Companies featured in this edition of the newsletter: ACCP, CBAI, CNLG, DRGP, ICLK, ITUI, IWEB, PSTI, SRRY
It was another volatile week on Wall St. as investors sifted through earnings data and digested speculative reports surrounding the government’s stress tests on financial institutions which led to a mixed closing for the major indices following the end of trade on Friday. All told, the Dow finished slightly in negative territory, surrendering 55 points on the week to close at 8076, down 0.7% on the week and 8% on the year. The Nasdaq managed to seesaw its way to a gain of 1.3% on the week on the strength of some better than expected earnings from tech companies, closing at 1694, up 7.4% on the year. The S&P 500 and Russell 2000 reported losses of 0.4% and 0.1% respectively, bringing both of their yearly losses to 4.1%.
While the earnings data reported this week were generally poor, the resounding fear characterizing most estimates made for a mixed bag as many companies performed poorly but managed to beat expectations. Of the 143 S&P 500 components reporting, roughly 80 of them managed to beat estimates despite the fact that overall EPS for the group declined by approximately 40%. Among the more noteworthy companies beating estimates were IBM (NYSE: IBM), Caterpillar (NYSE: CAT), Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT) and Ford (NYSE: F).
The other story snatching headlines and investors’ attention last week was the impending results of the government’s stress tests on financial institutions, the results of which were released late Friday. Preliminary results indicated that most US banks have capital levels well in excess of what is considered to be the critical level, but details were lacking as there were no indications if any banks failed the tests. The release late Friday sparked some volatility within the financial sector, but it remained largely unchanged from the day’s pre-report activities.
What should investors look for this week? Earnings reports continue to roll in earnest, but also pay attention to the Federal Open Market Committee’s rate decision scheduled to be announced Wednesday afternoon.
Earnings season continues in full swing; on Monday before the bell look for results from Verizon (NYSE: VZ) followed by Bristol-Myers (NYSE: BMY), Coca Cola (NYSE: CCE), Office Depot (NYSE: ODP), Pfizer (NYSE: PFE), and US Steel (NYSE: X) before the bell on Tuesday with Sun Microsystems (NASDAQ: JAVA) reporting after the close. On Wednesday, expect reports from Aetna (NYSE: AET), Arcelor Mittal (NYSE: MT), Burger King (NYSE: BKC), General Dynamics (NYSE: GD), Hess (NYSE: HES), Medco Health (NYSE: MHS), Royal Dutch Shell (NYSE: RDS), Time Warner (NYSE: TWX), and Wyeth (NYSE: WYE). After the bell on Wednesday, expect reports from First Solar (NASDAQ: FSLR), stem cell company Geron (NASDAQ: GERN), and Starbucks (NADAQ: SBUX). Thursday morning look for AstraZeneca (NYSE: AZN), Cardinal Health (NYSE: CAH), Colgate-Palmolive (NYSE: CL), Comcast (NASDAQ: CMCSA), Dow Chemical (NYSE: DOW), Eastman Kodak (NYSE: EK), Exxon Mobil (NYSE: XOM), General Motors (NYSE: GM), Motorola (NYSE: MOT), Procter & Gamble (NYSE: PG) and Viacom (NYSE: VIA) with Metlife (NYSE: MET) reporting after the close. The week comes to a close with Chevron (NYSE: CVX) and Con Edison (NYSE: ED) reporting before the bell on Friday.
Economic data for the week begins with April Consumer Confidence figures due out at 9:00am Tuesday followed by the S&P/Case Schiller Home Price Index for February at 10:00am. On Wednesday, look for advance Q1 GDP and Chain Deflator data at 8:30am followed by weekly crude inventories at 10:35am and the FOMC Rate Decision at 2:15pm that afternoon. Thursday begins with weekly initial jobless claims, Personal Income and Spending for March and Q1 Employment Cost Index all due out at 8:30am. Chicago PMI for April, will be released at 9:45am Thursday, with the week rounding up on Friday with Revised Michigan Sentiment Index for April at 9:55 am, March Factory Orders and April ISM Index at 10:00am, and Truck and Auto Sales for April at 2:00pm that afternoon.
Conferences for the week will be light again, but look for the two-day Barclay’s Capital Retail and Restaurant Conference beginning on Tuesday in New York. US Steel will hold its annual shareholders’ meeting Tuesday in Pittsburgh, and Ebay will hold their shareholders’ meeting Wednesday in San Francisco.
Conolog Corporation (NASDAQ: CNLG), an engineering and design company that provides digital signal processing solutions to global electric utilities, announced that it has received orders from North American utilities for immediate delivery valued at over $800,000. The company continues to look forward to the impending introduction of their CM 100 multiplexer which it feels will greatly expand applications for its products. Along with the introduction of the CM 100, the company is also looking forward to an expected $4 billion grant from the Obama administration aimed at overhauling our power grid in order to better equip the nation to reap the benefits of new renewable energy projects. Conolog and other companies in the teleprotection space should benefit significantly from this influx of federal money aimed at creating a more efficient means of transporting electricity across the nation. Shares gained twenty five cents on the week to close at $2.05.
Access Pharmaceuticals, Inc. (OTCBB: ACCP), an emerging biopharmaceutical company that develops and commercializes propriety products for the treatment and supportive care of cancer patients, announced that MuGard, its proprietary polymer-based oral mucositis product has been launched in Germany, Italy, UK, Greece and the Nordic countries by its European commercial partner, SpePharm, a pan-European specialty pharmaceutical company dedicated to the provision of high medical value medicines in supportive and critical care. Under a license from Access Pharmaceuticals Inc, SpePharm is responsible for manufacturing, regulatory approval and commercialization in the 27 countries of Europe. The company also announced that its collaborators at Centre Rene Huguenin in France presented new preclinical data on its lead anticancer compound, ProLindac, at the American Association for Cancer Research (AACR) Annual Meeting last week. ProLindac is Access’ novel polymer-based DACH platinum prodrug which has been shown to be active in a wide variety of solid tumors in both preclinical models and in human trials. Access recently announced positive results from the completed phase 2 monotherapy clinical study in recurrent ovarian cancer. The study reported in the 2009 AACR poster provides in vitro and ex-vivo data on the binding of ProLindac to blood components, and suggests a mechanistic rationale for ProLindac’s favorable efficacy and safety profile. Shares lost sixteen cents on the week to close at $1.35.
interCLICK (OTCBB: ICLK) the fastest growing advertising network in the US according to comScore, has entered into a partnership agreement with Bizo, Inc., the leading B2B advertising and targeting platform, designed to deliver highly targeted B2B campaigns across interCLICK]s vast network of premium publishers. The companies expect that applying Bizo’s rich data across interCLICK’s fully transparent ad network will enable B2B advertisers to more effectively target in-market decision makers with unprecedented scale and efficiency. By leveraging Bizo’s B2B assets across interCLICK’s fully transparent ad network, the companies expect to address a real need in the B2B market for better targeting and improved campaign results which should be rewarded with higher revenues for both companies.Shares gained seventeen cents on the week to close at $0.83.
i2Telecom International, Inc. (OTCBB: ITUI), a developer of award-winning patented and innovative high-quality mobile applications and services, announced last week that it has appointed Andy Berman Chief Executive Officer of i2 Telecom International, Inc. Mr. Berman became a director of the Company in April 2008 and will continue to serve in that capacity while replacing founder and current CEO Paul Arena, who will remain the Chairman of the Board, Secretary and Chief Financial Officer. Mr. Berman has over 27 years of experience in the technology sector with extensive experience in the disciplines of strategic alliance planning and business development, as well as sales and marketing, product development and distribution. He served as Vice President, Strategic Alliances and Business Development, at RadioShack from July 2003 through April 2006, where he successfully delivered emerging technologies and new products/services to distribution channels, and brought many licensing and investment opportunities to the company. Shares remained unchanged on the week at $0.08.
IceWeb (OTCBB: IWEB), a storage technology company specializing in Geographic Information Systems (GIS) that provides services to bureaucratic and corporate organizations, announced last week that it will offer mobile synchronization of its flagship IceMAIL Hosted Microsoft Exchange software service to Apple iPhone and iPod Touch device users free of charge. IceMAIL is a cloud based Software-as-a-Service (SaaS) subscription, available starting at $9.95 per month, which allows its subscribers to take full advantage of the world’s most advanced and most broadly deployed enterprise level email and collaboration product, Microsoft Exchange. IceMAIL enables both individuals and businesses to compete, collaborate, and communicate on a level most often enjoyed by only the largest and most cash flush organizations without needing to buy servers, software, or hire experienced technical staff. As a result of this announcement, IceMAIL subscribers who have iPhone or iPod Touch devices can seamlessly synchronize their Email, Contacts, and Schedules to those devices for no charge. Shares gained a penny on the week to close at $0.09.
Pluristem Therapeutics (NASDAQ: PSTI), a company engaged in developing regenerative therapies from stem cells derived from the placenta, presented the company’s development program on the Tel Aviv Stock Exchange last week. Dr. Edwin M. Horwitz, Chairman of Pluristem’s Scientific Advisory Board and one of the world’s renowned pioneer scientists in the field of stem cells and utilizing mesenchymal stem cells in clinical trials in the US, provided an update on the company’s progress to an audience of institutional and private investors. Shares gained nine cents on the week to close at $1.34.
Cord Blood America, Inc. (OTCBB: CBAI), an umbilical cord blood stem cell preservation company focused on bringing the life saving potential of stem cells to families nationwide and internationally, announced that it has decreased long-term debt by $1.75 million in 2009, and added last week that it has eliminated another $817,000 of long-term debt. The company and YA Global Investments, agreed to a one time common share settlement for liquidated damages in connection with assigning the outstanding principal and interest to an existing CBAI institutional investor. With this arrangement, Cord Blood now has no outstanding debt with YA, and regards this as a key milestone on its path to being able to operate on its cash flow. Shares remained unchanged on the week at less than a penny.
Dynamic Response Group, Inc. (OTCBB: DRGP), an innovative strategic marketing company, announced that its subsidiary, Medico Express, Inc., was granted accreditation by Community Health Accreditation Program, Inc. (CHAP). CHAP accreditation is an official acknowledgement that Medico Express meets the Medicare Conditions of Participation, a prerequisite for becoming an approved Medicare provider. Medico will launch its product offerings initially by offering diabetic supplies to the millions of individuals in Medicare Region C and will expand marketing to all other Medicare Regions, encompassing a market estimated to be in excess of 14,000,000 people. Shares remained unchanged on the week at less than a penny.
SPECIAL SITUATION:
Sancon Resources Recovery, Inc. (OTCBB: SRRY) $0.21
China’s environmental problems were one of the biggest global issues surrounding this past summer’s Olympic Games held in Beijing, and they continue to draw the attention of environmentalists and government organizations worldwide. As China became a world economic power, the rapid industrialization characterizing that growth often came at the expense of environmental considerations, leaving some wondering exactly what the long-term environmental costs of this expansion may be. As a result of this pressure on Chinese corporations to take some sort of environmental accountability, there is great demand for companies with the ability to increase the environmental sustainability of these corporations which are still growing despite the global economic contraction. Sancon is an environmental services company that specializes in the collection, processing, and selling of processed material such as plastic, metal, paper, cardboard, and glass. The recycled materials are reused by Sancon’s manufacturing clients to make a wide variety of new products that include: outdoor furniture, construction materials, building materials, packaging materials, and various other products. Sancon also trades in recycled materials originating from the United States, Japan, and various European countries to satisfy the growing demand for recycled materials by manufacturers in China.
What sets Sancon apart from its competition is its strong nationwide presence within China, which allows it to offer a full range of environmental services in multiple population centers by operating transfer stations throughout the country and processing plants strategically located in Shanghai, Nanjing, Chengdu, Tianjin and Donggua, in addition to one in Melbourne, Australia. The company processes 5,000 tons of waste materials in China in addition to its operations in Australia. These operations typically serve manufacturing clients looking to recover their recyclable materials rather than dumping them into landfills, and provide a significant value proposition aside from the obvious environmental benefits. Sancon makes out doubly well as they process the recyclable materials collected from their manufacturing clients and resell them to manufacturing clients looking to reduce their raw materials costs. These reprocessed raw materials are traded domestically within China and also within Sancon’s extensive network of overseas partners with approximately 25,000 tons being exported annually. With the economic troubles facing China and the rest of the global marketplace, expect revenue generated by these resales to continue to grow as manufacturers look for ways to keep margins up in the face of reduced demand for their products.
Founded in 2002, the company has managed to gain significant traction since its inception. Sancon has been demonstrating significant growth over the past few fiscal years, managing to increase revenues 166% year over year to $12.7 million during the ’08 fiscal year, up from $4.78 million in ’07 and $3.45 million in ’06. Profitability has also increased significantly, as gross profit increased by 324% to $5.95 million in 2008 from $1.4 million in 2007 and $0.518 million in ’06. The strong growth that the company has been able to demonstrate is most readily associated with their ability to continue to permeate new markets and foster organic growth within those markets as opportunities for these types of services abound in China. Since facing strong international pressure to implement environmental protection initiatives spurred by the concern brought about from the Beijing Olympics, the Chinese government has placed a heavy emphasis on environmental protection through implementing new tougher environmental protection and recycling laws and policies aimed at punishing polluters and rewarding recyclers which should serve to further increase demand for Sancon’s services.
The government’s commitment to reducing the environmental impact of China’s industrial enterprises provides Sancon with a significant market opportunity even in the face of a contracting global economy. The competitive landscape for waste management companies in China affords private entities such as Sancon with substantial advantages over their competitors, as the waste management market in China is dominated by state owned companies that suffer from the types of problems that typically characterize bureaucratic organizations; they are wasteful, slow to adapt to changing conditions within the marketplace, and struggle to keep up with technological advancements. Not only does Sancon have a sound business model in a rapidly growing market with the financial statements to prove it, but they are positioned at the forefront of a strong secular trend within one of the largest markets on earth. As the Chinese government continues to implement initiatives designed to encourage environmental protection and sustainability, demand for Sancon’s services continues to grow at a rapid pace. With a track record of proven growth and profitability in the face of one of the most severe global recessions ever experienced, Sancon seems extremely well positioned to reap the benefits of both the continued economic recovery and the increased emphasis placed on environmental protection by the Chinese government as they seek to reduce their impact on the environment in the face of booming industrialization.