Market Fear Translates into Opportunity: SPRD, FTWR, FEED

Trends, Charts and Exclusive Opinion

Three SmallCaps That are NOW very Affordable  

SPRD: Rev: Up. Gross Profits: Up. GAPP Net Income & EPS: Up

FTWR: New DSCI Deal for Boston and 12 other Major US Markets

FEED: Revenues Up, Profits Down, but Hog Prices to Climb

First up this morning is AgFeed Industries Inc., (FEED) http://www.agfeedinc.com/ currently trading in the $3.18 range. FEED was trading in the $4 range a year. In June of 09 FEED neared $8. It lost its momentum and gave back the gains. FEED eventually established a $4.50 floor, with some spikes over $5, and this month, dropped into the $3 level. FEED has a 52-week high of $7.96 set on 06-10-09 with current trailing twelve month revenues of $192+ million and a positive, corresponding diluted EPS of +$0.20. I like those earnings. I also like the fact that FEED has two breeder farms and 29 meat hog producing farms in five provinces in China. The Chinese have to eat. At this price level, FEED is a ‘Buy on the Dips’ consideration for me.        

This month FEED announced its Q1 revenues were up 58% to $52.9 million and it did eek out a 2 cent EPS for shareholders. Hog prices were down 11% in Q1 and that tipped the 65% drop in FEED earnings. On a brighter note... “I expect hog prices will begin to appreciate over the next 90 days and will lead to hog prices being 12 percent to 15 percent higher in the second half of the year," Chairman Songyan Li said.

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Next up this morning we have FiberTower Corporation (FTWR) http://www.fibertower.com/ currently trading in the $3.88 range on a 3-Month average daily trading volume of 278,227 shares. FTWR was trading near the $6 mark a year ago and did spike to $8 in early June of 09. Retreating down, FTWR did find some level ground at $4, but rallied in late-Aug to top $16 by mid-Oct. FTWR fell to $6 by the end of Oct (what a spike) and played out the rest of 09 and the first 4-months of ’10 with a $4 floor tipping into the $5 range here and there. FTWR has a 52-week high of $18.20 set on 10-16-09 with current trailing twelve month revenues of $66+ million. While I don’t think FTWR will reach its high anytime soon (of course it did set it once before, so I could be wrong; and in this market...) I do believe that based on the expansion of its network it is undervalued and FTWR would be a short-term (6 Mo) ‘Buy’ consideration for me.    

Earlier this month FTWR, a backhaul provider, posted its Q1 ’10 numbers. Its average monthly revenue per deployed site increased 17% to $1,842 from $1,572 and its adjusted EBITDA improved $3.1 million, or 63%, to a loss of $1.9 million from a loss of $5 million. Good move towards posting a gain in Q2. In Q1 FTWR did get new sales deals with Verizon Wireless, MetroPCS and DSCI, a telecommunications provider serving business communities in New England. “We had a strong start to 2010 with revenue increasing 17% year-over-year and sales booked in the first quarter at the highest level in recent company history," said Kurt Van Wagenen, FTWR president and CEO. FTWR serves national and regional wireless carriers and as of December 31 09 deployed 3117 sites, including 2788 deployed and billing sites.

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Finally this morning we have Spreadtrum Communications Inc., (SPRD) http://www.spreadtrum.com/ currently trading in the $9.45 range on a 3-Month average daily trading volume of 494,533 shares. As evidenced by the chart below, SPRD has staged a 12-month rally from just under $2 to $10 this month. Very impressive. SPRD has a 52-week high of $10 set on 05-18-10 with current trailing twelve month revenues of $105+ million. Even at its high, SPRD is a short-term ‘Buy’ consideration for me. Why? I believe the wireless provider is so well positioned in China that its price/value rally will continue.

Last week SPRD reported its Q1 numbers. SPRD total revenue increased 23% quarter-over-quarter and 534% year-over-year to $52.1 million, exceeding the Company's previous guidance of $40-43 million. SPRD gross profit was $23.7 million compared to $17.8 million in the previous quarter and $1.6 million in Q1 09. GAAP net income was $6.6 million, compared with $1.4 million in the previous quarter and a net loss of $8.3 million in Q1 09. GAAP net income per basic and diluted ADS was $0.14 and $0.13 respectively, an improvement from $0.03 per basic and diluted ADS in Q4 09 and a loss of $0.19 per basic and diluted ADS in Q1 09. Great turnaround.