 5 years. However, Q1 2014 puts IIN on track to reach or surpass those levels of 2007. In fact, Q1 2014 revenues of $17.3 million is highest level since Q2 2007.
| 2013 Fiscal Year | 2012 Fiscal Year | 2011 Fiscal Year | 2010 Fiscal Year | 2009 Fiscal Year | 2008 Fiscal Year | 2007 Fiscal Year | 2006 Fiscal Year | |
| Revenue | $53.0 | $60.0 | $52.1 | $58.7 | $51.7 | $57.9 | $69.0 | $51.7 |
- Restructuring plans resulted in a realization of cost reductions, focus on higher growth markets, and improved margins.
- The company is embarking on aggressive debt reduction initiative which should help margins going forward. For example reduced bank debt by nearly $1 million in Q1.
- IIN’s largest customer, Medtronic received FDA approval for their MiniMed insulin pump. IIN expects medical sales to remain strong in 2014 as Medtronic fulfills marketplace demand for MiniMed. This development should give investors comfort that revenues will not be lost from its largest customer.
- Bullish commentary from management:
“For the third consecutive quarter we recorded sequential growth in sales, gross profit margins and profitability from continuing operations”
“With a return to profitability and a favorable outlook from our major customers, we’re on track to continue to deliver strong performance in 2014”
- We believe these facts discussed could lead to valuation multiple expansion which currently stand at: (using Q1 run rate)
- EV/Sales = 0.8
- EV/EBITDA = 9.3
- P/E = 12.7
Caveats:
- Pull back in shares is certainly in the cards. Stock has had strong run in last three months rising from the mid $4’s in early April to current prices of high $8’s.
- The company has a history of lumpiness in its quarterly results.
We will attempt to interview management.
Pump and Dumps…
Medijane Holdings Inc (OOTC:MJMD) ($0.56) – On 5/16/2014 we mentioned there has been recent third party promotional activity, and that we are looking into the story for red flags regarding the characters involved in the story. On 5/20/2014 we released our short thesis article titled, “Medijane Prime To Attract Regulator Attention Amid Slew Of Red Flags”.
Yesterday, we covered our short position, locked in small gains, and now we are moving on to other opportunities.
For more timely information, particularly during the daily trading session, we urge our members to read our message board posts daily.
Sincerely,
The GeoTeam