Daily Archives: June 23, 2008

Gushan Insiders Already Cashing Out (GU)

Gushan Environmental Energy Limited (NYSE: GU) has filed to sell up to $100 million in ordinary shares, which it notes as having a HK$0.0001 par value (HONG KONG).  This notes that selling shareholders are selling ADS’s, with each share representing 2 ordinary shares.

This is an unspecified number of shares but based upon a closing price of $11.78 (-6.5% today) of nearly 8.5 million shares.  Gushan will not receive any of the proceeds from this offering.

The underwriting group here is rather large for a $100 million secondary offering.  Merrill Lynch is the lead underwriter; co-managers are listed as Oppenheimer, Piper Jaffray, and as Ardour Capital Investments. 

Gushan is supposed to be the largest biodiesel producer in China as measured by annual production capacity with a target of annual production capacity to 400,000 tons by the end of 2008.

Shares are down 0.5% at $11.72 in after-hours trading and the market cap as of the close was $982 million.  Gushan has only been public since December 2007 and it traded under $10.00 at the open.  Its post-IPO trading range since the IPO has been $7.00 to $17.95.

Jon C. Ogg
June 23, 2008

Posted on: June 23, 2008 – 4:13 pm in Alternative Energy, China, Secondary Offering,

Amazon.com Follows UPS Lower (AMZN, UPS)

Shares of Amazon.com (NASDAQ: AMZN) are trading lower in after-hours trading.  The company hasn’t issued any new news, but the problem is that United Parcel Service (NYSE: UPS) gave an earnings warning.  The tie here isn’t directly the higher fuel prices, but that comment about softening demand "on lower than expected package volume." 

Amazon.com closed down 0.5% at $80.68 in normal trading with a weak NASDAQ today, and shares are down about 1.4% in after-hours at $79.55 on about 89,000 shares.

The reason for the tie is even more simple that the overall mail delivery ties from one company to another.  If you order through Amazon.com you are almost assured that it will be delivered by UPS.

Jon C. Ogg
June 23, 2008

Posted on: June 23, 2008 – 3:51 pm in Internet, Retail, Transports, ,

UPS Follows FedEx Warning (UPS)

United Parcel Service, Inc. (NYSE: UPS) is currently halted on NYSE trading.  Big Brown decided it better follow the lead of FedEx Corp. (NYSE: FDX) and come clean with an earnings warning.  You can guess the two culprits, demand issues on lower than expected package volume and high energy costs.  The company now put earnings in a range of $0.83 to $0.88 EPS, down from a prior guidance of $0.97 EPS to $1.04 EPS.

The company did note that supply chain and freight unit performance have exceeded expectations.  On the lower demand, the company noted specifically that it has seen an accelerating contraction in the use of premium air products.

The formal earnings date will be released on July 22.  Shares were halted at $66.26 before the halt, and the 52-week range is $64.01 to $78.99.

We may see new 52-week lows and we may not.  After the FedEx earnings warning over the exact same thing this should have been mostly anticipated.

Jon C. Ogg
June 23, 2008

Posted on: June 23, 2008 – 3:44 pm in Earnings Warning, Transports, ,

The 52-week Low Club (TELK)(CC)(MBI)(NWA)(OMX)(GM)

Telik (TELK) Someone selling out of the stock in big numbers. A mystery wrapped in an enigma. Down to $1.24 from 52-week high of $4.96.

Circuit City  (CC) Still selling off after big loss. Down to $3.41 from 52-week high of $16.01.

MBIA (MBI) Analyst says bond insurance firm could lose another $7.5 billion. Falls to $4.71 from 52-week high of $68.98.

Northwest (NWA) Oil up. Airlines down. Sells off to $5.64 from 52-week high of $24.25.

Officemax (OMX) Small business spending falling off. Runs off to $14.67 from 52-week high of $40.97.

GM (GM) Oil up. Car stocks down. Pounded to $12.78 from 52-week high of $32.20.

Douglas A. McIntyre

Posted on: June 23, 2008 – 2:51 pm in HI/LOW, , , , ,

Getting The Bad News Out Early In The Day: Recession And Oil

One of the head investment strategists at Merrill Lynch thinks the stock market is heading lower, perhaps much lower.

"The Standard & Poor’s 500 Index has never reached a low within the first three months of a contraction, said Brian Belski, Merrill’s U.S. sector strategist," according to Bloomberg. If the theory is right, the market may not bottom until the third or fourth quarter.

Not to seem to be piling on, oil rose to $136.56. The Saudi offer to increase output is being viewed as bogus because the amount is so small. And, Nigerian rebels are still using Shell installations in that country for target practice.

The second half of the day may be better.

Douglas A. McIntyre

Posted on: June 23, 2008 – 10:39 am in Oil & Gas

SunPower Reclassifying Convertible Debt (SPWR)

SunPower Corporation (NASDAQ: SPWR) price of its common stock on at least 20 of the last 30 trading days during the fiscal quarter ending June 29, 2008 has equaled or exceeded $70.94, which represents 125% of the conversion price for one series of its outstanding senior convertible debentures. 

As a result, the market price conversion trigger has been satisfied and the debentures may be converted at the holders’ option during SunPower’s third fiscal quarter ending September 28, 2008.  Given that the market value of the debentures substantially exceeds the value holders would receive upon stock conversion, the company believes that holders may not have a significant economic incentive to convert at current prices.  As the principal amount of any debentures surrendered for conversion must be settled in cash, SunPower must satisfy the remaining conversion obligation of the 1.25% senior convertible debentures due 2027 in shares of common stock and it will classify the $200 million as short-term debt on its June 29, 2008 balance sheet.

If the common stock price conversion test isn’t met in a subsequent quarter, the debentures may then be re-classified as non-current debt as of the end of such quarter.

Based on SunPower’s current financial condition, its management believes that liquidity from the current sources combined with the potential future sources of funding from debt and equity markets will be adequate to fund SunPower’s financial obligations and to fund its planned capital expenditures and business plans over the next 12 months.

To put this in perspective, SunPower Corp. has a market cap of $6.89 Billion and the company had raw liquidity of cash, cash equivalents, and investments of over $558 million as of its last year-end.  Shares also closed at $81.36 on Friday and its 52-Week Trading Range is $53.18 to $164.49.

Jon C. Ogg
June 23, 2008

Posted on: June 23, 2008 – 7:41 am in Alternative Energy,

GE Maintains 10% to 15% Infrastructure Growth Target (GE)

Reuters has run a piece this morning commenting from an email interview from the Reuters Singapore desk with questions to John Rice, chief executive and vice chairman.  The conglomerate is maintaining a 10% to 15% growth target for its GE Infrastructure operations.  While inflation and commodity price hikes are a problem, the company notes that demand is strong and as this was in Asia the company noted that Asia infrastructure was a $20 Billion market that is growing approximately 20% per year and Southeast Asia was singled out as having 25% growth in the first quarter alone.

We have followed the developments and the key metrics inside GE rather closely ourselves.  While the company has been growing and making its strategic changes along the way, the stock has so far refused to be attractive to Wall Street and to Main Street.  The disappointment last quarter may have sealed its fate to one with a more questionable bias rather than that of a promising bias.  We feel shares have been sold off excessively in this last downdraft, but the market tries and tries to find equilibrium.  Its last guidance depended on things not getting worse, so that may be an issue if there are any of the expected scenarios that play out to slow the global growth down even further.

We had also refuted some of the rumors about the company after a spokesperson noted that rumors and blatant false data was being circulated in the market, but a downgrade and a soft market have sent shares even lower.  Our own year-end fair value estimate for GE of $33.75 is now seeming farther and farther away.

With appliances on the block and with issues having swirled around in finance and other units, you have to wonder if the company is going to start listening to more of pleas to break itself up.  We have maintained that there is safety in diversification through time under the conglomerate model and that an outright break-up is likely to only be good during a period of steady and continued bull markets.  Convincing Wall Street with that notion is often a far harder task.  Particularly when you are out of favor.

Jon C. Ogg
June 23, 2008

Posted on: June 23, 2008 – 7:26 am in Conglomerates,

Top 10 Pre-Market Analyst Calls (AGO, BRCM, CMI, IBM, JCP, MBI, MF, MOT, NOV, VISN)

These are ten of the analyst calls we are focusing on this Monday morning in the early pre-market trading hours:
Assured Guaranty Ltd. (NYSE: AGO) started as Buy at UBS.
Broadcom (NASDAQ: BRCM) started as Neutral at Robert W. Baird.
Cummins (NYSE: CMI) Raised to Buy from Sell at UBS.
IBM (NYSE: IBM) raised to Outperform at BMO Capital Markets.
JC Penney (NYSE: JCP) raised to Buy at Deutsche Bank.
MBIA (NYSE: MBI) Started as Neutral at UBS.
MF Global (NYSE: MF) Cut To Mkt Perform at KBW.
Motorola (NYSE: MOT) cut to Sell at Piper Jaffray.
Natl Oilwell Varco (NYSE: NOV) raised to Market Perform at RBC Capital Markets.
VisionChina Media (NASDAQ: VISN) raised to Outperform at Oppenheimer.
Jon C. Ogg
June 23, 2008

Posted on: June 23, 2008 – 6:31 am in Analyst Calls, , , , , , , , , ,

A Set-Back For Google’s (GOOG) Handset Hopes

Google (GOOG) is trying to get out a bunch of wireless handsets with its Android software. But, log-jams and competing agendas are hurting that. The first products were supposed to to be out in the second half of this year. According to The Wall Street Journal, "some cellular carriers and makers of programs that work with Android are struggling to meet that schedule."

Building Android to work on a massive number of phones and disparate cellular systems could become a nightmare as time goes on.

While Google and all of its PC-based competitors want to "go mobile" to make money in the new world of high-speed internet and smart handsets, the company may rue its approach. It is, at the very least, another one of a series of projects that the search company has taken up which may distract from its money-making operations.

With the hundreds of different handsets from Samsung, Motorola (MOT), Nokia (NOK), and their competitors and the dozens of carriers from AT&T (T) to China Mobile (CHL), Google will be chasing software developers for the next century. While it may seem appealing to offer a complete operating system for phones as a means of getting Google further along in wireless, it is not.

There is an easier way to do it. The best software and services win, even if the platform changes. If Google’s search products are the best and getting better, consumers are not going to use Google on their PCs and Yahoo! (YHOO) search on their phones. Google does not have to waste time trying to gain a foothold in the wireless world.

It will happen anyway and Google won’t have to waste all of the time and money.

Douglas A. McIntyre

Posted on: June 23, 2008 – 6:12 am in Consumer Electronics, , , , , ,

Nokia (NOK) Joins The Great Masses Chasing Apple (AAPL) And Pamela Anderson

Nokia (NOK) will join the scores of consumer electronics companies which have lost billions of dollars on the Hollywood walk of fame.

It is not enough that Nokia has 40% of the global handset market. It want to build a software and content business to feed those phones. It is the kind of horizontal diversification that Harvard Business School professors advise against.

The temptation is not unlike that encountered by Ulysses off the coast of the Sirens. What may be unbearably attractive can also be bad for the health.

The largest media companies have little reason set distribution deals with only one company. Even Apple (AAPL), which rules the market because of its iTune and iPod products, competes with Amazon (AMZN) and a host of other services which allow customers to download movies and music. Of course, many people simply pirate the content, which does not add to the financial appeal of the business model.

It is easy to see Nokia’s logic. Its price per handset is dropping. The fast-growing market are in China and India. Consumers in those regions are not good targets for $300 products.

The New York Times writes that "Nokia wants to transform itself into a next-generation entertainment company." Unfortunately, so does every other consumer electronics companies in the world, along with half of the websites on the internet.

Nokia will waste a few hundred million dollars and then go back to the phone business. In the meantime, meeting Pamela Anderson will be fun.

Douglas A. McIntyre

Posted on: June 23, 2008 – 5:43 am in Uncategorized, , ,

Bunge (BG) Bets The Farm, Doubles Down On Corn

Bunge (BG), which has a big business in finished corn products, is buying Corn Products International (CPO) for $4.4 billion. CPO’s name pretty much says how it makes its money.

The price is a 25% premium to the Corn Product’s recent share price, which is an awful risk for Bunge. According to The Wall Street Journal, "Buying Corn Products will give Bunge a presence in nearly every step of the so-called corn value chain."

The fact that the price of corn and other agricultural commodities is rising could be viewed as good for Bunge. It could also be viewed as very, very bad.

Bunge and its peers are operating in a market where corn price have spiked up 20% in recent weeks due to flooding in the Midwest. The rise in the commodity may allow Bunge to increase revenue, but it may quickly lose the opportunity to pass along the costs of raw goods to its customers. As the price of corn flakes and bread moves up, consumers may simply buy less. Bunge and Corn Products customers like Kellogg (K) and Coca-Cola (KO) may not be able to increase sales as expensive corn bread drives people to find food alternatives which as not as expensive.

Wall St. has started to catch on to the substantial gross margin risks at Bunge. Its shares are only up about 5% so far this year. Bunge is getting caught in the food inflation cycle and its earnings could be damaged as the second half of the year comes around. The CPO deal may end up as an example of how a fool and his money are soon parted.

Douglas A. McIntyre

Posted on: June 23, 2008 – 5:22 am in Agriculture, , , ,

Google’s (GOOG) High Reputation Could Ruin Share Price

Google (GOOG) is now the US company with the highest reputation, at least according to the annual Harris Interactive Reputation Quotient poll. According to Reuters, "Largely for its reputation for treating workers well, Google claimed the No. 1 spot from Microsoft Corp (MSFT), which fell to 10th place."

Other winners in the survey included Intel (INTC), 3M (MMM), and Kraft (KFT).

Being viewed well by the public may be bad for shareholders. Looking good to outsiders and doing well financially are often very different things. At the top of the Fortune "Most Admired Companies List" sit GE (GE) and Starbucks (SBUX). It would be hard to find two companies which have actively done so much to hurt their shareholders. Starbucks failed to monitor its growth and the quality of its service. GE refuses to dump its losing divisions.

Admiration and reputation are a simpleton’s way of viewing how corporations are doing. The smart money is looking at earnings.

Douglas A. McIntyre

Posted on: June 23, 2008 – 5:03 am in Media, , , , , , ,

News Corp (NWS) Can’t Keep Its Advantage: Facebook Passes MySpace

The two largest online social networks are Facebook, which is a private company, and MySpace, which is owned by News Corp (NWS). MySpace has always been the larger property. Facebook was a distant second, but gaining.

The News Corp deal to pick up MySpace was always viewed as a brilliant move by Rupert Murdoch. He paid $580 million for the operation in mid-2005. Facebook was recently valued at $15 billion. so the Australian got a discount by moving into the market early.

Unfortunately for Mr. Murdoch, his front-runner status is gone. According to audience measurement firm comScore, in May the unique visitors to Facebook hit 123 million. MySpace had only 115 million uniques. The FT writes "Facebook, the fast-growing social network, has taken a significant lead over MySpace in visitor numbers for the first time, according to one popular measure of internet traffic."

Over the last year, Facebook’s visits have almost doubled. MySpace is only up 5%.

Does it matter? Probably not. Over at News Corp, MySpace has been missing its revenue targets. Murdoch hoped the operation would do $1 billion last year. It was off that by about 20%.

Social network sites will probably never do well financially. That is only a recent discovery, but it makes the news no less damaging. Visitors to these sites go to build profiles of themselves, mostly juvenile and overblown portraits. Their friends and complete strangers can go online and check all of this dreck. But, it has little value to advertisers. Organizing social network users into unique "buckets" is hard. At Google (GOOG), marketers can target users by search topic. At Yahoo! (YHOO) content areas are broken down by subject–finance, news, sports, jobs.

The number of people using social networks may continue to grow quickly, but they have little value to GM (GM), Procter & Gamble (PG), or IBM (IBM), because no one knows why Facebook users spend their time online trying to make themselves look better than they really are.

Douglas A. McIntyre

Posted on: June 23, 2008 – 4:51 am in Internet, , , , , ,

Wall St., Now Dead, Gets An Obit (LEH)(MER)(C)(GS)

The last round of earnings for Wall St. firms showed that the financial industry was in bad shape and getting worse. That has been followed by news that the brokerage executives who said in May that things were getting better were wrong. Lehman (LEH) could still go out of business or be sold. Merrill Lynch (MER) and Citigroup (C) have said their losses have not ended. Both may have to raise more money.

Late word is that Citigroup and Goldman Sachs (GS) will lay-off about 10% of their investment banking employees. According to the FT, "The Wall Street bank (GS) is now expected to cut up to 10 per cent of staff in the division that handles mergers and acquisition advice and corporate fundraisings."

The head of hedge fund Paulson & Co recently said global write-offs at financial firms would hit $1.3 trillion. Only about one-third of that has been taken so far. If the number is anywhere close to accurate, the lay-offs among these firms could move up by tens of thousand more.

The loss of 100,000 or 200,000 Wall St. jobs may not seem a lot compared to the millions who may be on the street by the end of the present disaster. But, because these poor souls tend to be well-paid, the hit on the tax base could be more like 500,000 to 1 million people being sacked.

The financial firms have done a great deal to hurt that national economic infrastructure. Now, they are going to do what they can to bring down the tax base.

Douglas A. McIntyre

Posted on: June 23, 2008 – 4:26 am in Brokerage Firms, , , ,

This week on Stockhouse June 16–20

Stocks mixed on oil, financials, and economic data this week

Wall Street started the week mixed, as the lower price of oil was overshadowed by weak economic news. The financial sector put pressure on the U.S. markets on Tuesday, and Wednesday the Dow hit a three-month low, on weak results from FedEx and continuing concerns in the financial sector. Wall Street closed slightly higher on Thursday, as weak financial stocks outweighed falling oil prices. Energy and financial stocks took the TSX higher at the beginning of the week, and landed at a record high close on Tuesday. Wednesday saw the TSX slightly higher on oil stocks, but the energy sector triggered a triple-digit TSX loss on Thursday. Both the Dow and the TSX saw triple-digit losses on Friday. The Dow was down 220.40 points to close at 11,842.69, while the TSX fell 209.48 to close at 14,580.67.

Read More »

Posted on: June 23, 2008 – 4:12 am in Uncategorized

The Idiots At Harvard Look At Housing

Researchers at Harvard have looked at the housing crisis and say that it will be bad, very bad. According to Reuters, "A two-year home price drop is eating into housing wealth, curbing consumer spending and slicing away economic growth. This is unlikely to change until potential home buyers are convinced that prices have stopped tumbling, the study found."

The study confirms what most economists and homeowners already know. Don’t buy a house yet. The market is still falling. Don’t sell a house. No one wants it.

Douglas A. McIntyre

Posted on: June 23, 2008 – 4:10 am in Research,

Media Digest 6/23/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to Reuters, a new survey put Google (GOOG) first in reputation among US companies.

Reuters reports that gas prices climbed to a record $4.10.

Reuters writes that Bunge ((BG) will buy Corn Products ((CPO) for $4.4 billion.

Reuters writes that Citigroup (C) will cut 10% of its investment bank employees

Reuters writes that a study from Harvard says the housing rebound is far off.

Retuers writes that GE’s infrastructure unit plans to keep its forecasts, most due to growth in Asia.

The Wall Street Journal reports that there has been a surge in oil speculation since 2000.

The Wall Street Journal writes that the Saudis tried to calm fears of oil price by slightly raising production.

The Wall Street Journal reports that banks are struggling to get new capital.

The Wall Street Journal writes that plans for a Google mobile handset have slowed.

The Wall Street Journal reports that China and India have two of the world’s worst performing markets so far this year.

The New York Times writes that Nokia (NOK) is trying to make itself into a next generation entertainment company.

The New York Times reports that the fall-off in newspaper advertising is accelerating.

The FT writes that Goldman Sachs (GS) will cut investment banking staff this week.

According to the FT, Ambac (ABK) and MBIA (MBI) "are talking to banks about wiping out $125bn of insurance on risky debt securities."

The FT reports that Facebook has now claimed the lead over MySpace (NWS) in terms of unique visitors.

Bloomberg writes that high oil prices have undermined Barnanke’s cures for inflation.

Douglas A. McIntyre

Posted on: June 23, 2008 – 3:03 am in Press Digest, , , , , , , ,

Asia Markets 6/23/2008 (CHL)(SNP)

Markets fell in Asia.

The Nikkei was off .6% to 13,857. Mizuho Trust was off 3% to 192. NEC was down 2% to 597.

The Hang Seng fell .4% to 22,647. China Mobile (CHL) was up 1% to 107.60. China Petroleum (SNP) was down 3.3% to 7.81.

The Shanghai Composite was down. 2.5% to 2,760.

Data from Reuters

Douglas A. McIntyre

Posted on: June 23, 2008 – 2:35 am in International Markets, ,