GEO Investing

Call(s) to Action:

MAG ($25.00) –  Reported strong Q2 2014 results; Reported non-GAAP EPS of $0.74 more than doubling prior year results of $0.36 and crushing analyst EPS estimates of $0.32. Ex-GEO portfolio position reported significant increase in EPS due to decrease in pension expense. Business condition is improving, looking to re-establish the position.

APPG ($1.61) – For the pump and dump crowd, we have APPG. Second stock we found that aims at riding the hype that The popular TInder APP has created.  Issues detailed shareholder letter, a common move of prior pump and dumps. Fully diluted share count is 44.8 million.

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

  • ChinaHybrids
    • CTC ($1.60) – Announced that its plan for continued listing on the NYSE has been accepted.
    • CMCM ($20.50) – New bearish Seeking Alpha article for CMCM. Please also recall we published a short thesis article on 07/31/2014.
  • U.S. News
    • MSLP ($11.15) – Reported strong Q2 2014 results; Reported a 83% increase in sales; EPS of $0.03 vs a loss of $0.34 in the prior year and ahead of analyst estimates of a loss of $0.08.
    • SGC ($20.42) – Watching for pullback to buy.  The company has grown revenues and EPS for 6 straight quarters.  Management offered bullish commentary on it’s Q2 2014 earnings call.  We believe shares could trade at a trailing P/E of 25 or $33.75 per share.
    • GLUU ($5.72) – Will begin tracking due to recent accretive acquisition, analyst price target raised and turning profitable for first time (annually).
    • RWC ($4.10) – Taking a closer look due to a significant amount of shares purchased by an institutional holder/director.

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

Disclosure: Short CMCM ; Other Long Positions; Other Short Positions; Pump & Dump Positions (Password GEO2014)

Summary of general highlights:

On the Asian Front…

Ifm Investments(NYSE:CTC) ($1.60) – a leading comprehensive real estate services provider and the exclusive franchisor for the CENTURY 21® brand in China, today announced that the New York Stock Exchange, Inc. (“NYSE”) has accepted the company’s plan (“Plan”) for continued listing on the NYSE.

As previously disclosed, Century 21 China Real Estate received notification from the NYSE on March 12, 2014, that the Company had fallen below the NYSE’s continued listing criteria requiring that it maintain an average global market capitalization of at least US$50 million over a consecutive 30 trading-day period or total shareholders’ equity of US$50 million. As a result of the NYSE’s acceptance of the Plan, the Company’s American depositary shares representing its ordinary shares will continue to be listed subject to quarterly reviews by the NYSE to ensure the Company’s progress toward its plan to regain compliance with the continued listing standards. The Company has 18 months from the original notification date to regain compliance with the average global market capitalization standard or the minimum shareholders’ equity standard, subject to its compliance with the NYSE’s other continued listing requirements.

Cheetah Mobile Inc (NYSE:CMCM) ($20.50) – CMCM operates a platform that offer mission critical applications for its users and global content distribution channels for its business partners in the People’s Republic of China. There is a new bearish Seeking Alpha article for CMCM. Please also recall we published a short thesis article on 07/31/2014.

On the U.S. Front…

Musclepharm Corp Common (OOTC:MSLP) ($11.15) – MSLP engages in the development, manufacture, and marketing of nutritional supplements for athletes. The company reported strong Q2 2014 results:

  • Revenues was $46.7 million this quarter, a 83% of increase, as compared to $25.5 million in the same quarter last year.
  • EPS of $0.03 vs a loss of $0.34 in the prior year and ahead of analyst estimates of a loss of $0.08.

Quotes from management,

“MusclePharm’s solid second-quarter results are a testament to the strength of the company’s brands in what has historically been a challenging quarter,” said Brad Pyatt, MusclePharm’s chairman and chief executive officer. “As MusclePharm gains further traction both domestically and internationally, we remain focused on driving the strength of our brands, while enhancing our leadership position.”

Magnetek (NASDAQ:MAG) ($25.00) – MAG  manufactures digital power and motion control systems used in material handling, people moving and energy delivery. The company reported strong Q2 2014 results:

  • Revenues was $27.0 million this quarter, a 12% sequential increase, and remains flat as compared to 27.0 million in the same quarter last year.
  • EPS of $0.74 vs $0.36 in prior year, and vs EPS estimate of $0.32.

MAG is an Ex-GEO portfolio position (we closed out our position on 06/05/2014).  The reported significant increase in Q2 2014 EPS is mainly due to a decrease in pension expense.  It is worth noting that business conditions are improving, and that we may look to re-establish a position in the stock.

Quotes from management,

“End market conditions improved throughout much of our second quarter, and while our sales level was steady with last year, on a sequential basis our sales were up 12% from our first quarter. Compared to the first quarter, sales for material handling applications, our largest served market, were up nearly 10%, while sales into elevator markets were up 15%. In addition, our second quarter gross margin increased to 36% of sales, and our operating profit margin exceeded our stated target of 10%. In summary, we challenged the organization to improve our operating performance, and our people responded very well, as we not only saw healthy growth in our business, but also controlled our costs and managed our assets quite well,” said Peter McCormick, Magnetek’s president and chief executive officer.

“Business conditions in most of our end markets improved during the quarter, as the momentum we experienced late in the first quarter continued into the second quarter. We’re optimistic that economic activity will continue to show modest improvement through the remainder of 2014. Over the past several quarters, we’ve continued to take actions to better align our cost structure with current sales volumes, improving the operating leverage in our business, and we saw the impact of those actions in our second quarter results. If we’re able to maintain current incoming order rates throughout the third quarter, we should be able to post quarterly operating results in the second half of the year similar to the results of the second quarter,” said Mr. McCormick.

Superior Uniform Group (NASDAQ:SGC) ($20.42) – SGC manufactures and sells a range of uniforms, image apparel, and accessories primarily in the United States.    Our reasons for tracking this company are:

  • We began tracking the stock late 2011, and below is our notes,

“Just reported 2011 third quarter EPS of $0.31, up ~35% from 2010 third quarter. This is the highest quarterly EPS number in at least 14 quarters. Revenues also advanced. This was a nice quarter, especially given the fact that the company is experiencing margin pressures that will stick around for about 6 months.  Need to inquire about seasonality as it looks like the third quarter is the strongest. If seasonality is not an issue, the next three quarters could continue to show strong EPS gains. Company is facing challenging times as its employee apparel products are dependent on employment levels. However, see link to learn how the company is addressing this issue and possibly positioning itself for a new growth cycle.”

The near term challenges that we highlighted in 2011 continued in 2012, evidenced by meager increase in revenue and increase in its EPS. However, the company has grown revenue and EPS for 6 straight quarters, beginning in 2013. The stock price responded strongly to its recent q2 2014 financials:

  • Revenue increased by 72.5% from $30.9 million last year to $53.2 million this quarter.
  • Diluted EPS of $0.57 as compared to $0.23 in the same quarter last year.
  • Although the company does not expect similar financial performance going forward, it still believes it will grow in the remainder of the year, according to management commentary in its Q2 2014 earnings press release,

“Obviously, several factors came together and were well aligned at the same time in order for us to deliver stellar results of this magnitude. While this level of earnings is not to be expected each quarter, our overall backlog in the Uniforms and Related Products segment remains very strong and we expect to continue to report strong earnings in this segment as we move forward.”

“In addition, we strengthened our direct sales effort, and as a result, we won contracts with two of the largest healthcare providers in the country.”

“I believe the company has never been in better financial shape and we have the right team in place to continue to execute on our growth strategies.”

We are hoping the stock pulls back, but we believe shares could eventually trade at trailing P/E multiple of 25 or $33.75 per share.

Glu Mobile (NASDAQ:GLUU) ($5.72) – GLUU develops and publishes a portfolio of action/adventure and casual games for the smartphones and tablet devices users. We are starting to track this company due to the reasons below:

  • The company participates in a hot sector and just turned profitable after 3 years of losses.
  • Just acquired a company that has  eading racing app games on mobile phones, and GLUU claims the acquisition will be accretive.
  • Stock took a little hit on earnings because Q3 2014 low end revenue guidance of $80 to $85 million is less than consensus estimates of 84 million. But analyst still raised their price target from $6 to $8, we believe investors will come back to the name when they get excited about the acquisition.


  • We need to perform a  valuation analysis  on other mobile phone companies, but shares are trading at EV to EBITDA of around 9 based on the current quarterly EBITDA run rate, which is likely not terribly expensive for this space.

Relm Wireless (AMEX:RWC) ($4.10) – RWC designs, manufactures, and markets wireless communications products under the BK Radio and RELM brand names in the United States and internationally. Reasons for tracking:

  • The company has not shown impressive growth since 2004 in terms of revenue, but a couple of developments piqued our curiosity:
    • A significant amount of  recent share purchases were made by an institutional holder/director, (Privet fund) at prices ranging from 3 to 4 dollars. Specifically, the institution purchased 130,000 during this time frame, and Privet now owns 17.1% of the company.
    • The Privet fund has been purchasing shares since 03/11/2013.
  • The majority of this company’s business is dependent upon government funding, which is obviously has not been a favorable scenario over the last few years. But management stated that local governments have been releasing funds to buy its products. We get the sense that the story is more of a when it will gain momentum, not if.
  • Competitors are exiting the market.

Readers that want to know more about RWC are encouraged to read the 05/08/2014 Seeking Alpha article:

Article summary:

  • RELM announced a $1.4 million mobile radio order with a new federal customer.
  • Contract momentum provides support for the first half of 2014, and Q3 is seasonally strong.
  • A breakout year for RELM could yield nearly $0.50 in cash EPS and a higher stock price.


  • Dependence on government funding.
  • Intense competition.
  • Management does not provide financial guidance.
  • Investors may be losing patience in management of the company.
  • We are not totally convinced that the company is in a position to consistently grow its EPS on the quarterly basis at this time.
  • The company has history of having one or two good quarters followed by weak quarters, which occurred in 2013 when they had a record first quarter but weak second and third quarters.

Pump and Dumps…

Apptigo Intl Inc New (OTCCB:APPG) ($1.61) – APPG designs, develops, and markets mobile applications in the United States. The company completedreverse merger in April 2014. Reasons for tracking:

  • Just like BLCK, a stock we highlighted  in yesterday’s  email highlights, the company is  riding the  hype of the popular Tinder dating  APP with over 10 million downloads.
  • The company issued a detailed shareholder letter, which is a common move of prior pump and dumps. According to the letter,

“Our first mobile app introduced in the Apple®AppStore(SM) earlier this month is  SCOREâ„¢, an exciting, new, interactive dating game that allows people of all ages in local or far-flung geographic areas to determine their compatibility by answering fun questions across a broad range of topics. SCORE is the result of nearly two years of investigative market discovery and creative development and represents what we believe is the most innovative new mobile app entry in the $2.1+ billion online dating industry. In SCORE, we have combined intuitive geomapping technology with the power of social networking…”

  • The shareholder letter is very promotional talking about a $300 billion opportunity.

“According to industry research firm Gartner, the mobile app market is white hot and growing rapidly. They predict that by the year 2016, there will be 310 billion downloaded apps reaching $74 billion in annual revenue. So, there is no question that the market opportunity for us is immense and compelling.”

“SCORE is the result of nearly two years of investigative market discovery and creative development and represents what we believe is the most innovative new mobile app entry in the $2.1+ billion online dating industry.”

  • The company conducted a 3.5 for 1 forward split in the reverse merger transaction. Current shares outstanding as of 05/09/2014 is 29.2 million and the potential fully diluted share count is around 44.8 million. Please note that our original highlight on this company inaccurately stated that the company had a 13 million fully diluted share count, as we did not identify the forward stock split.

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


The GeoTeam