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Legend Media (OTC BB: LEGE) Dishes Up More New Business

For you penny stock lovers- Legend is dishing as I predicted, and really starting to get some momentum on the advertising sales side. Today, post close, LEGE dished up another really impressive new contract signing for a company delivering in the $8 million to $10 million in annual revs.

The Sanya Luhuitou Tourism Area Development Co. decided to dish up $400,000 in advertising contracts to Legend Media. This area is undergoing development that will include sea-view apartments, landscape villas, an intercontinental hotel and a shopping mall. Click Here to read the press release.

This new contract further reinforces my thesis on Legend Media. Radio and Airline Magazine are the best mediums to laser target higher net worth consumers in China as the more affluent will be driving cars and flying in planes.

Now, here's the really exciting news. You might not be seeing it as I wasn't, but the stock has come back down to the entry level I suggested, so if if like LEGE, it's finally time to snag a position.

As I write today's edition, the stock is actually bid $.235, offered the $.25 limit I suggested as the highest level I would pick up the stock. Despite being a fully reporting BB stock, the only place you would see the quote is the pink sheets for the reasons I covered last week. In fact, if you want to go straight to the real market- here's a link: Click Here.

I believe investors with the patience of 6 to 12 months might be in for an easy double from the current level. If you had the patience to wait for my $.25 level to materialize, you were rewarded with a lower risk entry point.

I strongly suggest using a limit order of $.25 or less on LEGE.
 

China Recycling (OTC BB: CREG) and China Education (NYSE: CEU) File Year End Numbers

Both CREG and CEU were out with year end numbers today, and both companies are absurdly undervalued in my view. However, if you believe as I do that the market loves growth, CREG won the growth race vs CEU, and the market is responding accordingly.

Here's a quick review. CREG delivered whopping growth and huge margins. Revenue for the year was $38.2 million, up 377% over the $8 million in '08. Profits rose to $9.8 million (.26 in EPS), up from a loss of $2.2 million. Bottom line profits were an impressive 25% of revenue. 

The current analysts estimates have CREG delivering $90 million in CY '10, which is why I love this stock. This should be another 100% growth year, and if the margins hold, the company could make $25 million this year. Wow!!!

CEU is a bit of a different story, and the market is selling this one off 5% on today's news. China Education Alliance (CEU on NYSE) delivered a top line of $37 million, up 49% over their revs in '08. Profits of $15.21 million were notched, up 52% over '08. 

The market probably didn't love the 4th quarter numbers, which showed a slowing growth rate to 14%. I believe the market was a little disappointed in the Q4 product mix. Their revenues come from 3 areas- physical classrooms, online classrooms, and advertising revenues- a very small component of sales.

There was no Q4 growth in online sales- all the growth came from class room sales, which is their lower margin business. I'm sure the market would like to see the company focus its growth strategies on the higher margin business.

However, CEU's balance sheet is very impressive. The company had $60 million in cash against about $1 million in payables. That equates to nearly $2 per share in cash. 

So, if you own this stock in the $5.75 range, you have $2 per share in cash and virtually no debt. I still believe this is a $10 stock. However, if the growth rate continues to slow, it won't get there. More likely their growth rate will go back up as the company starts investing some of its capital in expansion and possibly acquisitions.

As a result of today's news, I'm changing the order of my top picks to own as follows. Here are my new top four in order of my view of upside in the next 6 months:

• China Recycling (OTC BB: CREG)
• NF Energy (OTC BB: NFEC)
• Biostar Pharma (OTC BB: BSPM)
• China Education Alliance (NYSE: CEU)

Spicy Pickle (OTC BB: SPKL): 2009 Results Suggest Step #1 Is Completed- Now On To Next Step

Spicy Pickle (OTC BB: SPKL) joined the earnings parade yesterday with the annual audited numbers. The company delivered just over $4 million in revs, which was down a couple of percent from 2008, and reduced losses quite dramatically.

Losses in '08 were almost $6 million of $.12 in negative EPS. In '09, SPKL pared its losses to $2.7 million or $.04 on negative EPS- a major turn in the right direction. 

The lower revs are actually not bad when one takes two factors into consideration. First, the company sold one of its company stores to a franchisee. SPKL then loses the revenues, but gains the cash and the royalties. This, along with a number of recession related store closings, makes a small top line reduction seem pretty good.

The greatly reduced losses are a very good sign. The company did what it had to do in the recession. The lack of capital available to small businesses to fuel expansion hurt this particular company worse than most. 

Cost cutting is great, but it only works once. Top line growth then has to come back, and it should materialize this year. Existing stores are stable, new stores are coming on line, and growth is returning slowly but surely.

Here's the really good news. Any bad news you could glean out of the 10k filing is already priced into the stock. I believe there is a lot of upside from here, and I expect developments over the next several months to make me look right. I still own a boatload of this stock, and believe in the long term future of the company.
 

Quick Note on Beacon Enterprise (OTC BB: BEAC)

Last week Beacon announced an ambitious plan to get its warrant holders to convert their warrants into stock, or surrender them. They reduced the exercise price but changed the conditions.

This move is in response to suggestions from large institutional potential shareholders who felt the capitalization structure needed "cleaning up". The result was a pull back in the stock on some rather high volume days.

While short term this is a negative technically for the stock, longer term it's a huge positive for potential upside appreciation. The market will wrestle with a little short term supply, but it will get cleaned up. 

I believe this is a great buying opportunity.

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