MISSING CUSOMTERS- PART 3 (Dubai)
8/4/2008
Say whatever you want about their fund-raising and stock issuance, but you can’t deny SpongeTech Delivery Systems (SPNG) is selling the living daylights out of their product. With our last look they had $30 million in orders; now the total’s been cranked up to $34.2 million (excluding any delivered/booked orders this past week).
The customer was the Dubai Export Company…a prior customer of the car wash sponge. This $4.2 million order is their third, and biggest, yet. Most of the order was for more auto wash sponges, but a few household cleaning sponges were requested as well.
The third order from this company, and each on is incrementally bigger? Hmmm. Ya’ think maybe that’s a sign of growing demand? I do.
Don’t hear me wrong. When I look at the whole capitalization thing and how RM Enterprises - also managed by SpongeTech’s management - happens to be the biggest shareholder, coupled with the deep discount they got on their shares, I have to scratch my head. I don’t like dilution and disparity. Who does?
On the other hand, I can not and will not deny this….SpongeTech is making good use of the funds they’ve raised. More specifically, they’re generating more revenue than they’re spending on the effort. Margins have always been good, and the ROI on marketing has been just as solid. So, I have little (ok, no) doubt we’ll see profits once again when we finally get last quarter’s numbers.
Dilution? Yeah, yeah….I’ll grumble with you. I’m also looking a the bigger picture though - the company is profitable. If my post-dilution shares are more profitable than my pre-dilution shares, they can dilute all they want. That’s the overarching point/question I hope we’re all keeping in mind.
In any case, I’ll remind all of us again that SpongeTech has sent a steady stream of this ‘new’ and ‘large’ order news over the last few months. They’ve got a back log (12 to 18 months) of $34 million, but three quarters ago did about $260K in sales. You’re in their ‘growth’ stage. All things weighed fairly, I still really like this opportunity.
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