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Hello Readers,
Maybe we should change our name to “Penny Stock Buyouts”, because, as you will see in the below updates, another one of our picks is pending acquisition. This makes an even half-dozen over the last several months, and, thankfully, except for one of them, all the buyout offers meant some sort of gains. So, what’s happening? We suspect the markets have entered some sort of consolidation phase, which is typical of bearish cycles. However, we have never seen this sort of acquisition activity among penny stocks. Obviously, many larger companies with money to burn are picking off smaller companies at what some would consider to be fire sale prices.
The market is still stuck in a 500 to 600 point trading range due to a lot of uncertainties. We need not tell you what those are, since you probably already know. The best word to describe the current market action is “hinky”, for lack of a better description. People have the feeling that a lot of things just are not right, despite all of the glowing adjectives that politicians and certain gurus have been throwing around. And yes, the current funk has not been helping our Current Portfolio at all.
Here are the headlines since the last Newsletter about companies in the Current Portfolio; dates in parentheses are when we first recommended them. We are not giving updates about companies on the “Endangered List” unless we feel the news to be highly significant.
Acadia Pharmaceuticals (ACAD)(9/5/10). To present at the Stifel Nicolaus healthcare conference on September 17.
Banner Corporation (BANR)(8/5/10). Announces employment inducement award.
Rexahn Pharmaceuticals (RNN)(7/20/10). Submits Serdaxin Phase IIb protocol to FDA for major depressive disorder (MDD).
Clearfield(CLFD)(6/5/10). Announces ‘SmartRoute Troughing’ enhanced fiber management for FieldSmart FxDS. Extends product offering with licensing agreement for pushable fiber.
PHC, Inc (PHC)(5/20/10). To announces FY financial results on September 22.
Zalicus (ZLCS)(5/5/10). Until about ten days ago, this was CombinatorX, which obviously changed its name and stock symbol.
China Direct Industries (CDII)(4/5/10). Receives contract from Beijing Tianrun Construction valued at over $70 million for its basic materials.
Novavax (NVAX)(4/5/10). To present at the Stifel Nicolaus confab on September 17.
Cerus Corp (CERS)(3/20/10). Finds new potential in chronic fatigue. Company and Swiss Red Cross report successful outcome on INTERCEPT blood system Platelet study. Whittemore Paterson Institute and Cerus announce inactivation of XMRV in platelets and red blood cells by the INTERCEPT blood system.
Achillion Pharmaceuticals (ACHN)(3/5/10). To present multiple posters at AASLD’s The Liver Meeting October 29-November 2.
Microtune (TUNE)(2/5/10). As we mentioned in the above opening paragraph, another of our picks is on the acquisition block and this is it. Zoran Corporation has made an offer for $2.92 share; however, several lawsuits have been filed questioning management’s ‘fiduciary duty’, which could be interpreted that they feel the offer is too low.
Cytokinetics (CYTK)(2/5/10). Phase I clinical trial data relating to Omecantiv Mecarbil presented at the 2010 Heart Failure Society annual meeting.
CytRx (CYTR)(1/5/10). Initiates Phase 2 clinical trial with Bafetinib in advanced prostate cancer.
Uranerz (URZ)(11/20/09). Installs new monitor wells at Jane Dough Project.
Qualstar (QBAK)(10/20/09). To announce 4thQT and FY results on September 23.
Anadys Pharmaceuticals (ANDS)(8/20/09). To present at the Stifel Nicolaus healthcare confab on September 17 and the UBS Global Life Sciences confab on September 22.
Salary.com (SLRY)(7/5/09). Shareholder lawsuits filed against proposed buyout by Kenexa for pretty much the same reasons as the suits filed against Microtune – see above.
Durect Corporation (DRRX)(4/20/09). To present at the UBS Global Life Sciences conference on September 20.
Ligand Pharmaceuticals (LGND)(2/20/09). To present at the Stifel Nicolaus healthcare conference on September 17.
U.S. Geothermal (HTM)(8/5/08). Announces strategic investment by Enbridge in Neal Hot Springs as project construction accelerates.
Microvision (MVIS)(5/20/08). Stifel Nicolaus gives the stock a “buy” rating.
GlobalScape (GSB)(5/20/08). Expands partnership with Network Automation and becomes worldwide reseller of AutoMate. Offers free managed file transfer software through remainder of 2010.
ActivIdentity (ACTI)(3/5/08). Joins TSCP to address initiatives for secure information sharing. Announces new product solution and partner program to drive convergence of physical and logical access for government and enterprise customers.
Hollywood Media (HOLL)(1/5/08). Movietickets.com continues international expansion; will provide movie ticketing in Spain.
Move, Inc (MOVE)(1/5/08). Unveils new top producer 8i iPhone App.
Linktone (LTON)(11/5/07). Quarterly numbers about as expected; balance sheet still looks strong.
LRAD Corp (LRAD)(10/5/07). Receives new $600,000 plus order from DeTect for bird control and protection.
XATA Corp (XATA)(9/20/07). R.C. Moore upgrades fleet with XATA Navigation and new color display units.
YM Biosciences (YMI)(11/5/06). Announces positive results from CYT997 Phase I study.
Our picks for this Newsletter are a Chinese electronics wholesaler and a specialized semiconductor, both NASDAQ-listed.
SINOHUB, INC. (NASDAQ: SIHI) – $1.98. Twelve-month hi-low has been $5.70 – $1.98. Based in Nanshan District, Shenzhen, China, with about 190 employees, this electronics wholesaler has 28.6 million shares outstanding, $73.75 million in total current assets, $78.21 million in total assets, and $25.22 million in liabilities. Institutional ownership is around 5%. Three analysts rate the stock a “strong buy”. www.sinohub.com
Why SinoHub, Inc. is trading at nearly its 12-month low, we don’t really know. Some analysts seem to like the stock. The company has shown pretty good revenue growth and net income from a year ago, and the balance sheet looks pretty good. Then again, nervous markets have a tendency to throw babies out with the bath water.
Founded in 2000, and trading on NASDAQ for just over two years, SinoHub boasts that it is the most comprehensive electronic component supply chain management platform in China, or a one-stop-shop for all electronic component supply chain services. It provides products and services to suppliers and purchasers of electronic components in connection with the making and assembling of electronic products in China; and producing and selling mobile phones overseas. The company is involved in electronic component purchasing (ECP) and supply chain management (SCM) business. SinoHub’s electronic component sales include procurement-fulfillment and electronic component sales to manufacturers. The company’s SCM services include warehousing, delivery, and import/export.
It offers SinoHub SCM, a proprietary, Web-based software system that provides order entry with automated price and category checking, order tracking, inventory management information system, shipment information system, payment system, finished orders data base, operation results tracking, executive reporting system, shipment tracking, bonded inventory control system, vendor management inventory, and VAT tracking for recovery on export. SinoHub also manufactures private-label mobile phones for customers across Southeast Asia.
For FY2009, ending 12/31/09, revenue was $128.4 million with $12.36 million in net income. During the first six months of the current FY, ending 6/30/10, revenue soared nearly 40% from the same period last year at $82.48 million and net income of $6.38 million.
The company has recent reaffirmed revenue guidance for 2010 of $180 million, which means it needs another $100 million coming in over the last six months. If SinoHub meets that guidance, one would think the stock should get a nice lift.
Our 24-month target for the stock is $3.50 to $4.00.
For more information, contact SIHI’s Susan Liu at +86-755-2661-1080; susan.liu@sinohub.com
ADVANCED ANALOGIC TECHNOLOGIES, INC. (NASDAQ: AATI) – $3.39. Twelve-month hi-low has been $4.78 – $2.84. Based in Santa Clara, CA, with about 275 employees, this specialized semiconductor has 42.1 million shares outstanding, $119.47 million in total current assets, $143.91 million in total assets, and $20.57 million in total liabilities. Institutional ownership is around 57%. Four analysts rate the stock a “strong buy”, one as a “moderate buy”, and two have it as a “hold”. www.analogictech.com
Obviously, two things fired us up about Advanced Analogic Technologies, Inc. First, of course, was the unbelievably strong balance sheet. Next, were the number of analysts lined up behind the stock. So, something should be going right for this outfit.
Founded in 1997, and trading on NASDAQ for over five years, AATI develops advanced semiconductor system solutions. The company offers power management semiconductors for wireless headsets, notebook and tablet computers, smartphones, camera phones, digital cameras, personal media players, Bluetooth headphones and accessories, digital TVs, set top boxes, and displays. It also provides a range of analog and mixed-signal circuits that are used in system design. In addition, the company offers a portfolio of nearly 700 power management products comprising specific standard products and certain general-purpose analog integrated circuits in single-chip, multi-chip, and chip-scale packages.
AATI also provides various solutions, which include display and lighting products, battery chargers, fuel gauging, current limited load switches, switching regulators, inductorless DC/DC converters, linear regulators, A/D and D/A converters, audio class D and audio codec, power half bridges, integrated load switches, voltage references, voltage supervisors and monitors, power MOSFETs, USB OTG, PLL, and op amps and comparators.
In mid-August, Analogic Tech introduced what it says are powerful. high-efficiency multi-string backlight LED drivers optimized for notebooks, netbooks, monitors, and portable TVs. It claims these new drivers reduce the number of backlight PCBS, reducing costs, yet are capable of driving high brightness LEDs and ensuring uniformity across the display by precisely controlling the backlight intensity.
For FY2009, ending 12/31/09, revenue was $86.51 million with $12.67 million in losses. During the first six months of the current FY, ending 6/30/10, revenues were $45.06 million with $8.12 million in losses.
AATI seems to be holding its own on the revenue side but still needs to work on the losses. Of course, its balance sheet is a nice cushion to have as the company moves ahead.
Our 24-month target for the stock is $5.50 to $6.00.
For more information, contact AATI’s Lisa Laukkanen at 408-737-4788; ir@analogictech.com
Look for the October 5, 2010 Newsletter to be posted on 10/1 or 10/4.
Thank you,
George