Buzz Stock of the Day – Healthcare Services Group (HCSG)

Posted on Wednesday, April 15th, 2009


Healthcare facilities management companies were up today, led by our Buzz Stock of the Day — Healthcare Services Group, Inc. (Nasdaq: HCSG).

The Bensalem, Pa.-based company, which provides maintenance, food services and housekeeping to hospitals, retirement homes and rehabilitation centers reported first quarter profit of $7.7 million, or $0.18 per-share, a 13 percent increase over the same period last year.

Analysts estimated EPS of $0.17 per share for the quarter.

Revenue for the quarter increased 9 percent to $160.45 million, from $147.2 million a year earlier. The company also declared a first quarter cash dividend of $0.18 per common share, payable on May 15, 2009 to shareholders on record at the close of business on April 24, 2009. This marks a 6 percent increase over the dividend declared for the 2009 first quarter and a 29 percent increase over the 2008 same period payment. It is the 24th consecutive regular quarterly cash dividend payment, as well as the 23rd consecutive increase since the company initiated a regular quarterly cash dividend payments in 2003.

HCSG has quarterly revenue growth (yoy) of 5.2 percent, and has generated EBITDA of $44.7 million, on revenue (ttm) of $602.7 million. The company has an operating margin of nearly 7 percent, and has plenty of cash on hand. We like HCSG because it generates healthy operating cash flow and levered free cash flow, and has consistently raised its quarterly dividend.
The company also doesn’t take any reimbursement revenue, and all of its fees are paid in cash by customers. That protects Healthcare Services Group, Inc. from cuts or other changes in reimbursement rates, and despite the economic downturn, nursing homes need the company’s services, and are unlikely to cut them due to budget constraints.

The company also just announced an asset purchase agreement with Contract Environmental Services, Inc., a provider of professional housekeeping, laundry and food services to long-term care and related facilities. The transaction is expected to close around May 1st, and add more than $40 million to HCSG’s annual revenue, “as well as being accretive to future earnings per share,” according to the company’s first quarter earnings release.

As of December 31, 2008, Healthcare Services Group, Inc. provided services to approximately 2,100 facilities in 47 states.

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Buzz Stock of the Day – Antigenics (AGEN)

Posted on Tuesday, April 14th, 2009

Last month, cancer vaccine developer, Antigenics, Inc. (Nasdaq: AGEN) announced that its personalized cancer treatment, Oncophage(R) was granted a positive recommendation by the Committee for Orphan Medical Products (COMP) of the Europen Medicines Agency (EMEA) for orphan drug designation for the treatment of giloma, a life-threatening cancer that starts in the brain or spine.

Results from a Phase 1, 12 patient investigator-sponsored study, showed that the overall median survival was approximately ten and a half months, with four patients surviving beyond 12 months and one patient surviving almost two and a half years.

This compares with survival based on historical experiences in a similar patient population, which is in the range of six and a half months. The company is currently enrolling patients for the Phase 2 portion of the study, which is ongoing and has enrolled about two-third of its target patients, according to Antigenics’ chairman and CEO, Garo Armen, PhD.

Oncophage is already approved as an adjuvant treatment for early stage kidney cancer in Russia, where the company is still seeking commercial partners and government reimbursement. Russia has only recently launched proprietary products from western companies, and there are additional uncertainties including the company securing the necessary partnerships and government funds to successfully launch the product.

Antigenics’ bread and butter is its licensing revenue from QS-21, an adjuvant that’s used in various vaccines. Antigenics’ licensees include GlaxoSmithKline and Elan. There are currently 16 vaccines that cover a number of indications including non-smal cell lung cancer, malaria, HIV, melanoma, and influenza that use QS-21. GSK’s malaria vaccine, which uses the adjuvant, should enter a phase 3 study across Africa in the “very near term,” according to Armen.

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Buzz Stock of the Day- Misonix (MSON)

Posted on Monday, April 13th, 2009


There were more than 28,000 prostate cancer-related deaths in 2008.

Many of the current treatments including radiation and hormone therapies either result in a recurrence of the cancer, or have harsh side effects such as osteoporosis and anemia.

Minimally invasive treatments in late clinical trials are showing promise, however.

Our Buzz Stock of the Day — Misonix, Inc. (Nasdaq: MSON) — is developing a prostate cancer therapy based on High Intensity Focused Ultrasound (HIFU) technology. The company’s HIFU-based therapy is in Phase III clinical trials at a number of academic centers throughout the U.S.

In 1999, Misonix obtained a 20 percent equity position in Focus Surgery, a company leading the way in High Intensity Focused Ultrasound (HIFU) technology. Misonix manufactures the product for Focus Surgery. Misonix also markets the SB500 in the United Kingdom, Europe and Russia.

Treatment time using HIFU is usually 3-4 hours, and patients will more than likely be discharged the same day, or next day at the doctors discretion, according to Misonix’s Web site.

We like Misonix because the company makes money from its portfolio of ultrasonic medical devices that are being used in cosmetic surgery, neurosurgery, and laparoscopic surgery; is aggressively expanding its geographic footprint, and has a very promising pipeline.

For the three months ended December 31, Misonix reported net income of $194,000, or $0.03 per-share, compared with a net loss of $117,000 or $0.02 per-share. Revenue for the company’s second fiscal quarter increased 5.1 percent over the same period last year, largely due to sales growth for the company’s medical device products.

“Our medical device business made solid progress as we expanded our sales opportunities both domestically and internationally,” said Misonix CEO, Michael McManus in an earnings release.

The company has made continued strides to expand it sales and distribution network recently, and announced several agreements to enter new markets including Eastern Europe, Belgium and Luxenbourg, and Israel.

Misonix also recently strengthened its balance sheet by selling its Ultrasonic Laboratory non-core business for $3.5 million.

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Buzz Stock of the Day – A-Power Energy Generation Systems (APWR)

Posted on Thursday, April 9th, 2009


With favorable policy support from the Chinese government, wind power has been witnessing a rapid development in recent years, with annual growth reaching more than 100 percent in the past few years. It’s estimated that China’s wind power industry will continue its high growth momentum in the coming years with the annual growth rate likely surpassing 60 percent, according to a recent article.

Our Buzz Stock of the Day — A-Power Energy Generation Systems Ltd. (Nasdaq: APWR) — could likely be a big beneficiary of China’s greening.

The power systems firm reported a net income of $10.0 million, or $0.30 per share, compared with earnings of $3.4 million, or $0.25 per share, a year ago. Analysts were projecting earnings of $0.15 per-share.

Revenue rose 93.5 percent to $81.4 million in the fourth quarter.

For 2009, the company expects revenue of about $290 million and net income of about $29 million. These targets are based on the Company’s current distributed power generation (DG) backlogs, which are subject to change when the company signs new DG contracts and/or recognizes revenues from wind turbine sales during 2009.

“After China posted robust growth rates in wind turbine installation from 6GW in 2007 to 12GW in 2008, the Chinese government recently unveiled another ambitious plan to invest $11.7 billion (RMB 80 billion) in expanding the wind energy market to 30GW and requiring utility companies to generate 15 percent of their power from wind by 2010,” said A-Power’s chairman and CEO, Jinxiang Lu. “As we believe many Chinese domestic wind turbine producers are facing technological barriers and component shortages in their mega-watt class turbine production, A-Power, with its European and U.S. relationships, is well positioned to gain market share.”

A-Power had cash and cash equivalents of $43.5 million as of December 31, 2008, compared with $59.7 million at September 30, 2008. Working capital as of December 31, 2008 was $97.0 million, compared with $95.8 million at September 30, 2008.

The Shenyang-based company has had quarterly earnings growth of 124 percent year-over-year, and quarterly revenue growth of 119 percent year-over-year.

A-Power’s P/E ratio is 7.8, well below the industry average of 11.4, making it all the more attractive at these levels.

“Alternative energy perhaps has a near-term problem with overexposure in our opinion, but the industry is not hype by any stretch, and China’s demand for power will only increase again once the global crisis has passed,” said Brian Yerger, a partner at ARDA Advisors.

With recently announced partnerships with General Electric, and European wind turbine makers Fuhrlander and Norwin, A-Power could become a major player in China’s alternative energy market.

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Buzz Stock of the Day – American Technology (ATCO)

Posted on Wednesday, April 8th, 2009

Maritime piracy incidents were up more than 20 percent in 2008, according to a recent article.

The U.S. military and maritime security industry are taking steps to prevent acts of piracy including the installations of early warning systems like the ones developed by our Buzz Stock of the Day — American Technology Corp. (Nasdaq: ATCO).

American Technology’s LRAD sound-directed early warning systems allow operators to broadcast warning messages well beyond 1500 meters in some cases.

LRAD systems steadily gained adoption both in the U.S. and abroad, as evidenced by the San Diego-based company’s Q2 ghost numbers. ATC announced that it expects to report revenue of more than $5.5 million for the three months ended March 31, a 169 percent over the same period last year.

“With deliveries to the U.S. military leading the way, we continue to experience strong LRAD orders and sales growth,” said Tom Brown, president and CEO of American Technology.

Less than a month ago, ATC announced orders totalling $1 million for LRAD systems for the Singapore Navy, and Japanese Navy.

“Due to continuing piracy and terrorist threats, a growing number of Asian military and commercial security organizations are evaluating and procuring LRAD systems,” Brown said.

In addition to growing sales, the company plans to control costs at lower levels in 2009 than 2008. ATC also stated that it expects its LRAD margins to improve as production volumes increase.

“In addition to increasing military orders, escalating maritime piracy and an amplified focus on aircraft and passenger safety, while controlling and protecting wildlife, are generating demand for our proprietary LRAD systems in the U.S. and around the world,” Brown said.

Here’s a clip from 2006 on how the LRAD systems works:

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