TPS Position Update – April 19, 2016

. . . . Nevada Gold (NYSE: UWN) – Hold 

We recommended Nevada Gold in June 2015 at $1.66. Now it’s at $2.07 after running up as high as $2.50.

When the latest quarterly results were released last month, the numbers were solid.

For Q3 fiscal 2016, net revenue was up to $18.4 million.  That compares with $15.8 million for Q3 of fiscal 2015.  Most of the increase is flowing in from the company’s new casino on the outskirts of Vegas… Club Fortune added $2.4 million in revenue.

Operating expenses were up $2.2 million.  Operating income was up 50%, from $0.8 million to $1.2 million.  Adjusted EBITDA was $2.3 million compared to $1.5 million in the prior year quarter.  And $2 million in debt was paid down.

We continue to like what we’re seeing from this under the radar gaming company.  One of the reasons we bought it was the low overhead and the seasoned management team.

Operations in Washington continue to do well, but South Dakota slots are a problem, and a drag on revenue.  Operating expenses have been trimmed in South Dakota, but business in Deadwood continues to be slow.  It would not surprise us to see Nevada Gold spin off its South Dakota operating unit.

We’ll be happy to watch the debt taken on to acquire Club Fortune paid down, and for income growth to continue.  This is a good stock to hang onto.

. . . . Revolution Lighting Technologies, Inc. (NASD: RVLT) – Hold 

It hasn’t been pretty.  We need to be patient and ride out a rough stretch.

What’s going wrong?

When we recommended the Stamford, Connecticut-based manufacturer of LED lighting products, we were impressed with the company’s relationships with the defense sector.

We figured that the U.S. military would be more comfortable doing business with a U.S. firm than a Chinese competitor.

It hasn’t quite worked out that way.  At least not yet.

To try and get more defense contracts, Revolution entered into a “partnership” with The Cohen Group.

Cohen is run by retired Navy, Coast Guard, and Department of Homeland Security staffers.

But so far, the insiders haven’t brought their influence to bear in a meaningful way on behalf of Revolution.

In 2015, the firm narrowed its losses to $2.38 million.  Revenues are growing.  The company turned a modest $1.437 million profit in the most recent quarter.

But the stock price has been brutalized.  There was a reverse split which we told you about last month.  Since then, we have seen more dips.

If there’s going to be a rebound, we’ll need more profitable quarters and more confidence in the ability of the company to secure a stronger position as a go-to defense contractor.

We’ll keep you posted.

Action To Take

• Hold Nevada Gold (NYSE: UWN)
• Hold Revolution Lighting Technologies, Inc. (NASD: RVLT)

Category: TPS Update