Sino United Worldwide Consolidated Stock Looks Overvalued On Fundamentals (OTCMKTS:SUIC)

Summary

Sino United Worldwide Consolidated Ltd. distributes vending machines that can sell beer and mine cryptocurrency.
However, SUIC’s assets and revenues are low and its working capital and shareholders’ equity positions are negative.
SUIC’s valuation has grown to over $500 million after the company announced a JV with an Australian mobile payments firm.
There could be significant retail investor interest as the company is popular on several websites.
I think SUIC looks like a sell, but the short borrow fee rate stands at over 70%. Unless you have very high-risk tolerance, it may be best to avoid this one.

Finger press button on the vending machine — Photo by Black_Kira/iStock via Getty Images

Investment thesis

Sino United Worldwide Consolidated (OTCPK:SUIC) is a small Chinese company that has operated under several different names in different businesses over the past few years. The company has recently forayed into the fintech, vending machine, and cryptocurrency businesses.

Its valuation has grown to over $500 million as of the time of writing. However, looking at the business, I think this one is a sell. SUIC has barely any assets or revenues and its working capital and shareholders’ equity positions are negative.

Overview of the business

SUIC was founded in 2006 as Gateway Certifications and has also operated under the names of American Jianye Greentech Holdings, and AJ Greentech Holdings before changing its name to the current one in 2017. Over the years, the company has been focused on the design of alcohol base clean fuel, as well as hardware and software technologies.

In its own words,

The Sino United Worldwide Consolidated Company provides research and development, venture financing for and investing in private enterprises and the public sector that develop products and services adopting core capabilities of the Internet of Things, cloud computing, mobile payment, Big Data, Blockchain, and Artificial Intelligence, to enhance and streamline existing processes, and establish new and exciting business models that will create revolutionary products and services. - Source

In 2019, SUIC established joint venture companies in the USA and Malaysia, with the aim of distributing the smart beverage vending machines of Taiwanese firm iDrink Technology in the USA and Asia.

SUIC also announced a deal for 20% of iDrink Technology, but it seems this transaction hasn’t been completed yet.

I think that this vending machine is really weird. It can sell beer, but it also can mine cryptocurrency, and work as an online to offline digital currency ATM terminal.

(Source: iDrink)

In October 2019, SUIC and iDrink said that a total of 70 vending machines were installed and that they expected to reach 5,000 machines in 100 cities in 2021. They added that each machine sold an average of 20 to 40 cups per day and that it could generate sales of $2,000 to $4,000 per month. However, looking at the financials of SUIC, I’m skeptical about these figures.

Looking at the 2020 financials, the company generated revenues of only $0.12 million. They barely grew compared to 2019.

(Source: SUIC)

Also, SUIC said in its Q3 2020 financial report (page 12) that its revenues were generated from I.T. management consulting services.

Turning out attention to the balance sheet, I think this looks like a company in fire straits financially. As of December, SUIC had assets of just $0.31 million, and its working capital and shareholders’ equity positions were negative.

(Source: SUIC)

Overall, I think this is a pretty small company with barely any operations at the moment. According to the 2020 financial report (page 3), SUIC had just 14 employees and partners across three countries as of December.

Valuation

According to OTC Markets, SUIC currently has 33,503,604 shares outstanding and its market capitalization stands at $502.6 million as of the time of writing.

So, how is such a small company valued at over $500 million? Well, my theory is that it’s tied with retail investor interest as a result of its foray into online payments.

Notice that the share price, as well as the trading volume, started rising around the middle of February. Before that, the trading volume rarely passed 300 shares per day.

(Source: TradingView)

On February 11, SUIC announced that it’s forming a US joint venture with mobile payments firm QQ Pay Australia.

There are almost no details on this deal. Yet, this seems to have been enough for retail investors as SUIC has become relatively popular on Yahoo Finance, twitter, and Stocktwits among others.

About QQ Pay’s app, I don’t think that there's anything groundbreaking here. It looks like it's supposed to work like several other payment apps on the market today.

(Source: QQ Pay)

QQ Pay says on its website that the app should be available on Google Play, but I can’t find it.

Investor takeaway

SUIC is a small company focused on distributing beer vending machines that can also mine cryptocurrency. It’s a weird and interesting concept, but the business doesn’t seem to be doing well judging by the company’s financials. SUIC seems to be in dire straits financially as assets and revenues are low and its working capital and shareholders’ equity positions are negative.

I think that the company’s valuation has soared due to retail investor interest on the heels of an announced JV with an Australian mobile payments startup. However, I don’t see anything revolutionary about the latter's app and I doubt this new JV is worth much.

In my view, this one is a sell and investors can take advantage of the situation by shorting the shares. However, there are no put options available and the short borrow fee rate stands at 70.39% as of the time of writing according to data from Fintel.

So, unless you have a very high-risk tolerance, I think the best course of action would be to avoid SUIC for now.

This article was written by

Gold Panda

6.83K Followers

Gold Panda has been working as an M&A analyst for over 11 years. He's been investing since 2007. Preferring value to growth, he tends to take a relatively conservative approach in his investing. His focus is on small and micro-cap stocks, which he believes is the area which offers the greatest opportunity to exploit market mis-pricings.

Gold Panda is part of the team that runs the investing group Microcap Review. He provides a real-time portfolio to the group. Microcap Review focuses on three areas of opportunity in the micro-cap space: arbitrage and special situations, net-nets and undervalued stocks. Learn more.

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