Last week was a busy news week for many of our GeoBargain and GeoSpecial companies. Thankfully, all the news was positive and powered the shares of some these companies to new 52-week highs.
China Green Agriculture (CGA). Closing Price Aug. 3, 2009 was $13.19
- Added to GeoBargain list on April 1, 2009 at $3.38.
- On August 3, 2009 CGA reached a high of $13.19, an increase of 290% since our initiation date.
On July 29, 2009 China Green Agriculture announced that its 2009 financial results would exceed the top end of its previously announced revenue guidance of $32.8 million to $33.3 million. Furthermore, the Company recently completed a $28.8 million common stock offering. The proceeds will be used to expand its existing Jintai research and development facilities through the construction of additional research centers, new intelligent green-houses and more training facilities. Recall from our initial report that in the process of testing CGA fertilizers, Jintai produces products for commercial sale. Chine Green Agriculture commented:
Our new greenhouse facilities will further equip our research and development team to introduce new products to meet the growing demand for green foods while bringing our products to the market quickly.
Jintai's current product categories:
- Top-grade flowers distributed through their fertilizer distribution network.
- Green vegetables and fruits distributed to a variety of wholesale markets and supermarkets in Xi'an City.
- Multicolored seedlings distributed to the seedling centers and planting companies in China.
The GeoTeam was unsure of how Wall Street would react to the recent stock offering initially indicated in its July 21, 2009 press release. The immediate reaction was negative as the stock fell $0.72. However, with a clear understanding of the use of the funds combined with the positive revenue guidance, investors seemed to have taken well to CGA shares.
We are uncertain if the company will experience some short-term dilution issues. For investors to receive clarity on this issue, they will have to wait until mid September when the company plans to release guidance for 2010. However, for long-term investors the picture still remains intact. Please be aware that the company has reached the majority of the GeoTeam's short-term potential valuation scenarios. It seems quite reasonable to assume that the company will exceed its previously stated EPS guidance which could give some upside to our short-term potential valuation scenarios. However, due to the recent stick run-up, combined with the fact that the stock has attained the GeoTeam's short term valuation scenarios, we are considering removing CGA from the GeoBargain list. This is a tough decision as the company is just starting to hit its growth stride and will be realizing the full benefit of its new humic acid production facility which commences operations this month.
China Carbon Graphite (OTC:CHGI) Closing price Aug. 3, 2009 was $1.23
- Added to GeoSpecial list on June 1, 2009 at $0.73.
- On July 30, 2009, CHGI reached a price of $1.35, an increase of 85% since our initiation date
Near the end of last week, China Carbon reported what we believe to be very significant news. In our initial report we voiced some concern about the potential dilution resulting from 6 million outstanding warrants. On July 30, 2009 China Carbon announced that it had retired the majority of these warrants in lieu of the issuance of 887,500 common shares.
Reasons the GeoTeam believes this news is significant:
- The presence of dilution may have been a factor for depressed stock levels. With this issue out of the way, we are hoping investors will be able to more confidently assess the valuation potential of the Company's stock.
- With a fully diluted share count of 14.6 million shares and shareholder equity of over $36 million, the stock is selling at a discount to its book value of $2.47 per share.
- The Company's actions relay a message that it is has a vested interest to increase shareholder value.
- The retirement of shares should give the China Carbon the flexibility to make accretive acquisitions as opportunities arise.
China Security & Surveillance (CSR). Closing price Aug. 3, 2009 was $8.94
- Added to GeoBargain list on March 25, 2009 at $3.64.
- On July 28, 2009 CSR reached a price of $10.24, an increase of 181% since our initiation date.
On July 28 China Security & Surveillance reported strong 2009 financial results and maintained its 2009 full year financial guidance. China Security remains on the GeoBargain list.
Cpi Aerostructures (CVU) Closing price Aug. 3, 2009 was $7.29
- Added to GeoBargain list on February 4, 2009 at $5.00.
- On May 8, 2009 CVU reached a price of $8.30, an increase of 66% since our initiation date.
- Added to GeoBargain list on May 19, 2009 at $1.90.
- On June 9, 2009 LLFH reached a price of $3.68, and increase of 94% since our initiation date.
On July 29, 2009 L & L International pre-announced its fiscal 2009 financial results ended April 2009 showcasing strong revenue and earnings per share growth. Updated valuation scenarios are available.
Orchids Paper Products (TIS) Closing price Aug. 3, 2009 was $22.85
- Added to GeoBargain list on February 4, 2009 at $9.78.
- On August 3, 2009 TIS reached a price of $22.98, an increase of 135% since our initiation date.
The Company reported strong 2009 second quarter financial results, exceeding analyst estimates by 17%. New valuation scenarios are available. Orchids Paper remains on the GeoBargain list.
Virgin Mobile (VM) Closing price Aug. 3, 2009 was $4.90
- Added to GeoBargain list on May 11, 2009 at $3.56.
- On July 28, 2009 VM reached a price of $5.28, an increase of 48% since our initiation date.
On July 28, 2009 the Company entered an agreement to be acquired by Sprint Nextel for up to $5.50 per share. Accordingly, we removed Virgin Mobile from the GeoBargain list on the same day. While we are pleased that the purchase price is a premium over our initiation price we are of the opinion that this deal is unfair based on EBITDA and recent earnings per share growth trends. See Valuation Scenarios. We would not be surprised if a shareholder lawsuit arose from this development.
Medifast (MED) Closing price Aug. 3, 2009 was $15.90
- Added to GeoBargain list on April 8, 2009 at $4.75.
- On August 3, 2009 MED reached a price of $16.00, an increase of 236% since our initiation date.
On July 30, 2009 Medifast reported strong 2009 second quarter financial results, slightly eclipsing analyst estimates. The stock has met or exceeded all of the GeoTeam's short and long-term valuation scenarios. Accordingly, we are removing the stock from the GeoBargain list. The GeoTeam will continue to monitor the MED story for stock pullbacks or significant developments that could once again warrant a place on the GeoBargain list. Current valuation scenarios are now available.
Disclosure: Long CGA, CHGI, CSR, CVU, LLFH, TIS, VM, MED