Game, Set, Match for Prince Mexico SA Inc (PINK:LUVE)… Almost

We have never played tennis in our lives, but we are aware of the fact that the equipment is a big part of the game. And it does make sense when you think about it – no matter how good you are at hitting small yellow balls, if you don’t have the right racquet, you will lose miserably. There are a number of established brands for tennis equipment out there and it’s fair to say that Prince is one of them. Prince Mexico SA Inc (PINK:LUVE) is the publicly traded company that is distributing the brand in Mexico as well as Latin and South America and we decided to see how they are getting on.

LUVE started off as a manufacturer and seller of furniture back in 2010. This business was not that successful, however, with the acquisition of Prince Mexico in 2012, they put themselves in a much better position. As we mentioned, Price is a well-known brand in the tennis world and there are quite a few world-class athletes using their racquets and shoes which means that nobody is going to question the quality of LUVE‘s products. They will also skip the marketing costs associated with introducing a new brand and since only LUVE have the license to distribute the Prince products in Mexico, they will have no competition as well. All in all, the future is looking bright at the moment. Or is it?

Well, although the acquisition was closed back in December 2012, investors didn’t really seem to pay much attention to the ticker for a while and trading was slow in January and February. Then, around March 15, there was some upward movement, however, the last three sessions weren’t that good and yesterday they lost nearly 50%.

While there is no way of knowing what caused the sudden drop, we’re pretty sure that the uncertainty around LUVE has something to do with it. They do file their reports regularly but unfortunately, the latest 10-Q covers the period before November 30, which means that it was compiled when they were still selling furniture. Having looked through the report, we can understand why they were ready to give up on that business. It appears that as of November 30 they had no assets, no revenue, $22 thousand in current liabilities and a quarterly net loss of $10 thousand.

This business is gone, however, and we were eager to see how the selling of tennis apparel has been going on. Unfortunately, the only figures that we could lay our hands on were for the fiscal 2011 and, although we were expecting quite a lot, we were rather disappointed to see that twelve months of selling had resulted in $499 thousand in revenue and a $97 thousand net loss.

Of course, things might have changed since then but, we can only guess at that, at least until the next report comes out. One thing is for sure – if they want to gain some recognition among investors they will need to do something about their principal office since, as you can see from the picture on the right, the current one is rather unassuming and it’s definitely not suited to a well-known brand like Prince.

If they change it for something more presentable, they might give their price a nudge in the right direction and, with rumors of an upcoming paid promotion, things will probably heat up around the ticker in the coming months. We’ll be sure to keep a close eye on them.