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$10.45 Getting beat down pretty good....caught me off guard....
Tony Regans made an interesting point about Pope possibly converting instead of redeeming the note:
http://wefe5433.blogspot.com/
Interesting. Seems like Andy was not happy too much about your article. Well, he deserves it. :)
Wefe's updated CHBT spreadsheet: here is Wefe's (Tony Regans') updated spreadsheet that took into account the most recent Q2'FY11 results and company's guidance per 10Q report. The spreadsheet also includes other conservative assumptions re. projected revenue and earnings for the next 3 years (incl. FY2013 that ends in March 2013). It does not however include any projected revenue from the new Yangling project and thus yields much more conservative earnings compared to Nevader's most recent model. Here is a comparison of projected eps for the next 3-4 FY acc. to the 2 models:
Wefe's projected eps for:
FY'11= 1.72, FY'12= 2.55, FY'13= 3.47
Nevader's projected eps for:
FY'11= 2.07, FY'12= 4.76, FY'13= 9.83, FY'14= 15.76
Wefe's updated CHBT spreadsheet:
First a correction. In my previous post I said that free cash flow for the quarter was $6 million. That was an error in the press release. That is actually the figure for the six months ended Sep 30th. They have it correct in the table at the end of the press release and in the 10Q, it was just incorrect in that one paragraph in the press release. I was in a rush this morning to leave and just noticed it now when updating my spreadsheet.
Here is my updated CHBT spreadsheet. I kept FY Q3 Phase I bulk at 18.8 tons (75 ton run rate) and FY Q4 Phase I bulk at 25 tons (100 ton run rate), and modeled a further slight decline in ASPs to $650/kg. I simply modeled retail sales at up 15% yoy for Q3 and Q4. Using those numbers I arrive at $118.5 million in revenue for this fiscal year. I simply assumed that net margins will be slightly higher than this quarter's level to arrive at FY EPS at $1.72. I included historical G&A, R&D lines, etc, if you want to use your own assumptions for those items. I have Q3 at $32.2 million in revenue and EPS of $.46. I have Q4 at $37.8 million in revenue and EPS of $.53.
I have also updated my estimates for fiscal years 2012 and 2013. I modeled a further decline in ASPs for Phase I product (the more generic strains) to $600/kg. I also pushed out the commencement of production from Phase II to Q2, with a modest 5 ton production and then a similar ramp-up as Phase I. I have ASPs for Phase II product (the more customized strains and blended strains) at $800/kg. Using what I feel are these more conservative assumptions, I still arrive at FY 2012 revenue of $189 million, which would be roughly a 60% yoy increase, and 2012 fiscal year EPS of $2.65. I expect that when CHBT reports this fiscal year's Q4 results, they will again guide to '50% year over year revenue growth' for the next fiscal year.
Links to the original models:
http://wefe5433.blogspot.com/
http://seekingalpha.com/article/225301-china-biotics-shifts-focus-to-fast-growing-chinese-food-ingredients-industry
Short interest still very high. If CCME is any indication, this bodes well for this stock.
http://www.nasdaq.com/aspxcontent/shortinterests.aspx?symbol=CHBT&symbol=CCME&selected=CHBT
Wefe's comments on Q2 earnings:
Tuesday, November 9, 2010
quick CHBT earnings thoughts
Some quick thoughts on CHBT earnings.
- I think earnings and the cc went a long way towards proving the company's credibility. Citron's questions were answered right off the bat. The call went an hour and 45 minutes and there were some new names on the call, and some old ones including Pope. So maybe Pope is still considering converting their debt. Transparency was great. Management could have provided a clearer answer to the one caller who came on late, but they did explain earlier that they incurred around 4.5 million RMB in costs to terminate the leases for the closed stores (which if I recall correctly they said the penalty on most was 1 month's rent to terminate early). Still, they explained that reduced operating costs was worth it to incur the penalty.
- The company bought back around 220,000 shares at an average price around $12.46. Just about what I expected. Enough to show that the company has the ability to buy back shares should it decide to do so. However they explained they felt that investing in further growth may be the best use of cash.
- They maintained their 50% yoy revenue growth guidance for this fiscal year. Last FY they did $81.4 million, so guidance is for roughly $122 million. Since they did roughly $25 million in Q1 and $24 million in Q2, that's $73 million in the second half of the year. At Q2's 34% net income rate, that works out to almost $25 million in net income in the second half of the year, or around $1 in EPS for the remaining two quarters.
- Free cash flow was around $6 million this quarter. I think that is a safe baseline to assume for the run rate going forward from the retail side and Phase I of bulk as Q2 was a seasonally slow quarter on the retail side, costs were incurred in closing retail outlets, and on the bulk side sales are expected to ramp up in the second half. Annualized that's free cash flow of around $25 million just from retail and Phase I, and that should grow as Phase I continues to ramp. And then there is Phase II.
- ASPs on bulk were steady to slightly declining at around $660/kg.
- Overall, I do not see any compelling reasons for shorts to remain short. The company addressed outstanding questions. They have a strong cash balance. They closed most of the stores and are still significantly free cash flow positive. They maintained their 50% yoy revenue guidance. They demonstrated their willingness to buy back shares if the conditions are right, and did so in the past quarter at an average price of $12.46. I think we could finally start to see some meaningful short covering in the coming month.
- In conclusion the long term thesis is still intact. With the improved transparency and credibility, I think CHBT can return to at least 10x trailing twelve months earnings in the near term, so that's around $17. Longer term, I still like the potential for reaching near $30 as Phase II and Yangling come into focus and credibility and comfort with management continues to grow.
Posted by wefe5433 at 7:20 AM 0 comments
I believe that CHBT stated that the land deal for the Yangling animal feed plant will have been settled by the end of the year. They said that four contractors are bidding for the work, which will take two years to complete.
While discussing their cash position, and uses for it, I think that the Company mentioned that the Yangling Plant will cost them $50 mil. Wouldn't this mean that they no longer plan to partner with another company?
JB
in case you can't assess the main CGS main board, I just posted this that explains some more about the guidance and confidence you mentioned. (seems like I'll be way late to work today, really need to go now).
CHBT: rev and income came in much below my expectation but that's my fault. I probably set too high expectations based on a linear ramp up of bulk production (b/w 15 tons in Q1 and 25 tons in Q4) and using the same selling prices as last Q. They did point out that H2 of their FY (which includes the end of the calendar year and the Chinese New Year in the spring) historically makes up about 60% of their annual total rev. and reaffirmed guidance for 50%+ increase of rev for the FY. That amounts to about 122m min expected for FY'11. So far Q1 and Q2 rev add up to 48.5m which is fairly exactly 40% of 122m, so that's in line with guidance. That what counts. They are also very confident in meeting that target as they are done with testing equipment, training new staff at Qingpu 1, and ready to crank up volume for the next 2 quarters. No new bulk customers wer added last Q compared to Q1 (total 37 customers) but they have added quite a few since then (over 40). They were however not willing to disclose the exact bulk tonnage sold in Q2 nor the ASP. Seems like they reduced bulk selling prices aggressively and also sold much more low-margin low-price animal feed additives which are highly diluted (10x to 100x) compared to other additives for human usage like for food, dairy and pharmaceuticals...
The fact that they did buy back shares of about $2.8M value (out of 20MM allocated funds) did add to their credibility. To me, the most important thing is probably the reaffirmed guidance of rev. north of 122M for the year on a slightly decreased O/S basis. Also they seem to proceed well on the Yangling project, with designs being finalized by Dec this year.
Thanks Viking. If they sounded "very confident" in your words, I am grabbing even more today. will listen to cc when I get home. regards, tootall
wow, it was a long CC. They cut me off at the end as it went way into the trading hours. Or maybe they didnot want to provide a clear answer to how many tons of bulk vs. retail were sold at what ASP ? Looks to me they sold at much lower ASP than last Q ($665/kg bulk) b/c of promotions and b/c of the product mix b/w animal feed (which is very diluted) and other bulk additives for (food/dairy/pharma...) which may result in so low ASP that they didnt want to disclose ?
They didnot get any new bulk customers last Q, still 37 customers at the end of Sep but picked quite a few after that (they said over 40 now). Sequentially sales are down about 5.4% and adj eps down 16% vs. Q1. That's a disappointment that will certainly affect PPS in ST and provide LT investors a good entry/accum. point. They were still busy testing new equipment, pass government inpsections , train new employess at Qingpu although Phase I officially commenced production in Feb. I can understand that ramping up from zero to 150 tons takes its time and setbacks (same with CNAM, they cut their guidance twice so far this year b/c of startup problems with their new plant). They are still guiding for rev increase of min 50% for the FY. In the CC it was said that H2 typically makes up about 60% of annual rev and they seem very confident about being able to reproduce that result this FY.
Sorry I have stop and go to work (at my day job) now.
grabbing some now. Love the numbers and value going forward.
On paper, these earning look like a miss but that's just based on a few analysts expectations. Looking at the numbers, CHBT is definitely a buy at these levels. The valuation is way too low and when you factor in cash on hand and the growth rate, this is the perfect long term position for a portfolio.
wooohoo Jason Nevader get 'em
Monday 11/08/2010 6:25 AM ET - Comtex SmarTrend(R)
Analysts, on average, expect China-Biotics (NASDAQ:CHBT) to report earnings of $0.35 per share on sales of $27 million on November 09, 2010.
For the full year, analysts expect the company to post EPS of $1.44. In the year-ago period, the company reported EPS of $0.30 on sales of $17 million.
ummmm...how bout a press release before the conference call?
Citron and shorties seem to share your view, that's why they mount this desperate last-minute attack last night. I think that just shows how really scared they are that the stock may bounce quickly today upon earnings and updates,including a possible guidance for FY2011. I am hoping to see for Q2(FY11):
rev above 28m
NI 11m
eps 0.45
ttm eps 1.51
I would also like to see them report 16 to 18 tons of bulk production (vs 15 tons last Q)which tells me the ramp up at Qingpu 1 is on track.
The stock traded at a PE of 14 at the end of 2009. Give it a lowly 12 to 13 for now, it should trade at $18 to 19.6 after today. Maybe we will see some profit taking and "sell the news" today and tomorrow before the runup resumes. Technically it has broken out of the upper trend line.
Reminder: 8AM EST today E/R and CC !
SHANGHAI, Oct. 26 /PRNewswire-Asia-FirstCall/ -- China-Biotics, Inc. ("China-Biotics", the "Company") (Nasdaq:CHBT - News), the leading developer, manufacturer and distributor of probiotics products in China, today announced it will host a conference call at 8:00 a.m. Eastern Standard Time / 9:00 p.m. Beijing Time on Tuesday, November 9, 2010, to discuss the fiscal year 2011 second quarter and six months financial results for the period ended September 30, 2010.
The telephone numbers for the conference call are (866) 383-7998 (U.S.) or (617) 597-5329 (International), passcode: 45985589. A live web cast of the call will also be available on the investor relations section of the Company's website www.chn-biotics.com. To listen to the web cast, please visit the site at least 10 minutes early to register, download and install any necessary audio software.
The replay of the web cast will be archived on the website, and investors will be able to access the recording of the conference call until midnight EST on November 16, 2010 by calling (888) 286-8010 (U.S.) or (617) 801-6888 (International) and entering passcode: 21680945.
I'm not a member so I couldn't reply to your private message. I understand where you're coming from.
I'm thinking $15.50 by the end of the week and $19.00 by year end if all goes well this morning.
The probiotics industry has been growing exponentially due to very high growth of yogurt and animal feed products. The probiotics consumption is predicted to grow from 3,400 tons in 2006, to 10,000 tons in 2010. (Source: Domestic Probiotics Market Analysis and Forecast Report by Beijing Leadership Management Consulting Co. Limited.)
Another source from Euromonitor has shown that, in 2009, China finally overtook Japan as the heaviest consumer of probiotic cultures, reaching over 10,000 tons (Actual consumption number reaches 10,000 tons faster than Beijing Leadership Management Consulting Co. Limited has predicted.) Euromonitor International predicts that by 2014 this will have risen to almost 18,000 tons, accounting for nearly 30% of global consumption. (Source: Euromonitor).
CHBT’s net income growth is very high and stable. Net income growth has averaged 37% annually for the past 4 years, mainly from it supplement products. For the new market segment, bulk additives, CHBT has the largest capacity in China at 300 tons a year which represents a market share of only 2.xx% in 2010. When CHBT runs its 300-ton plant at full capacity in the next 4-5 years, it will have a market share of only 1.xx% of 18,000 tones in 2014. This means there is a lot of room for CHBT to grow very fast.
CHBT doesn’t have to invest much in working capital as we can see that overall CFOA is a little higher than net income (excluding changes in fair value of derivatives.) Moreover, the probiotics industry is not a capital intensive business, so CHBT has invested around 50% of CFOA over the past 4 years in order to grow net income at least 50% annually for the next 4-5 years.
CHBT’s valuation
My forecast is that CHBT’s EPS will be $1.92, $3.33 and $5.23, during 2010-2012, which is 65% annual growth for the next 3 years. At $13.61, the P/E ratio is 7.1 times and the PEG is very low at 0.11. In my opinion, this is a great opportunity to buy a great stock at a very low price.
Conclusions
CTRP P/E 53 future growth 30% PEG 1.76
BIDU P/E 76 future growth 50% PEG 1.51
CHBT P/E 7.1 future growth 65% PEG 0.11
Great stocks usually have very high P/E ratios. In my opinion, they should be priced at least at a 30 P/E and some might be worth more than 50, depending on their fundamentals. So, to be successful in investing in great stocks, you need to buy them before others realize their potential or when there is a temporary problem which brings the price down to a cheap level.
CHBT is one great stock that is unknown to many investors. Additionally, it is having a temporary problem, which I have written about in my previous article, so we can buy it at a very low-price. I will give more details on CHBT in my next article.
Disclosure: Long CHBT
BIDU’s valuation
Analysts have forecasted that BIDU’s EPS will be $0.97, $1.44 and $2.27 in 2009-2011, respectively. This represents around 50% annual growth. At $109 a share, BIDU’s P/E ratio is 76 times for the 2010 fiscal year and the PEG is 1.51.
China-Biotics, Inc. (CHBT) is engaged in the research, development, production, marketing, and distribution of probiotics products, which are products that contain live microbial food supplements. The Company manufactures and sells several health supplements under the Shining brand in China.
All of these products have been approved by the Ministry of Health in China. In February 2010, China-Biotics, Inc. commenced production at its facility in Qingpu and began producing bulk additives products, which are sold to institutional customers, such as dairy manufacturers, animal feed manufacturers, pharmaceutical companies, and food companies.
There are non-cash items from changes in fair value of derivatives that have to be excluded to see the real net income. I’ve adjusted them in the table below.
Up until now, Chinese dairy manufacturers imported probiotics mostly from Europe and Japan. CHBT entered into the bulk additives probiotics industry over a year ago and just started production at its new plant in Qingpu. It is now the biggest domestic player in China.
The quality of its products is equal to or better than that of its foreign competitors while prices are 20-30% lower. Entry into the industry is very difficult because the standard of food production is so high; it requires high technology; and it is hard to get licenses from the government. CHBT’s being a cost leader also gives it an advantage in terms of competitiveness.
same old junk; the guy is desperate to cover his shorts
boy, this lemon guy must be really desparate to use the same old tired "where are the retail stores" arguments that nobody wants to hear anymore. Last ditch effort to save his butt, hoping to cause the stock to dip a point or two before it breaks out ala CCME following tomorrow 8AM CC with earnings release and updates.
The funny thing is he's using the same old guerilla timing tactic that served him well during the first attack which was launched right after market close on Friday Aug 27. This time around the hitpiece came out today after close (which is 4AM Beijing time) with a list of 12 questions for Mgmt to answer during the CC which is scheduled at 8AM tomorrow New York time.
Here is the hitpiece for your reading pleasure:
http://www.citronresearch.com/index.php/2010/11/08/will-china-biotics-chbt-come-clean-up-to-them/
For more amusement pls. also read also the disclaimer of his website:
http://www.citronresearch.com/index.php/disclamer/
bradford...i'm a little confused. Are you saying you agree with the Citron report or that you disagree?
I'd say some stuff, but the last time I did I received a notice (see below) bottom line: "Success is the best revenge"
--- excerpts ---
Referring to me as a financial terrorist and using the word "raid" and falsely claiming that I abandoned a website has caused damage to my reputation and caused harm to me and my family. I gave you ample notice to correct, but it is still up here. I am cc this to my attorney to start an action against you.
....
I will take legal action. If you think I am kidding about it, than you have not done your due diligence on me. I will sue you, and I will win.
I take these matters seriously.
This is a bunch of crap. Citron couldn't come up with two or three questions to satisfy them? Instead they have 12 questions? I bet if the company answered 11 of them due to time restaints Citron would complain they didn't answer the last one.
This Citron company is starting to annoy me. I question their motives and I would like them to disclose their current position in CHBT (aka, SHORT)
Quotes from the Citron website...
"Citron Research makes no representations, and specifically disclaims all warranties, express, implied, or statutory, regarding the accuracy, timeliness, or completeness of any material contained in this site."
"Citron Research does not guarantee in any way that it is providing all of the information that may be available."
"The principals of Citron Research most always hold a position in any of the securities profiled on the site. Citron Research will not report when a position is initiated or covered."
LMAO - hit piece out at market close. last ditch effort.
Dear Reader,
stock ticker: CHBT
Tomorrow CHBT will make its first quarterly report since Citron Research publicly declared our belief that it is a fraud. The company continues to operate as though it lives in a parallel universe in which there are no rules regarding disclosure for publicly traded companies, and no consequences whatsoever for the most blatant lies. So Citron offers up a set of questions which the company should answer in its conference call tomorrow. Settle down on your couch with some popcorn -- this should be entertaining. For the list of questions go to: www.citronresearch.com.
Cautious Investing To All
Reports > Blog > Legal Disclaimer > Contact Us
SA article: "In search of great stocks-Part III"
he put CHBT right next to BIDU and CTRP as the next great stock to invest in.
http://seekingalpha.com/article/235520-in-search-of-great-stocks-part-iii?source=yahoo
I still have a ton of Nov 10 and am holding until at least $5 (if we get a pop to $15 today, next week or the week after). Am thinking of selling half and converting the other half into commons. Let's hope we get a strong guidance and some solid news.
Almost sold my Nov 10s and 12s yesterday in early trading, and am hoping that I made the right call. We'll see. Keeping the commons for the long haul.
I watched the brisk sell-off and suspected another short article had appeared but found nothing and thus added another 1k @ $13.67....no worries here...
Hi Value, I hope you had a good presentation in spite of all the distractions with CCME's crazy moves in the back of your head :P
well tomorrow is another day. I think it's good for the stock not to move up too fast a few days before earnings as this would only make the "sell the news" just worse next week. I am not much of a trader anyway so I am not too worried about ST ups and downs as long as things move in the right direction.
Hey guys, Burp, Viking, et al., i was away teaching all day... came back, been reading your posts... Saw that in fact CHBT closed BELOW the 200dma after a big move about it earlier today. Whaddyda' think?
I never did pick up any shares of this, though i've read quite a lot on the stock and the silly controversy about "retail outlets," etc. Co. looks really healthy with the bulk sales of probiotics.
What do you think about the T.A. going forward from here?
Here it is: with Tholean Punctuality! good volume too.
The breakout move higher is just about upon us. Should be huge. Time will tell.
Forgot to mention a nice TA indicator for a pending upturn. The Full STO is showing the same bullish curlup as just before the big runups of Sep 25 and Oct 10. Hoefully it doesnt fade away by selling pressures.
Love what they are doing. CHBT have a tremendous production profile.
weeeeee......... closed at 13.00 again today. Looks like shorts tried hard to push it down below 13 but failed. If we can break resistance at MDA 200 before E/R next Tuesday (mark your calendar: E/R and CC at 8AM Tue 11/9)and they announce a nice ramp up of bulk production (anything b/w 16 and 19 tons vs. 15 tons in Q1 would be great news) with some other good news about some partnership for Yangling or with Danisco, guidance for FY2011... we are off the races.
Short interest practically unchanged at 4.4M+ shares as of Oct 15:
http://www.nasdaq.com/aspxcontent/shortinterests.aspx?symbol=CHBT&symbol=CCME&selected=CHBT
Q2 E/R and CC on Nov 9:
http://finance.yahoo.com/news/ChinaBiotics-to-Report-Fiscal-prnews-781084794.html?x=0&.v=1
Wefe brought up an interesting point re. Pope. Dec 11 is the day its $25M convertible note expires and can be cashed out or converted into 2.08M shares at $12/sh. If Pope cashes out, the breakeven price for Pope including the accrued interest is about $14.2/sh. So I really hope the stock would not rise much above that price until Dec 11 so Pope would opt to cash out. That would mean 2.08M shares less for the O/S or almost 10% more eps growth for an eternity!
Let's see: with no Pope's shares, Nevader predicts an eps of $8.82 for FY 2013 (ending March 31 2013)vs. 7.98 with Pope's shares, or 84c more per share. Give it a PE of 15 just as an example, that's a price difference of $12.6 per share. So let's pray Pope doesnt convert !!!!!
Excellent summary Viking. Thank you.
from Wefe's blog:
Re. Q3 earnings:
Earnings are now only 18 or fewer trading days away.
- I am not expecting this to be a blow-out quarter with respect to expectations because bulk was not projected to ramp up significantly and Q2 is seasonally slower on the retail side.
- However, sentiment had gotten so negative across this space, and for CHBT in particular, that I think the bar has been set pretty low. Sales will still be up around 50%, net income and EPS will be up. Just the fact that it is 'business as usual' and the CEO and CFO didn't suddenly disappear as the shorts like to remind you happened at some other China small cap could be enough to restore some confidence.
- Someone correct me if I am wrong, but I believe with CHBT's share price below $12 on the last day of the quarter the 2.1 million Pope convertible shares will not be included in the fully diluted share count as their effect would be anti-dilutive. So reported fully diluted EPS will be a few cents higher than it otherwise would have been.
- The quarter we are currently in (December quarter) should be good with seasonally stronger retail sales and Phase I bulk sales guided to be at a 100 ton/yr run rate by end of the calendar year. Management has also guided to Phase I being at 125 ton run rate by end of the March quarter, and in June quarter Phase II is supposed to kick in. If management reaffirms those projections it should be good for the stock.
High Short Interest stocks in our space....CCME 50%, RINO 50%, CHBT 40%,
http://www.highshortinterest.com/
resistance and support levels... once one is past, and show as close of day, newer numbers are calculated..
reading the charts.
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China-Biotics, Inc. ("China-Biotics," "the Company"), a leading manufacturer of biotechnology products and supplements, engages in the research, development, marketing and distribution of probiotics dietary supplements. Through its wholly owned subsidiary, Shanghai Shining Biotechnology Co., Ltd., the Company has operations in Shanghai. Its proprietary product portfolio contains live microbial nutritional supplements under the "Shining" brand. Currently, the products are sold OTC through large distributors to pharmacies and supermarkets in Shanghai, Jiangsu, and Zhejiang. China-Biotics plans to launch 300 Shining brand retail outlets in major cities in China. Currently, China-Biotics is strategically expanding its production capacity of probiotics to meet growing demand in the bulk additive market. For more information, please visit http://www.chn-biotics.com
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