TPS Position Update – August 30, 2016

. . . . Sino-Global Shipping (SINO) – Hold    

We recommended the stock in September 2015 at $1.01. Today, it closed at $1.40.  Earlier this month, it traded as high as $2.24.

Sino-Global’s stock price has been giving up some ground, but we are anticipating a resumption in upward movement when fiscal Q4 earnings are released in mid-September.  

We need to see continued improvement on the receivables front in order to strengthen cash flow.  

We are anticipating a turnaround in both inland transportation management services revenue, and shipping agency and ship management services.  Each of these separate revenue streams was down significantly in Q3 2016 from the corresponding quarter in 2015.

When economic activity in China slips, and when the shipping of imports and exports slows down as a result, Sino-Global suffers. 

Sino-Global is also involved in chartering and logistics, along with agency services, inland transportation management, and ship management.

The company has been working to expand its service offering so it can diversify and insulate itself from the ups and downs of a pure play ocean transport firm.  To move beyond ships, it unveiled an agreement earlier this summer with COSCO Logistics.  

This strategic partnership is designed to expand Sino’s inland transport services business for freight being shipped to and from China.  Sino-Global has already been working to strengthen this business through the establishment of a new subsidiary. 

. . . . Flexible Solutions Int. (FSI) – SELL

We recommended Flexible Solutions in May 2016 at $1.24.  Today, the stock closed at $1.82.

The company develops and markets biodegradable polymers for oil extraction, and products for crop nutrients.  Flexible Solutions also manufactures biodegradable and environmentally safe water and energy conservation technologies.

We are troubled with the lack of revenue growth, and given the high valuations for penny stocks in general, we are advising a sell.  Selling at today’s market close of $1.82 gives you a 52% return.

Q2 2016 revenue was $3.7 million, down 4% from Q2 2015 revenue of $3.9 million.  Net income grew to $561,237 from $318,671.

We are concerned that the recently strong net income growth can’t continue much longer.  Revenue needs to grow.  Oil and agriculture are the business sectors for the firm’s most important customers, and pricing pressures in each sector have held back growth for FSI.

This is an opportune time to close out your position. The stock is trading close to its 52-week high, and well off its 52-week low of $0.66. 

Action To Take

• HOLD SINO-GLOBAL SHIPPING (SINO)
• SELL FLEXIBLE SOLUTIONS INT. (FSI)

Category: TPS Update