Service Team Inc (OTCMKTS:SVTE) is the latest stock to surprise the market recently. The share price jumped this month. Market participants on the iHub forum and the Yahoo Finance forum had problems explainingthe move. Thus, we thought that the market would appreciate some research on the company. This article resumes our work. Here, you will find several hypothesis to explain the market moves.Before anything, have a look at the share price movement. After a long decline, it seems that the share price started to wake up with large volume that crossed the 600 million share mark on some days. Have a look at the price action.
Business HistorySVTE was founded on June 6, 2011. Initially, the company was created to "comply with the warranty obligations of electronic devices manufactured by companies outside of the United States". However, on June 5, 2013, management decided to gain exposure to other more profitable sectors by acquiring 100 percent of the outstanding stock of Trade Leasing, Inc. for 4,000,000 shares of its common stock. The new business consists of manufacturing, maintenance, and repair of truck bodies.SVTE provided more information about the truck bodies manufactured in its facility at South Gate, California in its annual report:
"The company manufactures truck bodies that are attached to a truck chassis which consists of an engine, drive train, a frame with wheels, and in some cases, a cab. The truck chassis is manufactured by third parties that are major automotive or truck companies. These companies do not typically build specialized truck bodies." Source
We could obtain some photos of the models from the website, which we encourage subscribers to visit:
Who are the customers?In the 10-k, it is also noted that the customers are "auto dealers, and users of trucks; such as dairies, food distributors and local delivery". The number of customers is large for a company of this market capitalization; 400 customers. In addition, it is important to mark that the company employs 47 factory workers, and five management personnel.Recent DevelopmentsThe company filed the following announcements to the SEC website. On June 8, 2017, it was noted that the issuer of some of the convertible notes that the company holds is Tangiers Investment Group, LLC, but not Tangiers Capital Group. We believe that the fact may have some implications on the share price. Thus, we noted it here.Additionally, on April 3, 2017, the Q1 2017 earnings results were given to the market. The company recorded $897,084 in sales and had a gross margin of $156,261. However, the net income applicable to the common shares was negative. The most important expenses were the cost of sales, and the General & Administrative Expenses. Additionally, it was noted that the company had 168,671,089 shares issued and outstanding as of February 28, 2017, as well as 100,000 preferred stock issued and outstanding as of February 28, 2017. The good news for retail investors is that the preferred stock is not convertible. Thus, there is no dilution risk derived from this security.Financial SituationThe following are the assets of the company. Note the large amount of cash and the money that clients will have to pay to the company:
ASSETS
2/28/17 8/31/16
Cash
$
109,838
$
321,728
Accounts receivable
256,757
222,423
Other current assets
-
40,000
Total current assets
366,595
584,151
Property and equipment, net of depreciation of $262,626
50,144
53,781
Prepaid expenses
14,000
14,000
TOTAL ASSETS
$
430,739
$
651,932
Now check the liabilities, and note as well that the company is able to receive money faster than paying it. Financial advisors appreciate this kind of businesses, since the risk of a liquidity shock is less important. Finally, check the increase in the convertible notes, and the total liabilities. Make your own conclusions about it, or consult your financial advisor if you don't understand the accounts:
LIABILITIES & SHAREHOLDERS' (DEFICIT)
2/28/17 8/31/16
Accounts payable
$
169,359
$
137,998
Promissory note – related party
4,000
6,768
Convertible notes payable, net
73,000
34,040
Promissory note, net
82,734
246,387
Accrued expense
134,636
104,649
Accrued interest
16,362
18,261
TOTAL LIABILITIES
480,091
548,103
How do we explain the recent move and conclusionThe only way to justify the latest market move using the news is the filing released on June 8, 2017. We cannot explain how market participants celebrated the fact that the lender was Tangiers Investment Group, LLC, but not Tangiers Capital Group. Maybe market participants appreciated the the way this fund works with companies. You can find its other positions here. Tangiers Capital group seems to have less money under management. Have a look at it here. Perhaps, some market participants know something that the company is going to announce soon.To sum up, there are good things about SVTE. Also, there are some things that we cannot really explain. The company seems to have a business model that is working. It is a business that grows everyday. Furthermore, SVTE is able to collect money from clients rapidly, and pay providers slower, which advisors usually appreciate. Finally, the latest share price move seems to mean that something is going on, thus we expect the company to make a new announcement soon. Try to be alert and subscribe for the next move made by SVTE.We will be updating our subscribers as soon as we know more. For the latest updates on SVTE, sign up below!Disclosure: We have no position in SVTE and have not been compensated for this article.
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