Jul 23, 2010 10:31 AM PDT
The big news today is that Big Cap bank stocks are seeking approval to redeem their preferred stock issues from the Treasury Dept. After paying back their TARP loans, the bankers really don't want the government to have any vested interest in them. No comments yet on regulation (which will happen).
The stories beneath the today's headlines are just as significant to investors however as Small Cap earnings begin to roll out. With a strong dollar globally, excess capacity and a decrease in wage pressures, Where's the money to be made in Small Caps?
Follow the earnings...
The big jump of 25% in share value today by ModusLink Global Solutions (MLNK) is earnings driven. MLNK http://www.moduslink.com/ trades in the $5 range on the Nasdaq with an average 3-Month trading volume of 190,115 shares. That volume surpassed 415,837 shares today by noon EST.
For the third quarter of its fiscal year 2009, ended April 30, 2009, MLNK reported some decreases, some increases and a few 'breakeven' numbers that got the trading moving. Net revenues of $231.5 million, were a decrease of 3.2 percent from the third quarter of fiscal 2008. Operating income of $2.7 million compared to the third quarter of fiscal 2008 was a breakeven.
MLNK posted a net loss of $1.9 million, or ($0.04) per share, compared with net loss of $2.6 million, or ($0.05) per share, in the same period last year. I think the story here is cash: Cash, cash equivalents and marketable securities were $167.8 million at April 30, 2009, a $32.1 million increase from $135.7 million at January 31, 2009, the end of the second quarter of fiscal 2009. As of April 30, 2009, the Company had working capital of approximately $236.7 million compared with $217.4 million at January 31, 2009 and $238.7 million at July 31, 2008. MLNK concluded the quarter with no outstanding bank debt.
In addition to the cash position, I think that the Company's announcement by its Board of Directors that it has authorized the repurchase of up to $15 million of the Company's common stock from time to time over the next 12 months played a 'confidence' role in today's upswing.
MLNK services include sourcing and supply base management, manufacturing and product configuration, fulfillment and distribution, e-business, and aftermarket services, such as reverse logistics and asset disposition. Its clients include: hardware manufacturers, software publishers, storage and consumer electronic device manufacturers, telecommunication carriers, and broadband and wireless service providers.
MLNK has a market cap of $237M and at $5 is well below its 52-week high of $12.72 on 07-29-08. At $5 it is currently above both its 50-day and 200-day moving average and its shares out versus float ratio is near-parity. MLNK's trailing twelve month revenues of $1.07B are nearly four times its market cap.
A FIVE DAY CHART
A ONE YEAR CHART ON MLNK
Also coming off a strong earnings report is a company we've mentioned before SpongeTech Delivery Systems (SPNG) http://www.spongetech.com/ trading on the OTCBB in the $0.14 range on a 3-Month average trading volume of 68,712,200 shares.
But reporting $50M in estimated gross revenues for its Fiscal Year ending May 31, 2009 and $10M I pre-tax profits led me to re-visit them today. The estimated revenues generated during the fourth quarter were substantially higher than any other quarter in the Company's history. The exact results for both Fiscal Year 2009 and the 4th Quarter shall be released in its Annual Report on Form 10-K at the end of August 2009.
CEO, Michael Metter said, "The estimated gross revenues of $50 million far exceeded our expectations and we look forward to an even stronger year ahead as we continue to release new products." SpongeTech designs, produces, and markets unique lines of reusable cleaning products for car care, child care, home care, and pet care usages.
SPNG has a market cap of $106M on trailing twelve month revenues of $35.12M. It is now well above its 50-day and 200-day moving average and near its 52-week high of $0.16 on 06-08-09. Its shares out (722M) versus float (390M) remains lopsided and I would like to see more shares in the float for stability.
A FIVE DAY CHART
A ONE YEAR CHART ON SPNG
Also of interest today...
Penske Automotive (PAG) http://www.penskeautomotive.com/ trading on the NYSE in the $16 range with a 3-Month average trading volume of 1,049,830 shares and a $1.47B market cap seems to be floundering.
PAG has now officially announced that it will be purchasing the Saturn brand from GM, including the rights to sell parts and cars through the Saturn dealerships. There may be little cash involved, as no inventory is being transferred. The company also may outsource production to a lower-cost producer in India or China to lower Saturn's costs. In the end as one automotive reporter noted, this is a "dealership acquisition" by Penske.
And retail apparel is of interest today as the sector continues to suffer. Talbots (TLB) http://www.talbots.com/ trading on the NYSE in the $5 range on an average 3-Month trading volume of 746,508 shares with a market cap of $268.37M reported a first quarter net loss from continuing operations of $18.8 million or $0.35 per share, including restructuring and impairment charges of $6.4 million, or $0.12 per share, compared to last year's net income of $18.5 million or $0.35 per share for the thirteen week-period ended May 3, 2008, including restructuring and impairment charges of $3.8 million or $0.07 per share. Total sales from continuing operations for the thirteen weeks ended May 2, 2009 were $306.2 million compared to last year's sales of $414.8 million. Retail store sales for the thirteen weeks were $256.4 million compared to $345.1 million last year. Comparable store sales declined 26.9% for the thirteen week period. Ouch.
