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Hello Readers,
Since the last Newsletter, we closed one position, for a gain.
SCOLR PHARMA (7/5/07). Closed position 10/5/07 at $3.58 for a 63% GAIN.
At first, nothing seemed to be propelling SCOLR, which had been on a steady uptick for over a month after sinking to under $2 back in August; but a few days after closing the position for a 63% gain, the company revised estimates upward, so, someone probably knew something beforehand.
Frankly, we are surprised that the markets have had such a great run since mid last month because September and October are traditionally bad months. The Dow and S&P have hit new highs, and, finally, we see money coming back into small stocks, albeit, not as much as we would like. Patience is the operative word, for now.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parenthesis are when we first recommended them.
Nucryst Pharma (NCST) 10/5/07). We hate this. A few hours after posting the last Newsletter, the company announced it had revised its agreements with Smith & Nephew, which could impact revenues in 2008; and, as a result the stock has dropped to its current levels.
American Technology (ATCO) 10/5/07). Sees revenue over $10 million for 2007. Company’s LRAD 1000 selected by U.S. Navy for large vessels.
XATA (XATA) (9/20/07). Stock took a nice bounce as C&S Grocers implements XATANET on-Demand fleet management software.
Wave Systems (WAVX) (9/5/07). Enters sales and marketing partnership with Convergent Computing. Unveils SmartSigningRoom.
Radcom (RDCM) (7/20/07). To publish quarterly results on October 29. To transfer to Nasdaq Capital Market.
Alliance Fiber Optic (AFOP) (7/20/07). Slates earnings call for October 25.
Alphatec (ATEC) (6/20/07). Subsidiary terminates credit agreement with bank.
Hana Biosciences (HNAB) (5/5/07). To present data on three compounds at cancer confab on October 23 & 25.
ECtel (ECTX) (5/5/07). Rostelcom places $1.7 million order for company’s IRM solutions. To release earnings on October 29.
UQM Technologies (UQM) (2/5/07). Brokerage downgrades stock from a “buy” to “neutral and, no, we have never figured out what “neutral” means? Announces $1.13 million in additional military orders.
Endologix (ELGX) (1/20/07). Announces successful Powerlink deployments with advanced Visiflex integrated system.
Lantronix (LTRX) ((12/5/06). Dutton Associates gives the stock a “strong speculative buy” rating.
WJ Communications (WJCI) (12/5/06). Stock takes a fall as company says third quarter revenue to be less than expected and that 4th QT demand will probably be lower than anticipated.
YM Biosciences (YMI) (11/5/06). Sets annual shareholders meeting for November 28.
Proxim Wireless (PRXM) (11/5/06). Lorain, OH utilities department links up with Proxim GigaLink.
NTN Buzztime NTN) (7/5/06). Launches several new games – Blur and Odds On Sports.
02Diesel (OTD) (5/20/06). Doubles use at Port of Long Beach. This is on the “Endangered List”.
ThermoGenesis (KOOL) (4/5/06). FDA approves company’s cord processing system.
Lipid Sciences (LIPD) (2/20/06). Preclinical data shows HDL Mimetic peptide to increase HDL.
MIND C.T.I. (MNDO) (2/5/06). Acquires UK-based Omni Consulting Co. (trading as Abacus Billing)
8X8 (EGHT) (1/20/06). Sets earnings call for November 1.
Gene Logic (GLGC) (4/20/07). To sell its genomics assets for $10 million.
Digital Angel (DOC) (12/20/05). Tags selected by Superior Livestock Auction for process verification program. Gets $600,000 order from USDA.
Westell (WSTL) (10/20/05). Introduces UltraLine Series3 residential gateway to European broadband market.
RAE Systems (RAE) (10/5/05). Delivers custom wireless gas detection systems to PetroChina.
N.A. Scientific (NASI) (8/5/05). Receives non-compliance notice from NASDAQ. Enters brachytherapy fiducials market. Wins new brachytherapy contract. This is on the “Endangered List”.
Applied Micro Circuits (AMCC) (11/20/04). Sets October 25 for quarterly conference call. Introduces new suite of 3ware SAS RAID controllers.
Network Engines (NENG) (6/5/04). Acquires Alliance Systems for $40 million. Usually this sort of thing hurts a stock, but, here, it helped a little.
Management Network (TMNG) (4/20/04). Acquires TWG consulting for $1.7 million. Schedules earnings call for November 12.
Our picks for this Newsletter are two AMEX-listed companies; one is a medical supplier and the other is a Chinese cell phone seller.
RETRACTABLE TECHNOLOGIES, INC. (AMEX: RVP) – $1.87. Twelve-month hi-low has been $3.48 – $1.72. Located in Little Elm, TX, with about 140 employees, this medical supplier has 23.7 million shares outstanding, $54.43 million in total current assets, $67.18 million in total assets, and $12.38 million in total liabilities, of which $3.97 million is long-term debt. Institutional ownership is around 9%. www.vanishpoint.com
Periodically, we pick one of those really boring companies with a decent balance sheet whose stock is trading near the low end of its range. Now, we need Retractable Technologies, Inc. to turn its unit sales growth into better revenue growth, despite the obstacles in its path.
Founded in 1994, and public for over six years, Retractable Technologies designs and sells safety needle devices to the healthcare industry. The company’s VanishPoint syringe and needle products are sold to acute care hospitals, alternate care facilities, doctor’s offices, clinics, emergency centers, surgical centers, convalescent hospitals, VA facilities, military organizations, public health care facilities, and prisons. RVP claims that their products virtually eliminate health care worker exposure to accidental needlestick injuries. Their devices use a patented friction ring mechanism that causes the contaminated needle to retract automatically from the patient into the barrel of the device, a feature designed to prevent reuse.
Retractable Technologies offers an IV safety catheter, introduced last December; 1cc tuberculin, insulin, and allergy antigen VanishPoint syringes; 3cc, 5cc, and 10cc VanishPoint syringes; and the VanishPoint blood collection tube holder and small tube adapter. Its also offers a dental syringe, a butterfly IV, and an auto disposable syringe. Of particular note is that in 2006, the company was awarded a federal contract to supply syringes for 16.4 million units to various African countries.
The company has had one major marketing roadblock, and that is from group purchasing organizations (GPOs) and manufacturers entering into long-term, exclusive contracts that use financial penalties to effectively prohibit purchases outside the contract. The company says that, amazingly, the Medicare anti-kickback “safe harbor” exemption permits huge GPOs to receive billions of dollars from medical suppliers. So obviously, RVP has struggled for market access, and, so far, with some degrees of success.
For FY2006, ending 12/31/06, revenue was $25.32 million with $3.9 million in losses. During the first six months of the current FY, ending 6/30/07, revenue was $11 million with $4.58 million in losses, a decrease from the same period in 2006. This is largely due to lower unit sales and lower average selling prices in domestic markets. However, in the first half, overall unit sales rose 9.2%, principally due to higher international unit sales.
RVP appears to have a much sought after product. Looks as if they could use more government contracts and overseas unit sales, where a weaker dollar may be of some help.
Our 24-month target for the stock is $3.25 to $3.50.
For more information, contact RVP at 972-294-1010; rtifinancial@vanishpoint.com
ORSUS XELENT TECHNOLOGIES, INC. (AMEX: ORS) – $4.35. Twelve-month hi-low has been $5.60 – $2.00. Headquartered in Beijing, China, this cell phone seller has 29.8 million shares outstanding, $54.5 million in total current assets, $54.92 million in total assets, and $29.5 million in total liabilities. There is a chance that the PRC owns some of the stock, which has been the norm in China; this can be a help or a hindrance. www.orsus-xelent.com
Rarely have we added to the Current Portfolio a Chinese company, but Orsus Xelent Technologies, Inc. appears to have a very attractive product line, half-decent balance sheet, revenue growth, and has turned profits for four consecutive quarters. Yes, the stock is a little on our pricey side, but…
Founded in 2003, and public for over two years, Orsus designs and markets cellular phones for retail and wholesale distribution in the People’s Republic of China (PRC) under the brand names Orsus and Proxlink. Its products are customarily equipped with leading features including 1.8″ to 2.8″ CSTN, TFT, or QVGA dual-color display, one minute to four hours video recording, 300K to 3 million pixel photography, MP3, MPEG4 and U disk support, dual stereo speakers, email messaging, multimedia messaging, 40 to 64 ring tone storage, slim bar-phone and flip-phone technology, and ultra-thin lightweight design.
Since its first product launch in 2004, Orsus has sold over 1.5 million cell phones; about 500,000 in 2006. The company claims many of them have been “firsts” in the China mobile industry and gained great popularity in the market, such as the first wrist-watch mobile, the first 4-frequency mobile (850/900/1800/1900 MHz), and the first mobile using three-color OLED organic EL secondary display with TFT main display.
Orsus has also begun to address the growth market of specialized applications with Proxlink. Since September, 2006, the company boasts of great advances in designing mobile terminals that meet the needs of people from specialized occupations such as lawyers, stocks investors, healthcare workers, firefighters, and tour guides. For example, last month, the company announced it was to begin shipping Proxlink X180 units to law enforcement officials in Hebei Province, and, within 12 months, it expects more than 10,000 such officials to become users of these handsets.
For FY2006, ending 12/31/06, revenue was $68 million with $6.7 million in net income. During the first six months of the current FY, ending 6/30/06, revenue was $36.36 million with net income of $2.69 million, which is on pace to top 2007 numbers. Actually, earlier this month, Orsus announced that it foresees 3rdQT revenues climbing more than 20%.
Orsus has a good feel to it. We like what the company has done in R&D so as to better compete in the highly competitive Asian markets.
Our 24-month target for the stock is $7.50 to $8.00.
For more information, contact ORS at 212-719-7535.
Look for the November 5, 2007 Newsletter to be posted on 11/1 or 11/2.
Thank you,
George