TPS Position Update – March 16, 2016

. . . . . Revolution Lighting (NASD: RVLT) – Hold 

We recommended RVLT in December 2015 at $0.86.  Today, it closed at $6.51.

But don’t crack the champagne.  Last week, Revolution Lighting Technologies announced a 1 for 10 reverse stock split.

There will not be a change in the par value per share, or the authorized number of shares, but this reverse split will cut the number of outstanding shares from 160 million down to 16 million.

What does this mean for investors?  Not much.

The company probably wants to prop up the value of the stock to either satisfy a stock exchange’s minimum share price for listing, or to encourage mutual funds and other institutional investors who have minimums for share prices to invest.

Whatever the RVLT motives, there’s a sour note to this.  Reverse stock splits are rarely celebrated.

Does this mean rough times ahead?  Should we run for the exits?  That would be premature, and here’s why.

When 2015 financial results were reported last week, we got some good news.  Q4 revenue was $44.3M, up 61.3% over Q4 2014.  Adjusted EBITDA came in at $4.5M.

For the year, revenues grew to $129.7M, up 68.7% over FY 2014.

Net income for Q4 was $1.4 million compared to a net loss of $2.6 million for the same period in 2014.

Please note… we are adjusting the buy price of record to reflect the reverse split.  The $0.86 becomes $8.60, so you can compare apples to apples.

. . . . Sino Global Shipping (NASD: SINO) – Hold 

When we picked up the Wall Street Journal one morning last month and saw the following headline, we were not surprised…

Chinese Ship Builder Warns Investors of Possible Rougher Seas Ahead

When anything involving Chinese shipping hits rough waters, Sino Global Shipping takes a beating.

How has SINO been holding up?  Not as well as we would like.

For Q2 of fiscal 2016, revenues were $1.6 million, down from $3.1 million for the corresponding quarter of FY 2015.

Rate cutting from competitors scrambling for a piece of a shrinking pie has hit SINO hard. SINO walked from some business rather than diving to take an unacceptable rate.

This strategy has been helpful for margins. Margins grew to 55.7% from 45.8%.

A lot of this comes from the company’s inland transportation business, agency, and ship management services.

We recommended SINO in September 2015 at $1.01.  Today, it closed at $0.66.

This is not a good time to sell.  We are not inclined to lick our wounds and take our losses.  We expect SINO to recover and for the stock price to make up for lost ground as the Chinese economy regains some steam.

The obvious question… how long will this take?  We believe sooner rather than later, and we believe SINO is well-positioned to ride the recovery.

Action To Take

• Hold Revolution Lighting (NASD: RVLT)
• Hold Sino Global Shipping – (NASD: SINO)

Category: TPS Update