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Great analysis, thanks.
I agree, the average sales price has such a huge swing that it could make a huge difference in EPS. I'm just happy that the conservative numbers tell me this is a $40 stock, because it means I am in the right place.
Good luck to longs, hopefully we will make enough to be able to donate to a local food shelter for the families of the shorts.
Viking,
Really appreciate that feedback. I'm glad I put my finger on three stocks you both own and agree, in light of CHBT's good standings, that diversification towards CHBT makes sense. I'm still rather Cro-Magnon when it comes to the nitty gritty of buisness metrics. So the feedback is especially appreciated. I'm catching on to the dilution problem and the hassle of low liquidity, both of which seem to be in pretty good check with CHBT. Thanks too for framing your response in longer term timeframes as that tends to be my predilection for investing at the momement.
Steve
Florinda: I also own those 3. Each one definitely has its own story and a potential of being a 4 to 5 bagger in about 2-3 years ago. But all 3 may dilute in a year or two. SKBI just withdrew a big S1 (poor timing !!) that it may need again once its stock is back up. CHBT however has enough cash for 2 to 3 more 300mt plants and has at least equal if not huger growth going forward, not just in China. Also less subject to regulations as pharmas.
I feel like this one could be a 3-bagger within a year but what do I know?
So I would definitely carve some funds out of the 3 and put it here. Hope that helps.
I've been following this company for quite while; bought in at about $10 bucks and sold out later. Now I'm fundless and yet it seems like the company has now found it's niche and its new production facility is kicking in. Definitely seems like a good company to own going forward. So I'm thinking of jumping ship on either CHGY, BSPM or SKBI to secure some funds. Each of these three seemed to have some built in setbacks: CHGY won't do anything until it can uplist; BSPM doesn't seem like it's going to put out good numbers till Q3; and SKBI hasn't finished its new facility so that might not go down well with investors come earnings. Anyway, if any of you have any opinion on the matter I'd very much appreciate hearing your thoughts on it.
tia,
Steve
Shorts seem to be getting no help in covering unlike in CCME. 3+ mil shorts stuck here.
Yompkee: Thanks for the link.
I agree with being conservative when it comes to future projections. I rarely have a problem with underprojecting by 20 to 40% to protect ourselves against unforeseen pitfalls. But we donot want to be overly conservative and possibly underestimate revenues by up to 100% (which seems to be the case here) and possibly miss a good investment opportunity based on the numbers the model yields.
a) For all his projections Nevader uses a selling price of $733/kg based on Company's estimate made about a year ago when they projected that Phase 1 of the new 150mt plant will bring an additional total annual revenue of 110MM, i.e. 110/150=733/kg.
b) based on some exchange with Throwerw and my own DD, I am more inclined to think that price is too low b/c the company has raised the bulk selling prices 60 to 70%+ since. The FY2010 10K reports bulk sales of 21.8 MM but no exact production amount. Taking the old plant capacity of 12mt (metric tons) and adding the 5 mt produced in March by the new plant, one can surmise that max FY2010 bulk production was in the 12mt to 17mt range since some of this production was for retail which accounted for about 3/4 of the total revenue. Selling price range thus estimated from report = 21.8/12= 1817/kg to 21.8/17= 1283/kg, mid price= 1550/kg .
Looking at the composition of their bulk customers over the past 12 months I don't see a major shift in customer mix or demand that would justify a strong shift toward the "easier" stuff (simple strains of additives that can be made in one workshift and cost less) vs. the "harder" stuff that may take 21 days to produce and costs much more. The vast majority of the now 39 bulk customers comes from the same high-end industries as reported at the end of the Q1/10 (16 customers) and Q2/10 (20 customers), namely mostly diary products, food additives and pharmaceuticals. Only in the last few months (Mar-Jun/10) have 4 new customers been added from the animal feed industry that may arguably require the simpler probiotics strains. The largest market is probably for yoghurt and yoghurt drinks, an increasingly important and competitive market, and I can't imagine they want much cheaper additives now as compared to a year ago.
This discussion is not of purely academic interest since such a difference in selling price has huge effects on eps estimates ($1 to $1.50 difference for FY2011 and much more for the following years). So I'll wait to get more accurate info on bulk selling prices from the Company before deciding which # to use for FY2011/2012. I have emailed IR about this (both the CFO and the bulk-sales contact person Luke Tang) but they are now in a "black-out period" and cannot answer any questions about earnings... :((
from Q2/FY10 report:
As at September 30, 2009, we have entered into contracts with 20 customers for the food additives business. In this regard, we have created a number of formulations for testing by many potential future customers. We have established an array of business relationships with commercial customers located in Beijing, Qinghai, Shanghai cities, Jiangsu, Jiangxi, Shaanxi, Shandong and Zhejiang provinces. These growing companies are among the leaders in the baked foods, dairy and pharmaceutical industries. The Company’s existing manufacturing facility, with current annual manufacturing capacity of 12 metric tons of probiotics for use as bulk additives and capsules, will supply the initial orders for these customers. The need to create a large number of new products for potential customers is pushing the capacity of our current production facility. With the delay in the commissioning of the new plant from our earlier projections, we have been carefully managing the use of our production capacity and selectively increasing the price of our products to make sure that we strike a balance between achieving current and future sales.
From the recent update of July 7:
China-Biotics gained more bulk customers during the quarter ended at June 30, 2010 and the total number of bulk customers increased to 39 by the end of June. Among the 39 customers, 4 are animal feed producers and the remaining are dairy enterprises.
To answer my own questions I looked up in the most recent investor presentation of June 2010 and some older
reports.
Phase 1: will ramp up to 100 mt by Mar 2011, that's 25MT possibly for Q4FY11.
Phase 2: will be ready by Mar 2011, probably same ramp up as Phase 1 as long as there are orders.
And looks like orders will come in as demand to supply right now is something like 100:3 (10000 tons per 300 tons their new plant can produce max).
He mentioned over at the Yahoo board that he likes the price he put in because:
1) It is conservative
2) The limited capacity earlier meant they likely made harder stuff, which sold for more. Now they will be making easier stuff, which sells for less. So even though the p"price" is going up for pro-biotics, the mix may mean that their average price may be about the same.
Makes sense to me. I think his price target is a bit high but I don't think $40 is out of the question this year.
Excellent article. The price he uses for all his predictions seems low though ($733/kg). Do you have an idea/guess what that stuff sells for this year?
unless, of course, the average selling price continues to drop substantially as they ramp up production
Bulk additives production increased 2-3 times in Q1 over Q4. A projected 60% increase in bulk revenues qoq still seems low to me.
New article on China-Biotics. I am convinced, I am going to hold my position and add tomorrow!
http://seekingalpha.com/article/217093-china-biotics-an-exciting-transformation-has-arrived?source=yahoo
How cool are you! Thanks for sharing!
wow, Phase II looks almost ready.
When does it come online? Will it be doing 60 tons or so next year while Phase I will to be revved up to close to 150 tons?
CHBT new facility pictures
http://wefe5433.blogspot.com/
SAIC vs. SEC disparity: the shorts have been exploiting a SA article published by Waldo Mushman bashing TXIC, CHBT... b/c of disparities in the revenue and net inc figures reported by SAIC vs. SEC. In the case of CHBT the 2007 and 2008 figures show indeed a very strong disparity:
http://seekingalpha.com/article/213213-orient-paper-not-all-bdos-are-the-same?source=yahoo
There have been several posts over the past 2 days on the CGS mainboard refuting that argument b/c of the big differences in the function and nature of SAIC and SEC, making the issue raised a non-issue IMO. Here are a few of these for those who dont follow the CGS board:
http://china.fixyou.co.uk/2010/07/on-saic-and-sec-filings.html
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=52633570
(hope this makes Longs feel more confident about CHBT !!)
Short interest has increased 6.6% to 3.3M+ shares. This looks interesting as we get closer to Aug 09.
Either they know sth that we dont know or the SQUEEZE will be even more powerful!
http://www.shortsqueeze.com/?symbol=chbt&submit=Short+Quote%99
Feb 11 15.00 calls look like a multi-bagger from here
I need to set up an options account, haha
Average analyst estimate: .33
Number of Analysts: 4
Low Estimate: .30
High Estimate: .35
Rev. Estimate: 25.25 million
Low Estimate: 24.7 million
High Estimate: 25.89 million
What are these people getting paid for?
ok, let me second guess you with my napkin math re. your guess that Q1/FY11 eps will be at least 50c.
They announced on July 7 that the Qingpu plant produced over 15 mt (metric tons) of bulk additives in Q1/FY11. That translates into:
15 x $1,283/ton = 19.24MM buld additives rev in Q1
How do I know it's $1,283/ton? Because in FY2010 the total bulk additives rev was 21.81MM with max. 17 mt produced (assuming 12mt capacity of old plant plus the 5mt produced in March 2010, the first production month of the new plant). That's 21.81M/17mt= $1,283/mt.
Assume retail sales is flat to Q1/FY10= 15.41M
So Q1/FY11 rev = 19.24 + 15.41 = 34.65M
Net Inc= 34.65 x 0.34 = 11.78M assuming same Net Margin as FY2010.
Q1 eps = 11.78/22.37= 0.526E
I'll take 0.50E and give you an A :)
I'll take
oops, big mistake: trailing eps= 1.31 if Q1 eps comes in at 0.50. Still x15 is almost $20 !!
yes, I'd love to pick up some cheap shares too.
But if Thrower has his way, we may see 0.5 eps in just 2 weeks.
(I don't think he's kidding).
Geez, that's a trailing eps of 2.22, the SP will go thru the roof, esp. with 3M+ shares short to cover with only 10 days.
I'd better go get some funds now.
In a more serious note: Can somebody fill me in with Pope's and other major inst. holders' transactions? Acc. to the link below, Pope currently owns 1.76M or 7.87% shares. How many shares (from total of about 2.08M) has Pope converted and how many sold so far?
Also, who is Li Yan (owns 17.8%) and Tai Leung (owns 6.57% shares)? Thanks.
http://www.dailyfinance.com/company/china-biotics-inc/chbt/nas/institutional-ownership
I've been long this stock for over 16 months now and I continue to find every reason to like it. With that being said, let's keep in mind that fast growing companies often go through some growing pains and it's not going to be a one way trip to $100 a share.
While the earnings this quarter should be solid, I'll be interested to see how much cash is being laid out for expansion. This could certainly dent the short term view on the stock with a lower EPS than expected but would keep my long term view in tact. I'd like to see major investments being made which would bolster the arguement that demand is strong.
Personally, I hope they completely blow the quarter, the stock falls, and I pick up more shares on the cheap. I just don't think that's going to happen. CHBT hits $17.00 by the first week of Sept.
Thanks for the wefe link.
here are a few comments:
1)Considering the huge domestic demand for probiotics and CHBT's clear price and quality advantages over imported products, its bulk additives business seems to have ample room to grow to me for years:
China-Biotics estimates that domestic demand for probiotics as bulk additives is around 10,000 tons/year. Again, that demand is mostly met by imports currently. China-Biotics has finished constructing a new state of the art facility in Qingpu with production capacity of 150 tons/year of bulk additives. That facility has already ramped up to a run rate of 60 tons/year as of the end of June, and is expected to reach 100 ton/year run rate by the end of March 2011. Construction has already begun on Phase II of the facility, which will add an additional 150 tons/year capacity, which will begin to come on-line in the beginning of 2011. When Phase I and Phase II are both at full capacity, they will be capable of producing 300 tons/year.
2) re. the SAIC/SEC issue: I am just asking to get more unbiased info on the charge. I personally think there's not much to that charge. It's probably comparing apples with oranges as CHBT may be required to report different portions/aspects of its rev to the 2 organisations. IMO POPE has invested 25MM in Dec 2007 in this company after having doing intense DD on the company. It would not have sunk that much money in a company doing only 0.4M rev in 2007 and 0.5M in 2008. That's absurd. From what I know from their other investments in BSPM, UTA, CNYD...they only invest in select small companies with outstanding growth prospects and they usually stay with them for a fair period of time. In 2009 CHBT did another raise for 75MM which again proves they are on track with their growth plan. In addition, this is a company with very high insider (50%+) and institutional ownership (25%) which is the best warrant for me against fraud.
Viking - I was pretty concerned about the SAIC disparity as well. What do you make of wefe's blog?
http://wefe5433.blogspot.com/
There are a number of very good posts about SAIC in there that provide a reasonable explanation. Of course, as Maj was saying on CGS a perception problem might still exist that causes price pressure.
Another question - I haven't seen anyone discrediting CHBT yet - have I missed something?
Hey gang, I am starting some DD here. Looks very interesting.
Has anybody been able to refute Waldo Mushman's charge about the BDO Limted issue? After all the difference in the # reported is huge, 30M+ to 40M+ of rev difference b/w SAIC and SEC:
SAIC report:
rev 2007= 0.4M, 2008=0.5M
NI 2007= (1.10),2008= (1.2)
SEc report:
rev 2007= 30.6M, 2008= 42.3M
NI 2007= 10.9M, 2008= 17.5M
But there is no Muddy Waters follow up here. Does the charge hold?
http://seekingalpha.com/article/213213-orient-paper-not-all-bdos-are-the-same?source=yahoo
Impressive....almost to good to be true....it's crazy how cheap some of these China stocks have....i think I maybe buying more options Monday...probably some Novembers that expire a few weeks after earnings....smells like $$$$$....I also just noticed that Aug pth earnings are for first Q 2011...so we are already into 2011 projections...They also have a top auditor "BDO" so no problems with restatements....yippy!
Impressive....almost to good to be true....it's crazy how cheap some of these China stocks have....i think I maybe buying more options Monday...probably some Novembers that expire a few weeks after earnings....smells like $$$$$....
The numbers will be better than this, in my opinion. $21 million in revs in 2009 came from 17 tons of bulk additives, at most (12 ton capacity previously plus 5 tons from new facility in the last month). So the selling price would be 1.24 million per metric ton, or $1,240/kg. That's about 70% higher than this guy is estimating.
Also, I think the prices only go higher from here, since they are producing at about 1/6th of the cost of their foreign competitors.
Really powerful article....5 bagger overnight!
http://seekingalpha.com/user/691175/instablog
really... you think more than 50 cents eps for the quarter?
I'm willing to bet a few shares that we see more than 50 cents.
Grabbed 20 contracts of the AUG $12.50 calls @ .64....should be a double from here by earnings release Aug 9th...
China-Biotics to Report Fiscal Year 2011 First Quarter Financial Results on August 9
China-Biotics (MM) (NASDAQ:CHBT)
Today : Friday 23 July 2010
Click Here for more China-Biotics (MM) Charts.
China-Biotics, Inc. ("China-Biotics", the "Company") (Nasdaq: CHBT), the leading developer, manufacturer and distributor of probiotics products in China, today announced it will host a conference call
at 08:00 a.m. Eastern Daylight Time on Monday, August 9, 2010 to discuss the fiscal year 2011 first quarter financial results for the period ended June 30, 2010.
The telephone numbers for the conference call are (866) 783-2138 (U.S.) or (857) 350-1597 (International), passcode: 76874068. A live web cast of the call will also be available on the investor relations section of the Company's website http://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 EDT on August 16, 2010 by calling (888) 286-8010 (U.S.) or (617) 801-6888 (International) and entering passcode: 75529413.
I came across this great research report on China-Biotics (CHBT). It is very informative and makes a compelling case for a $60 price target.
http://seekingalpha.com/user/691175/instablog
http://en.wikipedia.org/wiki/Bacterial_growth
CHBT could grow as fast as the bacteria they make
I'm very bullish on CHBT. Probiotics demand grows 25% a yr so 2500 tons a yr. They an easily build a 300 tons/yr every year and it costs only 50mil to build and each plant adds $5 to EPS and it does not fill much widening gap of demand and supply. IMO
CHBT projection chart: I am really out of my league with this chart.
DD source
http://wefe5433.blogspot.com/search/label/chbt
URL of chart http://1.bp.blogspot.com/_oIsBiobgXf0/S7i2vs4suuI/AAAAAAAAAF4/Mt8zZM3LFYw/s1040/CHBT.png
really not outlandish at all, if you are willing to wait.
the market they are targeting is 10,000 metric tons of probiotics bulk additives per year and growing. the market is almost completely supplied by more expensive, lower quality (due to bacteria dying during transportation) imports from developed countries. Their 300 ton capacity of cheaper, higher quality additives should be used up pretty quickly. The return on investment of these plants is off the charts, and I see no reason why they wont keep building them, one after another. If the market doesn't get it, they will just keep buying back stock with the free cash until it does.
chbt really not outlandish (120)...
Haha actually I'm in Dali in southwest China, where old ladies with babies strapped on their back come up to you on the street and try to sell you weed. Perhaps things do look different from up here.
I will revise my price target for you burp... 60 bucks after a 2-1 split!
$120....c'mon and gimme some of that china weed your smokin! LOL....hope China is treating you well!
these guys are way ahead of schedule. They guided for 50% utilization by December 2010. Here we are in July and they are already at 40%. 15 tons last quarter would be more than their entire bulk production in 2009. What if they get up to 100% utilization by the beginning of next year and move right into the next 150 ton expansion? wow...
if 12 tons of bulk additives accounted for about 25% of sales in FY 2010, and we are at a 60 ton run rate already, we could see 3 bucks+ per share in FY 2011. If the ramp up continues at this speed, they should be able to sell all 300 tons in FY 2013. So, 3 years from now, we could see 8 bucks a share??? Actually, it could be more, since the company announced a $20 million buyback and could do more as the cash starts flowing in.
Is a PE of 15 too much to ask for a rapidly growing company poised to become the dominant domestic supplier in a market supplied by imports? I would not surprised to see 120 bucks in 3 years.
Very interesting time for traders coming up. Early FY 2010 results due June 11, generalized market mayhem, beat down China sector, and exclusion from the Russell index late June.
One could make a fortune! Me, I intend to hold .
IOH
Looks like we're getting knocked off the Russell
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=50493899
I recall the spike when China-Biotics was added. If the same happens again it may present a very attractive buying opportunity. Myself, I'd sell and rebuy except for the fact that you guys would immediately spike the PPS to the $50 it's worth shortly after I sold.
IOH
8:41AM China-Biotics says it has received the Good Manufacturing Process approval from the Shanghai Food and Drug Administration for its new production facility in Qingpu Industrial Park (CHBT) 16.27
I follow the CGS board and see allot of top 10 predictions for 2010. It is rare to see China-Biotics on any of the lists. I feel this will change by 2011, and should change presently. These guys just opened their new 150 ton (x12 capacity expansion) manufacturing plant in March 2010. On top of this they broke ground the second phase of this buildout (another 150 ton plant) in December 2009. They say that the first 150 ton plant will be running @ 50% utilization rate by Dec. 2010. This is a $404M market cap company as of 4/3/10 with $151M cash balance. Even with the gradual ramp up of capacity utilization the company is still guiding at least 50% rev growth for 2010! What do you think the rev % growth will be for 2011? 2012? Even my challenged napkin math ratios tell me this company is going places...fast! The market cannot ignore this kind of value and growth forever.
IOH
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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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