Tri-Tech Holding (NASDAQ:TRIT) jumped from $1.39 on Monday morning to $2.48 at the close on Thursday, notching a cool 78% gain. My previous article on the company laid out the basic history of the company since its IPO and why I thought there was significant upside. Since the article was posted, the company has issued 3 press releases:
- Announced changes to senior management
- Updated land sale in Baodi, China
- Suspended India partnership with Chengdu Xingrong Investment Co.
The changes to senior management were not that surprising to me, although we'll have to wait and see how much of an impact it will ultimately have. The press release giving an update on the land sale in Baodi, China, did not really contain any new information, but still caused the stock to jump. By announcing that the sale was proceeding "on schedule" and "smoothly" did alleviate concern that the property did actually have the value the company claimed, and should mean a much improved cash position moving through the end of the year. I am not able to discern whether the suspension of the India partnership is a positive or negative right now. While the partnership should have allowed for good growth opportunities, it may have also put a burden on cash flow and increased expenses while waiting for those opportunities to materialize.
A decree signed by Chinese Premier Li Keqiang, which stipulates that all governments above the county level must include the building and management of urban drainage and sewage treatment facilities into their economic and social development plans, seems to be the cause of the parabolic stock rise on Thursday. Almost $82 billion was to be allocated in the 5-year plan from 2011-2015, but it's not apparent exactly how much has already been spent. This does represent a huge opportunity for Tri-Tech, since the company specializes in early warning flood systems, which often carry much higher margins than traditional EPC contracts. Also, a September guideline issued by the State Council aimed to increase the consumption of recycled water should provide increased sales opportunities for the company's Forward Osmosis technology.
As of Sept. 30 there were 217,764 TRIT shares short. A short squeeze probably accounted for a good amount of the stock rise, although I'm still maintaining my 12-month price target of $6.75. If the company is able to reduce expenses and improve its cash position through the end of the year, Tri-Tech should be in prime position to capture a good chunk of new work being stipulated by Chinese Premier Li Keqiang, and I may revise my price target upwards. As usual with micro-cap stocks, however, your conviction will be tested and wild price swings should be expected.
Disclosure: I am long TRIT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.