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    Stock Alert for Recon Technology Ltd. (RCON)

    Recon Technology Ltd. (RCON) is a non-state-owned oil field service company in China. The Company has been providing software, equipments and services designed to increase the efficiency and automation in oil and gas exploration, extraction, production and refinery for Chinese oil and gas fields for more than 10 years. RCON’s specialized proprietary software and hardware manage the oil extraction process in real-time thereby reducing extraction costs.

    Share Statistics (20-Mar-12)   FY

    2010

    FY

    2011

    %

    Chg

    Q4

    2010

    Q4

    2011

    %

    Chg

    Symbol RCON Revenue, CNY Mn 117.00 63.69 -45.6% 32.18 30.84 -4.2%
    Current price $3.92 Gross marg. 42.2% 31.7% -24.9% 36.3% 29.6% -18.5%
    52wk Range: $0.27-$4.50 Oper. margin -44.9% 6.8%
    Avg Vol (3m): 25,636 Net margin 17.1% -45.6% -366.7% -64.3% 4.5% -107.0%
    Market Cap. 15.49M              
    Shares Outstanding 3.95M EPS, $ 5.23 -5.87 -212.2% -3.75 0.35 -109.3%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    Recon Technology Ltd. (RCON) spiked more than 74% Tuesday, a day after the company announced that one of its variable interest entities, Beijing BHD Petroleum Technology Co. Ltd. (BHD), introduced the Baker Hughes Frac-Point System to China Petroleum and Chemical Corp.’s (Sinopec) Zhongyuan oilfield. The stock set a new 52-week high of $4.58 before closing at $3.92, on high volume of over 7 million shares.

    Shares in the Chinese non-state-owned oil and gas automation services provider have surged 460.0% in the last fives days and 429.7% in the last month.  Year-to-date, the stock is up 10.4%.

    According to the release, the system helped Sinopec in completing the fracturing of  a dense sandstone horizontal well that required multistate fracturing. As of March 19, 2012, BHD has inked several contracts, which have an accumulated contract value of about $4.75 million. These contracts will be performed in different stages and are expected to be completed during the first half of this year.

    As a smaller company, our strategy is to be the leader of the very specialized oilfield service sector. We aim to improve our technological knowhow and to accumulate experience by cooperating with leading international companies to represent and promote their advanced products in China,” commented Chen Guangqiang, CTO of RCON.

    The Baker Hughes Frac-Point System is widely used around the world and has been installed in more than 2,200 oil-gas wells, 150 of which are located in China, said Guangqiang.  RCON qualified last year to develop the Frac-Point Completion System of Baker Hughes for Zhongyuan Oilfield, a subsidiary of Sinopec.

    “It is our honor to be among the select few domestic suppliers designated by Sinopec of the horizontal multistage fracturing technology.  BHD and Sinopec have now signed contracts to provide this technology for ten wells in the Zhongyuan Oilfield.”

    Late in February, RCON announced that BHD received a notice from Sinopec that it had won a contract to provide four 4,500 kW furnaces and four 400 kW fluid-jacket furnaces to Sinopec’s Northwest Oilfield. The contract is valued at approximately $954K.

    Source:

    http://www.recon.cn/en/news.aspx?class_id=17

    Financial Summary

    RCON posted total revenues of RMB30.84 million ($4.85 million) for the three months ended December 31, 2011, slightly down from RMB32.18 million reported in the comparable quarter of the previous year.  As stated by the Company, new business, much of it from existing clients, factored heavily in reducing declines in revenues.

    Total revenues in the six months ended December 31, 2011 decreased more significantly to RMB35.79 million ($5.62 million) from RMB53.98 million in the six months ended December 31, 2010, due largely to the deconsolidation of one variable interest entity (VIE) in 2010.

    The Company realized a net income attributable to ordinary shareholders of RMB1.40 million ($219K) for the quarter period, an increase of RMB22.07million or 106.75%, from a loss of RMB20.68 million for same period of 2010.

    Net loss attributable to ordinary shareholders was RMB2.01 million ($316K) for the six months ended December 31, 2011, an improvement of RMB17.82 million or 89.87%, from a loss of RMB19.83 million for same period of 2010.

    As of December 31, 2011, RCON had cash and cash equivalents of RMB1.09 million ($171K). Except for RMB6.98 million ($1.1 million) of short-term borrowings, there were no other finance leases or hire purchase commitments, guarantees or other material contingent liabilities.

    Source:

    http://finance.yahoo.com/news/Recon-Reports-Second-Quarter-prnews-918556621.html?x=0=

    Financial Strength (20-Mar-12)

    Company

    Industry

    Sector

    Quick Ratio (MRQ) 2.50 0.91 0.48
    Current Ratio (MRQ) 2.94 1.45 0.69
    LT Debt to Equity (MRQ) 0.00 36.02 13.36
    Total Debt to Equity (MRQ) 8.64 40.93 17.55
    Interest Coverage (TTM) -18.80 74.79 4.45

    Source: Reuters.com, SEC Filings.

    Technical Analysis

    Source: http://stockcharts.com

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Dec07-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    Bolt Technology Corp. BOLT 3.92 15.49M n/a n/a n/a n/a
    Magellan Midstream Partners L.P. MMP 72.30 8.18B 19.08 17.46 4.33 4.13
    Honeywell International Inc. HON 59.48 46.12B 13.40 11.97 1.20 1.13
    Rockwell Automation ROK 81.42 11.59B 15.22 13.64 1.81 1.68
    Industrial Electrical Equipment Median       16.61 n/a 1.23 n/a
    Recon Technology Ltd. RCON 3.92 15.49M n/a n/a n/a n/a

    Source: Thomson Financial

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