Tuesday, December 13, 2011

Arabian American Development Company ($ARSD) Up on Word of $60 Million Contract

Shares of Arabian American Development Company (NASDAQ: ARSD) surged more than 20% in today's trading. Dallas-based Arabian American Development Company is engaged in the manufacturing of various specialty petrochemical products. The small-cap stock closed at up 8.21% at $3.30.

Today's trading activity comes on the back of the company's announcement that it has signed a five-year agreement through its subsidiary South Hampton. According to the agreement, the company will deliver a specialty hydrocarbon blend to a new customer. Under the terms of the agreement, the company is shipping its products to the customer's testing facility. The company anticipates to ramping up the project once the testing is done and expects to start commercial volumes by fourth quarter of 2011. The commercial contract is worth $60 million and will be valid in the last three years of the five-year contract.

In its latest 10K filing, the company highlights some of the risks it faces. These include supplier risks as the company depends on a single source for certain raw materials, relying on few customers, regulatory and macroeconomic factors. The company also faces challenges from its investment in AMAK, a Saudi Arabian mining company in which it has a 41% stake. In its 10K, the company mentions that in 2008 and 2009, two customers contributed a little more than 10% each to its total revenue.

Arabian American Development's stock has a 52-week range of $1.97-$3.97. In fiscal year ended 2009, the? stock reached a high of $3.97 and a low of $0.60. In the prior year, the stock reached a high of $8 and a low of $0.41. Currently, it is trading above its 50-day and 200-day moving averages.

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