GEO Investing

Call(s) to Action: None

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

  • ChinaHybrids
    • BONA ($7.49) reported Q2 2014 results, reported non-GAAP EPS of $0.05 vs $0.04 on a 58% increase in revenues.  Q3 non-GAAP net income guidance implies Q3 EPS of around $0.12 sharply higher than analyst EPS estimates of $0.06.
    • NCTY ($2.57; marked up pre market) – Announced the joint venture with QIHU has obtained the publishing and operating license of Firefall in China.   NCTY also announced the sale of one its subsidiaries, Shanghai Huopu Cloud Computing Terminal Technology Co., Ltd. for a total consideration of RMB200 million in cash.
    • KNDI ($19.12) – China is considering a new tax on gasoline to help make electric vehicles more attractive to Chinese consumers, according to WSJ, citing BYD Chairman Wang Chuanfu.
  • U.S. News
    • UEPS ($11.70) – Reported strong Q4 2014 results;
      • Revenues of $182.7 million vs $117.8 million in the prior year
      • EPS of $0.51 vs $0.28 in the prior year and crushed analyst estimates of $0.33.
      • Guides above for fiscal 2015 EPS.
    • XXII ($3.03) – Announced that NASCO Products entered into a multi-year manufacturing agreement with Smoker Friendly International.  We look forward to tracking this development.  Recall on 8/27/2014 we released our short thesis report on XXII, “22nd Century Group: A Lot Of Smoke, Not Enough Fire”.
  • Marijuana Hype
    • Adding TTNS to our Cannabis screen: a low float marijuana company  ( 10.5M shares  outstanding) as result August  15, 2014 reverse merger.

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

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

Summary of general highlights:

On the Asian Front…

Select China Earnings…

Stock Price** EPS Estimate Reported EPS Prior Year Reported EPS
China Cord Blood (NYSE:CO) $5.24 $0.05 $0.06* $0.06*
Bona Film Group (NASDAQ:BONA) $7.15 $0.04 $0.05* $0.04*

* denotes non-GAAP; ** Pre-market

Please see our ChinaHybrid June 2014 quarter earnings screen (password GEO2014) for select companies that have reported earnings.

In Other News…

The9 (NASDAQ:NCTY) ($2.57; marked up pre market) – an online game developer and operator, announced today that;

Shanghai The9 Information Technology Co., Ltd., a wholly-owned consolidated variable interest entity of The9, has closed a transaction with Shanghai Zhengwu Investment Center (Limited Partnership) for sale of its wholly-owned subsidiary Shanghai Huopu Cloud Computing Terminal Technology Co., Ltd. (“Huopu Cloud”) for a total consideration of RMB200 million in cash. Huopu Cloud holds a web game QiJiGuiLai and has the right to receive a minority portion of royalties generated from operation of the game Firefall® in mainland China upon payment and other conditions. Firefall® is a MMO shooter game developed by Red 5 Studios, Inc., a subsidiary of The9.

The9 has obtained a fair market value appraisal from an independent valuation advisory firm prior to the completion of the transaction. The board of directors of the Company reviewed the transaction and approved it. The9 intends to use the proceeds of the sale for developing and operating its other MMO, web and mobile games.

NCTY also announced;

that Red 5 Singapore Pte. Ltd. (“Red 5 Singapore”), a subsidiary of The9, has entered into a license agreement with System Link Limited for publishing and operating Firefall® for a five-year term in mainland China. Under this license agreement, System Link Limited will pay to Red 5 Singapore at least US$160 million including license fee and royalties during the contract period. Firefall® is a MMO shooter game developed by Red 5 Studios, Inc., a subsidiary of The9. System Link Limited is a joint venture formed by The9 and Qihoo 360 Technology Co., Ltd.

On the U.S. Front…

Net 1 Ueps Technologies (NASDAQ:UEPS) ($11.70) – UEPS provides payment solutions and transaction processing services for various industries in South Africa, Korea, Europe, and internationally. The company reported strong Q4 2014 results:

  • Revenues of $182.7 million vs $117.8 million in the prior year
  • EPS of $0.51 vs $0.28 in the prior year and crushed analyst estimates of $0.33.
  • Guides above for fiscal 2015 EPS.

Quotes from management,

“Our results once again demonstrate our ability to implement large and complex national projects efficiently, and to rationalize our cost structure in order to drive margin improvement. We can achieve such results due to our superior technological solutions and their ability to adapt seamlessly to the ever-changing needs of our markets and our customers. More importantly, we have been able to focus our attention on our growth strategy targeting international markets. This strategy is mobile- and payment-centric, and is designed to deliver solutions that incorporate a number of “killer” applications in the space of money transfers, loyalty programs, electronic wallets and secure CNP payments,” said Dr. Serge Belamant, Chairman and CEO of Net1. “Our new streamlined operational teams are ready for significant expansion not only locally but globally as well. This new focused approach will allow us to diversify our risk profile from a geographical, currency and customer point of view. I am delighted with our personnel and their commitments, and strongly believe that we are now entering a period of sustained growth that will result in continued shareholder value creation,” he concluded.

“I am proud of our financial achievements in fiscal 2014, which have provided the catalyst for our expected growth trajectory in fiscal 2015,” said Herman Kotzé, Chief Financial Officer of Net1. “For fiscal 2015, we expect fundamental earnings per share of at least $1.92, assuming a constant currency base of ZAR 10.40/$1 and a share count of 46 million shares. Our fiscal 2014 fundamental earnings per share included approximately $0.40 related to the recovery of our SASSA implementation costs, which will not recur in fiscal 2015,” he concluded.

Recall on 6/6/2014 we stated:

UEPS provided an  update on South African Social Security Agency award.  No judgement is to be made for likely a year; UEPS has a  contract through February 2017 unless new judgment is ruled.  Timing of the decision is likely a slight positive for UEPS shares.  This development may not be a strong enough catalyst to cause as an aggressive of a near term move in shares of UEPS as we hoped.

Marijuana Hype…

Thermal Tennis Inc (OTCCB:TTNS) – CannaSys was originally organized as a Colorado limited liability company in October 2013 and converted to a Colorado corporation in June 2014.  Based on their experience for over four years in the medical cannabis dispensary business in Colorado between 2009 and 2013, founders Brandon C. Jennewine and Daniel J. Rogers organized CannaSys to create, develop, and commercialize innovative solutions to solve problems, create opportunities, and streamline the connections between the producer, seller, and consumer/patient segments for the growing medical and recreational cannabis community. The company conducted a reverse merger on 08/15/2014:

“On August 15, 2014, Thermal Tennis, Inc., a publicly held Nevada corporation subject to the periodic reporting requirements under the Exchange Act (“Thermal Tennis”), and CannaSys, Inc., a privately held Colorado corporation focused on providing services to the cannabis industry (“CannaSys”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) to combine the business and activities of Thermal Tennis and CannaSys into a single entity (the “Merger”).  Under the terms of the Merger Agreement, a wholly owned subsidiary of Thermal Tennis formed to effectuate the Merger was merged with and into CannaSys, the surviving entity, which then became a wholly owned subsidiary of Thermal Tennis.  By operation of the Merger, which was effective August 15, 2014, all of the CannaSys outstanding common stock was converted into a total of 6,000,000 shares of common stock of Thermal Tennis, which constitutes 57.70% of the Company’s total issued and outstanding common stock.”

For a list of stocks we are tracking in the Marijuana space please go here.

**Please note that our decision to buy selected marijuana names is just based on our desire to ride the hype surrounding the sector and not an endorsement of their operations.  In the long-term, most of the marijuana stocks being hyped will likely come crashing down.  Also note that on 3/17/2014 we  mentioned that we have liquidated most of our marijuana holdings.

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


The GeoTeam