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At GEO, our focus is on providing high quality insights on mid and micro cap equities, both in the China and U.S. spaces. Since our inception, we have come to be known by our GeoBargain selections, a group of stocks with a specific set of criteria that has proven to help them perform better than... More
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  • FOSUN's Large Stake In China Information Intrigues GeoInvesting; New High Research 0 comments
    May 6, 2013 11:25 AM | about stocks: MKTY, CNIT, HYDI, PWRD, ARIS

    GeoInvesting will now publish select Premium research notes here on our Seeking Alpha blog. Please note that these notes have already been sent to our Premium Members on GeoInvesting.com, who get a regular morning email near market open.

    On the Asian Front

    China Information (NASDAQ:CNIT) ($1.98) - On April 11, 2013 GeoInvesting published some due diligence findings on Perfect World Co (NASDAQ:PWRD). Part of our bullish thesis was based on the fact that FOSUN, a company with a good track record of investing in U.S. listed Chinese companies, has taken a large stake in PWRD shares.

    Upon further due diligence we noticed that FOSUN has also taken a stake in shares of CNIT. Through a 13G filed on February 13th 2012 FOSUN disclosed that it holds a 9.49% stake in CNIT (5.2 million shares). FOSUN disclosed its initial ownership in CNIT through the ownership of 4.3 million shares on June 20th 2012.

    While GeoInvesting has not performed any due diligence on CNIT we will establish a small position in its shares, on FOSUN's coattails.

    From a fundamental point of view CNIT has reported losses and lackluster revenue growth for several quarters. CNIT management claims that it is in the midst of restructuring operations to put the company on the path of growth.

    The tangible book value of CNIT is $5.50.

    Investors should keep in mind the CNIT shares have spiked several times since March, only to see shares pull back.

    New High Research

    Ari Network Services (OOTC:ARIS.OB) ($2.75)

    We will start actively tracking ARIS, a company that develops software solutions connecting consumers, dealers, distributors, and manufacturers in selected vertical markets.

    Shares hit a new high May 3rd 2013 on news that its division targeting the auto-motive tire industry experienced revenue growth of 25% in March. These revenue gains are being driven by a November 8th 2012 acquisition of one of its leading competitors. We do not know how much of the company's revenues are derived from the tire segment. However, the company has disclosed that the recent acquisition will double the size of its website business which accounted for 25% of its total revenue pre acquisition but comprise the majority of the company's overall revenues post acquisition.

    ARIS reported 2012 revenues of $22.5 million (similar to revenues in 2010 and 2011). We estimate that the acquisition will allow ARIS to achieve 2013 revenues of $30 million leading to a marketable increase in the company's quarterly revenue run rate to at least $8 million, which is well above the company's quarterly run rate of $5 to $5.9 million experienced over the last 3 years.

    GeoInvesting also noticed that an investment company filed a 13D disclosing its shares in ARIS and may seek to engage in discussions with other shareholders and/or with management and the board of directors of the Issuer concerning the business, operations or future plans of the Issuer.

    Mechanical Tech (OOTC:MKTY.PK) ($0.68)

    MKTY shares have risen from $0.18 on March 22nd to its current price of $0.68 on the heels of a March 21st 2013 press release which contained clues that the company has addressed problems that has hampered revenue growth and the attainment of profitability over the last couple of years specifically, heading into the 2012 4th quarter the company had experienced losses for 6 straight quarters

    However, it appears that the company reported 2012 4th quarter EPS of $0.12, albeit it on lower revenues ($2.4 versus $3.3 million). We are encouraged that the company has been able to achieve profitability at a level where it had previously reported losses.

    Management commentary insinuates that the positive momentum will continue into 2013. If the company can maintain the level of profitability achieved in its 4th quarter 2012 we believe the stock should easily eclipse $1.

    The company is engaged in the design, manufacture, and sale of test and measurement instruments and systems through its subsidiary MTI Instruments, Inc. MTI Instrument's products use a comprehensive array of technologies to solve complex, real world applications in numerous industries including manufacturing, semiconductor, solar, commercial and military aviation, automotive and data storage.

    GeoInvesting will look to establish position today ahead of first quarter 2013 results. We will attempt to interview management.

    Hydromer (OOTC:HYDI.PK) ($1.99)

    The following comments buried in the HYDI's December 31st 10Q will lead us to track the story.

    "The Company is nearing a return to profitability. Cost management and revenue growth are the key factors and while we did not reach the same revenue levels achieved a year ago, it is certainly within reach. During the past few years, the Company's R&D resources were dedicated to its T-HEXX Animal Health product line as that could yield the quickest revenue return (as compared with the much longer term human medical product line). Some of the recent developments in the T-HEXX product line are being rolled out into the market."

    -----

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    Disclosure: I am long CNIT, OTCQB:MKTY.

    Additional disclosure: This information has previously been provided to GeoInvesting's Premium members around today's Market Open.You agree that you shall not republish or redistribute in any medium any information on the GeoInvesting website without our express written authorization. You acknowledge that GeoInvesting is not registered as an exchange, broker-dealer or investment advisor under any federal or state securities laws, and that GeoInvesting has not provided you with any individualized investment advice or information. Nothing in the website should be construed to be an offer or sale of any security. You should consult your financial advisor before making any investment decision or engaging in any securities transaction as investing in any securities mentioned in the website may or may not be suitable to you or for your particular circumstances. GeoInvesting, its affiliates, and the third party information providers providing content to the website may hold short positions, long positions or options in securities mentioned in the website and related documents and otherwise may effect purchase or sale transactions in such securities.GeoInvesting, its affiliates, and the information providers make no warranties, express or implied, as to the accuracy, adequacy or completeness of any of the information contained in the website. All such materials are provided to you on an ‘as is’ basis, without any warranties as to merchantability or fitness neither for a particular purpose or use nor with respect to the results which may be obtained from the use of such materials. GeoInvesting, its affiliates, and the information providers shall have no responsibility or liability for any errors or omissions nor shall they be liable for any damages, whether direct or indirect, special or consequential even if they have been advised of the possibility of such damages. In no event shall the liability of GeoInvesting, any of its affiliates, or the information providers pursuant to any cause of action, whether in contract, tort, or otherwise exceed the fee paid by you for access to such materials in the month in which such cause of action is alleged to have arisen. Furthermore, GeoInvesting shall have no responsibility or liability for delays or failures due to circumstances beyond its control.

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