Category Archives: VMW

The Venaxis Spring is Coiled (APPY)

I know on the surface that Venaxis Inc. (NASDAQ:APPY) hasn’t exactly been the most riveting of stocks lately. Heck, APPY shares are exactly where they were at the end of July, and volume has been even less than minimal. I’m telling you though, there’s just something about this stock – and its chart – that tells me an explosive bullish move is brewing.

Just as a preface to a chat about APPY, think about a spring that’s coiled. There’s potential for a violent “boing”, but as long as whatever’s keeping the spring is coiled, then that potential de-coiling is irrelevant. If for some reason the spring’s shackles are undone, the look out – BOING! Yeah, well, just think of Venaxis Inc. as a coiled spring. It’s not doing anything right now, but it could very easily make an explosive bullish move with just one small (and easy to achieve) catalyst.

The Venaxis spring has been coiled by a rising support line and a falling support line. The rising support line is the 50-day moving average line (purple), while the falling support line is the 100-day moving average line (gray). Those two moving averages are on a collision course though, and clearly APPY can’t drift sideways between the two when there’s no space to waffle in between then.

But how do we know APPY is apt to make a bullish break rather than a bearish one? Truth be told, we don’t; there are never any guarantees in trading. But, there are some clues in place that suggest the undertow is bullish.The biggest clue in favor of bullishness from Venaxis Inc. is the fact that the stock’s actual still in a broad (even of wobbly) uptrend since June’s lows. The way shares have been gyrating around the $1.46 mark is also a biggie. That line was resistance in June and July, and though it’s not exactly become a support line yet, clearly the buyers are having no problem holding the stock above that former technical ceiling.

As for the timing, we’re apt to see the spring uncoil sooner than later. Though just gyrating around the $1.46 mark, we can also see the string of higher lows and lower highs has pretty much taken APPY to the pointy tip of a wedge shape [aided by the two key moving average lines]. The contraction is squeezing the chart tighter and tighter, but there’s no room left… the pressure building.

The proverbial green light is a close above the 100-day moving average line, currently at $1.48. Not only will a move above the 100-day line crack what’s been a tough ceiling, it will also rock Venaxis Inc. shares out of the converging wedge pattern.

The trick is exercising patience until that one last step is taken.

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The Deal: Blackstone’s Hilton Chain Checks Out $1.25B IPO

NEW YORK (TheStreet) — Blackstone Group (BX) is taking hotel operator Hilton Worldwide Holdings public in an IPO that is expected to raise up to $1.25 billion, according to a Thursday, Sept. 12, regulatory filing.

McLean, Va.-based Hilton owns and franchises a portfolio of 4,041 hotels in 90 countries and territories. The company’s brands include Waldorf Astoria, Conrad, DoubleTree, Embassy Suites, Hilton Garden Inn, Hampton Inn and Homewood Suites.

An eventual exit from the hotel chain will be something of a turnaround story, since Blackstone took Hilton private in October 2007 in a leveraged buyout worth $26 billion, right before the end of the LBO boom and as the recession was beginning to get under way.

Indeed, in 2008, the chain posted an operating loss of $4.5 billion. But with Blackstone at the helm, Hilton increased the number of its rooms by 34% or 170,000 rooms by June 2013 over the number it had in June 2007; grew the number of rooms in the development pipeline by 52% to 176,000 and increased the total number of rooms under construction by 121% to 92,000, according to the offering prospectus. The company posted 2012 adjusted Ebitda of $2 billion on revenue of $9.3 billion, up from adjusted Ebitda of $1.8 billion on revenue of $8.9 billion in 2011. The number of shares to be offered has not yet been fixed, nor did Blackstone indicate if it would sell shares. The filing does not disclose how many shares will be sold in the offering. It does not indicate how many shares Blackstone would sell in the offering either. Hilton said that proceeds would go toward paying down debt. As of the end of 2012, the company had long-term debt of $15.2 billion, down slightly from $16bn in 2011. However, given positive trends in the hospitality industry and the company’s own efforts to streamline its operations, Hilton’s initial public offering is expected to be welcomed with open arms. “Industry trends have been solid over the past several years, so the timing of the IPO is not surprising,” said an industry source who did not want to be named.

In fact, according to industry intelligence firm PKF Hospitality Research, or revenue per available room in the U.S., where 78% of Hilton’s rooms are located, will grow 7.2% in 2014 and 8.1% in 2015.

“Hotel stocks are trading at more or less 12 times enterprise value to projected 2014 Ebitda. Hilton should be there or even higher given its positive evolution,” the person said.

Hilton is not the only hotel company Blackstone is expected to take public. In July, Charlotte, N.C.-based Extended Stay America Inc. filed for a $100 million IPO. Private equity firms Blackstone and Centerbridge Partners LP and hedge fund firm Paulson & Co. acquired Extended Stay out of bankruptcy in 2010 for $3.9 million. Deutsche Bank AG, Goldman, Sachs & Co. and JPMorgan are the joint bookrunners on that deal.

IPO intelligence firm Renaissance Capital said the $100 million figure is likely a placeholder and that Extended Stay could raise between $500 million and $1 billion in the offering. So far this year, the performance of publicly traded hotel chains has been on an upward trend. Marriott International (MAR) share price has increased 10.8%, Hyatt Hotels’ (H) is up 16.6% and Starwood Hotels & Resorts Worldwide’s (HOT) is up 15.9%. Deutsche Bank, Goldman Sachs & Co., Bank of America Merrill Lynch and Morgan Stanley are the joint bookrunners on Hilton’s IPO. An exchange and ticker symbol for the public company have not yet been chosen. — Written by Taina Rosa in New York

JPMorgan to Suffer $4B Compliance Hit in 2013: Report

NEW YORK (TheStreet) — JPMorgan Chase (JPM) faces an additional $4 billion in costs this year related to the mounting regulatory challenges it faces, according to a report from The Wall Street Journal .

The additional costs will include “an additional $1.5 billion on managing risk and complying with regulations, including a 30% increase in risk-control staffing,” according to the report, which cited unnamed sources. The bank is adding 5,000 employees “to clean up its risk and compliance problems,” and will also add $2.5 billion to its litigation reserves, according to the report.

Investors now have some very large numbers, putting a stamp on comments made by JPMorgan Chase Chief Financial Officer Marianne Lake at a conference on Monday, when she said the bank’s legal expenses for the third quarter could exceed $1.5 billion, but that it was “still finalizing” its estimate for costs associated with a “crescendo of activity in past weeks.”

Lake said JPMorgan was “reacting” to the flurry of regulatory activity against it, and was setting aside additional litigation reserves, although she didn’t provide an estimate of how much additional costs the company would face. “We are trying to put some of this behind us and hope that taking these reserves will go a long way towards that,” she said. Lake also said that the bank expected its mortgage origination business to see a net loss for the second half of 2013, in light of the vast reduction in industry refinancing volume as long-term interest rates rise. JPMorgan’s mortgage business will also suffer from lower margins on sales of newly originated loans to Fannie Mae (FNMA) and Freddie Mac (FMCC), which is also a result of rising long-term rates. Sell-side analysts earlier this week were downplaying the effect of the additional expenses even though they didn’t have all the figures. JPMorgan became a political and regulatory pincushion after CEO James Dimon in May 2012 first disclosed the “London Whale” hedge trading losses within the company’s Chief Investment Office, which eventually came to at least $6.2 billion. The company is facing about a dozen separate investigations by the Department of Justice and federal bank regulators. The bank has already entered into one large regulatory settlement this year, agreeing to “pay $410 million in penalties and disgorgement to ratepayers” to resolve civil charges of energy market manipulation by the Federal Energy Regulatory Commission.

Among the large figures being bandied about through various leaks to media outlets, the Federal Housing Finance Agency — which regulates Fannie and Freddie — is looking for JPMorgan to cough up $6 billion to settle claims the bank falsely claimed loans sold to government-sponsored enterprises met required underwriting standards, according to The Financial Times.

The Journal last week reported JPMorgan would completely exit student lending as part of a continuing effort to “simplify” its operations, although federal regulators’ proposed leverage capital rules provide plenty of incentive for the biggest banks to focus on higher-risk, higher return businesses.

JPMorgan weathered the post-crisis environment quite well through 2012 with record earnings for three years running. But the regulatory costs are mounting, making it possible that Wells Fargo (WFC) will jump to the head of the line as the nation’s most profitable bank.

A JPMorgan Chase spokesperson said the company had no additional comment. Dimon was interviewed by the Journal, saying “Fixing our controls issues is job No. 1… This is a huge investment of people, time and money…but it will make us stronger in the long run.” JPMorgan’s shares were up 0.4% in early trading, to $52.45. JPM ChartJPM data by YCharts Interested in more on JPMorgan Chase? See TheStreet Ratings’ report card for this stock. — Written by Philip van Doorn in Jupiter, Fla. >Contact by Email. Follow @PhilipvanDoorn

Philip W. van Doorn is a member of TheStreet’s banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.