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That last post of mine was based on reading the summary 10Q that was posted to the Yahoo message board "news" section. Subsequently, I found the actual 10Q on Edgar and thought I should paste this text from the very end of the document:
As a result of the delay in its ability to transfer cash out of PRC (partially due to the stricter foreign exchange restrictions and regulations imposed in the PRC starting in December 2008), the Company became delinquent on the payment of interests under the November 2007 Debentures and May 2008 Notes in December 2009.
On February 15, 2010, the Company and Pope Investments LLC (“Pope”) entered into a Letter Agreement (the “Letter Agreement”), whereby Pope agreed (i) to waive certain provisions set forth in the Securities Purchase Agreement, by and between the Company and Pope Asset Management LLC, dated as of November 6, 2007 (the “2007 Securities Purchase Agreement”) with respect to the 6% Convertible Subordinated Debenture of the Company dated November 6, 2007 issued to Pope (the “2007 Notes”), and (ii) to waive certain provisions set forth in the Securities Purchase Agreement, by and between the Company and the investors who are parties thereto (collectively, the “Investors”), dated as of May 30, 2008 (the “2008 Securities Purchase Agreement”) with respect to the 6% Convertible Notes May 30, 2008, issued to the Investors (collectively, the “2008 Notes”). Pope is the holder of $4,000,000 principal amount of the 2007 Notes and the holder of $15,000,000 aggregate principal amount of 2008 Notes.
Pursuant to the Letter Agreement, Pope (i) agreed to waive until February 25, 2010 the Events of Default (as defined in the 2007 Notes and 2008 Notes) that have occurred as a result of the Company’s failure to timely make interest payments on the 2007 Notes and 2008 Notes that were due and payable on November 30, 2009, and agreed not to provide written notice to the Company with respect to the occurrence of either of such Events of Default provided that the Company has made such interest payment to the holders of the 2007 Notes and the holders of the 2008 Notes on or prior to February 25, 2010. If the interest payments are not made by February 25, 2010, all rights and remedies of the holders of the 2007 Notes and the holders of the 2008 Notes , as set forth in the 2007 Securities Purchase Agreement , the 2008 Securities Purchase Agreements, the 2007 Notes and the 2008 Notes, respectively, shall remain in full force and effect as if the Letter Agreement had not been executed.
Notwithstanding the foregoing, the Company also agreed that in the event that its common stock has not been listed on The Nasdaq Stock Market on or prior to April 15, 2010, that the Company shall pay to the holders of the 2007 Notes and the 2008 Notes an amount equal to the difference between the interest on such Notes previously paid for the period from June 1, 2009 to November 30, 2009 (the " Interest Period ") and the default rate of interest that would have been payable with respect to such Notes for the Interest Period.
I wonder what is significant about Feb 25, other than that it is 10 days later than Feb 15? Perhaps the company is just about to resolve its cash transfer issue and will have done so by then? Also note the contingency related to the uplist happening by April 15. Much to my disappointment, it sounds like that is the new "conservative estimate" (to use Elsa's words) for when the uplist will happen, but perhaps this will be clarified in a conference call, if they conduct one, and I have no reason to doubt that they will.
Regards,
Eric
Thanks for the heads up.
It will be interesting to get the full explanation on the conference call (and to see if they issue any change in guidance for the full year numbers) but my initial reaction from this report is disappointment. Of course, if they give us some positive news during the conference call regarding a) uplist; b) acquisition; c) resolution of currency transfer problem; or d) no negative change to full-year guidance, then I could easily forget about the negatives in this report. I'll let everyone else read and assess for themselves but here are my quick hits:
Negatives:
1) Obviously, much lower sales. This was partially explained by the recertification process affecting their factory for 6 weeks(not of concern to me) and also by increased competition (that is a big deal, unless they can make up for it in other ways).
2) Almost no cash generation this quarter.
3) Apparently still no resolution to the cash transfer problem.
Positives:
1) Not sure how much of a positive it is, vs. just a rubber-stamp but I guess the recertification is a positive although it is also old news.
2) Apparently they spent $17 million on land for future expansion, which explains part of the negative #2 above.
3) It also looks like they made a very large tax payment, if I read the 10Q correctly, which would also help explain negative #2 and put my mind at ease a bit about their future cash generation abilities.
Traditionally, the 3rd quarter is their best for sales, so maybe we will get some guidance about how that is tracking so far although Jiangbo isn't in the habit of doing that very often. I suppose someone could ask that question during the conference call and see what they say.
Hope everyone has a good weekend, in spite of the report. GLTA!
Still long on this stock,
Eric
False alarm -- the idiot just admitted he was joking and then asked "I got in at 13.96 Can anyone advise whether I should hold on to this or not?" Sheesh...
Someone just posted on the Yahoo board that the uplisting has happened (or perhaps about to be announced?) and the ask price simulaneously jumped to 14.50 but I can't find anything in terms of news yet, and so far, the person who "announced" it hasn't backed it up with any kind of link or proof.
Anyone here get any wind of news this morning? Maybe it is just somebody trying to make a quick buck on false news.
I sent them back an e-mail, congratulating them while also more or less asking the same question, although I had already asked Crocker about it last week and he didn't provide any info, other than to say "Be patient, it will happen".
It is certainly frustrating that our company, which seems to be doing as well if not better than many of those other companies, at least from a sales and cash standpoint, is still stuck in OTC land, while the other stocks are taking off on the big exchanges.
I guess it is still a positive sign for what is to come once the uplist happens.
A happy holiday and prosperous New Year to all of you!
Eric
Just to elaborate on an earlier comments regarding the conference call, someone on the Yahoo board said that the other 2 investment companies that asked questions were Stanford Capital and Punch & Associates.
This person also felt that the presence of the analysts meant that the uplisting was imminent and that the recent change in the handling of the debentures in terms of the income statement and balance sheet may have been mandated by NASDAQ as part of their "comments" and that hopefully, JGBO's change in their 10Q reporting will be the key to trigger the approval for the uplist in the near future.
I will answer my own question, since I did finally get to hear the full recording. I have to type this quickly and get back to work but here is a quick recap of the highlights from the questions and answers:
1) The one you are all most interested in came last and wasn't an especially positive answer: the uplist is still proceeding with JGBO responding to the comments on their application. Elsa says it is going well and they expect approval by "beginning of the year" which I believe means Jan or Feb. (or at least I hope no later than that)
2) Income tax appears to be high because they can't deduct non-cash expenses nor can they deduct any US-based expenses.
3) Says they didn't revise full year estimates in spite of better than normal 1st qtr results because they are planning a couple major advertising efforts this year and that will increase the Admin expenses in those quarters. However, said it is possible they will recoup those expenses and continue to surpass expectations.
4) Possible further price cuts on their oldest drugs but expect it won't affect bottom line since any price cuts should be offset by increased volume.
5) Discontinuing pursuit of one of the drugs licensed from Shangdong University (LFAA?) but going after a different Class I drug instead -- announcement to follow in a few weeks.
6) Continuing to pursue strategic acquisition but based on current progress, may not happen in fiscal 2010.
7) The drug that has been in the pipeline the longest and is closest to approval should still be approved this fiscal year but perhaps not as soon as their latest forecast which I believe was by December.
The biggest positive about the call for me was that just about every question came from an investment analyst (Brean Murray, Pope Investments and 2 other companies I didn't catch) rather than individual investors so this says they are starting to get more attention in the institutional investment community.
We will see if anything else newsworthy comes out of tomorrow's conference but it clearly won't be an uplist announcement, much to my great regret.
Still, with that cash position, maybe it will attract some institutional investors prior to the uplist, although I think most won't touch OTC stocks.
GLTA!
Eric
Anybody else call in to the conference call or try to listen to the recording? I just tried (although admittedly, I started just a few minutes after they posted the recording) and the recording cut off just as Elsa was starting to answer the first question, which was about the derivative liabilities (from an analyst at Brean Murray, where they are presenting tomorrow). Maybe I was listening too soon -- I will try again later. Otherwise I will send an e-mail to Crocker.
All of the portion before the questions was basically just Wabu and Elsa reading from the 10Q -- no new information there.
Yes, I noticed that. hopefully, someone attending the conference call will ask if they don't volunteer the info themselves.
I can't find very much to criticize with this company, but if there is one thing, it is that when it comes to pronouncements about when events are going to happen, they almost always end up later than the company's first (and sometimes second and third, as in "uplist") estimate. I guess we just have to automatically add a few months on to anything they say in the future, in order to get a more realistic date.
In their defense, some of those delays may be due to bureaucratic red tape, which I'm guessing can be pretty horrendous in China, unless perhaps you have good connections.
I'm fairly sure it has something to do with putting some sort of current valuation on the convertible debentures, and then recording the impact of any change to that valuation since the last 10Q. It is purely GAAP stuff, and has no bearing on their business, or actual profitability. I'm pretty sure it is also not a deductible expense for tax purposes, which is why their income tax looks relatively high compared to the pre-tax number, but not so much when compared to their operating income number.
This is why I will be happy when the debentures are converted, even if the end result is an increase in the number of outstanding shares. At least it will give us a meaningful EPS number.
One other thing to point out (which the casual investor looking at this stock might miss) is that their cash, as of Sept 30, is now equivalent to over $11.00 per share. So the stock is currently trading at a negative premium to their cash!! I wonder how many other companies in the world are similarly priced right now -- it is just amazing, really -- but all of that should be rectified once the uplist to the NASDAQ goes through and this stock gets on the radar of a lot more people. My big regret is that I don't have any funds to invest right now; I would love to buy more shares before it goes up.
GLTA!
Actually, the biggest hit to net income is the GAAP (non-cash) adjustments included in the 7.4 million of other expenses. As someone said over on the Yahoo board, their true net income after taxes from a cash basis is more like 6 million, which means they are actually earning more like 60 cents/share for the quarter. That is why cash increased so much, again, in spite of the low net income number.
Unfortunately, other investors will see the 0.19 EPS number and feel this stock is overvalued.
Oh well....
Don't know if any of you saw it or if it was one of you that posted the message over on the Yahoo boards, but it was from someone that said they sent an e-mail to Jiangbo asking about the status of the factory renovation and the uplist. Supposedly, they received a reply which said the Hongrui factory renovation will be completed in December (instead of October as stated in the last conference call) and that the uplist is proceeding with Jiangbo responding to comments from the NASDAQ people and that the uplist should be completed by the end of this year or early 2010 (which is also clearly a delay from their "conservative" estimate of end of the year).
I'm not sure if this info is legit or not; it occurred to me that it might be posted by someone who is shorting the stock. Or someone who hopes to buy some shares cheaper, which I suppose describes just about all of us when you put it that way.
We will certainly have the opportunity to hear what Elsa says and to ask questions if JGBO holds a conference call for the soon to be released Q1 numbers, but in the meantime I guess it is just be patient, as others have said.
GLTA!
Well, they didn't exactly answer my question over at the GFRE board (and perhaps no one there knows the answer for sure) but one person did post the following comment, which I found interesting:
"GFRE took a different route, jgbo and others did their split first and then applied, gfre applied first, waited for comments, then when the only matter left was price, they did their split"
As I said earlier, I thought there was a requirement to maintain the price for some number of consecutive trading days (60, 90, ?) but obviously not if the folks at NASDAQ were satisfied with GFRE after just a couple weeks or so, although GFRE was trading a lot higher before their 1:4 reverse split ($2 range) than we were before our 1:40 reverse split.
It sounds like for us, the key thing is whether or not comments were made to JGBO that required resolution prior to acceptance by NASDAQ. I don't suppose that is something Crocker would be privy to or be able to share with us, but if anyone wants to try, that would be cool.
All the best,
Eric
Hi there,
I'm a shareholder of JGBO, which is another Chinese stock that Crocker Coulson, your PR guy, represents. They have submitted their application for uplist to the NASDAQ over a month ago and us shareholders are trying to figure out how much longer it might take. Do you know how long it was after your company submitted its application that you were approved? We heard it was an average of about 2 months but just wanted a comparison.
Good luck to you guys -- looks like you have a great stock that should make you a bundle.
Another one of Crocker's Chinese stocks began trading on the NASDAQ today -- GFRE. Unlike JGBO, they just did their reverse split a few weeks ago, in order to get their share price above $4 or $5, whatever the requirement is, so apparently it didn't need to trade at that level for 90 days or whatever we thought the requirement was. I haven't studied it very much yet to see if it said how long ago they submitted their application but if I find out, I will let you know.
You guys probably have visibility into this as well but someone on the Yahoo message board noted that it was a single trade for 195K shares at $12.39. Don't know if it should be viewed as insider selling or Pope selling, or another way to look at it might be an institutional investor managing to pry loose some shares from someone like an insider or Pope at pre-uplist prices, although most institutional investors won't touch OTCBB. Maybe if the investor got word that uplist was happening soon, they would go ahead and jump in.
All of this is pure speculation of course, but certainly got my attention.
GLTA!
No problem, yours too. That list you put up really captures the holding pattern we are stuck in right now, but I think we will definitely bust out once we get news of the uplisting, and more news on what JGBO plans to do with their cash.
Hi everyone,
Interesting you mention other Chinese drug companies since I have some numbers from another of those that I believe put Jiangbo in a very positive light. But before I get to that, I'll share the answers that Elsa sent back to the questions I e-mailed her after the conference call. (And before you get too excited, I have to say that the answers were rather general and didn't really provide as much detail as I had hoped, but I'll let you decide how to interpret them).
My first question was about the problems transferring cash out of China. Here was her response: "The problem is common for companies located in the PRC due to the stringent foreign exchange regulations in China. The Company has engaged a China based legal firm experienced in this area to assist us in working through this issue and hopefully this issue could be resolved soon."
My second question more or less asked her to speculate on whether or not the convertible debentures would be converted or paid off, and if converted, when, since that would impact the fully diluted EPS number, although not certain in which direction. Here is her answer: "Like you have mentioned, we do anticipate the convertible debt should be converted by the holders prior to the expiration date since the stated conversion price is far below the market price ;though, prior to the maturity, the convertible debt is to be converted at the holder’s option. While it is hard to guess when the conversion would actually happen, one would assume that the higher Jiangbo’s stock price goes, the more likely the holders would elect to convert."
My third question asked about factory capacity since I recall from a previous PR release or conference call that they were runnning at 70% factory capacity. Here is her answer: "The Company currently has two factories, the original Jiangbo one and the Hongrui one we acquired in the January acquisition. The Hongrui factory is mostly used for Chinese traditional medicine and the current renovation/expansion work done on the Hongrui will increase the Company’s capacity on manufacturing the TCMs including Isatidis to meet the future demand of the TCMs."
My last question was about the Chinese government's healthcare initiative, whereby they are increasing insurance and coverage for more of the country, and I wondered if Jiangbo was seeing any benefit from that yet. Here is her answer: "We believe the healthcare reform initiative in China would increase overall sales volume for drugs including both prescriptions and OTC drugs. However, we also anticipate certain degree of the pricing control pressure especially on the drugs listed on the National Essential Drug list. Our announced sales forecast have included the estimated impact from those factors. Fiscal 2010 is a critical year for Jiangbo; as the macro healthcare environment continues to revolve, we will continue to monitor and adjust the Company’s directions and strategies. Shall there be any material changes, we will update our shareholders."
Okay, now back to the other Chinese company. The call letters are TPI, and they only make TCM (Traditional Chinese Medicine) products. They have the same fiscal calendar as Jiangbo and for 2009, they had revenue of 43 million, and profits of 7.9 million, so way below JGBO. Not sure how much cash they have but they are issuing a quarterly dividend of 2.5 cents/share. The big thing is that they trade on the AMEX and they are currently priced at $3.70, 9X their 2009 EPS of $0.41/share. Obviously the dividend is part of that price but given Jiangbo's cash reserves, I imagine we can expect a similar valuation once the stock uplists to the NASDAQ, which would mean the price would roughly double from the current levels. Hopefully the uplist will happen soon.
GLTA! Eric
Hi 996,
Sorry I didn't get back to you sooner -- I was offline yesterday. To answer your questions (in case you haven't heard the CC yet), none of those things were covered. I did send an e-mail Tuesday to Elsa and Crocker after listening to the CC with 4 additional questions, one of which was to ask about the issue with transferring funds out of China.
When I got into work today and still didn't have a reply, I sent a follow-up to which Crocker almost immediately replied and said Elsa was in route to China so I probably wouldn't get any answers for a few days. I will share my questions and her response when I get it.
I'm resigned to us kind of staying stuck in this holding pattern around $11.00-$12.00 until either the uplist occurs, or Jiangbo makes an announcement regarding the investment of their cash that they teased about in the conference call. My guess is that the 1st quarter numbers will be pretty bad, due to the factory closure, so the 10-Q which will come out mid-November will not be any help for the stock price, unless it comes with news on those first 2 items I mentioned.
I had hoped that we would have a chance of seeing $25.00 - $30.00 before Christmas and while I suppose it might still happen if some institutional investor or someone like Cramer jumps on board (that's a big "if"), I am now willing to wait for next year to see what happens with their investments and how that impacts their forecast and FY10 sales and profits.
Also, I still don't think it is unreasonable to expect the company to achieve $5.00 EPS within the next 3-4 years, and on the NASDAQ, I think that means the potential for a $100 share price, assuming they haven't done a split before then.
GLTA! Eric
Yes, for those who were unable to listen to the conference call, Elsa mentioned that they were exploring using their large cash holdings for new investment opportunities. She initially declined to provide much detail, but when pressed during the question and answer period, she actually gave quite a bit more details.
Basically, she summarized the expansion plans into two categories: purchasing additional drugs or drug companies; and expanding into the pharmacy management business. She explained that if they pursue the latter, it "would not be mom and pop size pharmacies but instead would be large pharmacy operations" (which I took to mean either large pharmacies in big cities or perhaps pharmacy chains).
The person asking the questions then asked "What do you think would be the likelihood that by the end of FY2010, you would do both of those things, one of those things, or none of those things?" and Elsa's answer was, "There is ZERO per cent chance that by June, 2010 we will do NONE of those things and greater than 50% chance that we will do both", meaning investing in more drugs for production AND investing in pharmacies. She also added that anything they do would very likely be accretive to FY 2010 results, and that their current guidance excludes the results of any expansion.
I have just sent her an e-mail asking some additional questions and will pass along those questions and her answers if she replies.
Eric
Thanks, big, for that news -- it is just a matter of time now before we are on the NASDAQ and by extension, on the radar of institutional investors.
Any discussion in the CC or in your conversation afterwards regarding the "cash out of China" issue?
I'll try and listen to it on my lunchbreak and report back on anything else of interest.
Eric
If you are a day trader, then I don't know what to tell you but if you are in it for the long haul, then take advantage of the dip in prices. All you have to remember is that this company has nearly $10.00 per share in CASH! (not to mention the future profits).
I think the big factors in terms of this morning's drop (especially for the short-term crowd) are the weird diluted EPS number (you can see that they don't follow that methodology when referring to 4th qtr diluted earnings), and the fact that they are predicting little revenue and earnings growth for FY 2010, due to the overhaul of their factory. I was a shareholder the last time they did a factory overhaul and they came out of it with blazing sales, so I'm sure it will pay off big again. Also, notice the "teaser" comment that their forecast for 2010 only includes their current products and not the gains from any acquisitions they might make with that mountain of cash they are sitting on.
I will have to listen to a recording of the CC later. I hope somebody asks not only about the uplisting but also their issue in transferring cash out of the country since that is the only other negative the company is facing right now.
GLTA! Eric
While I still don't understand what they are doing, at least the calculations that go into the fully diluted EPS number (it is not a typo!!!) can be found on page 21F of the report. They are subtracting $32 million from net income, among a number of other things, and that is what wipes out just about all of the basic EPS number. Hopefully, they will explain the rationale behind these calculations tomorrow, but I'm pretty sure they have to do with what they feel are GAAP requirements regarding the convertible debentures.
I'll just say that I agree with both views on this subject that a) people should be focusing on the true fundamentals of the company, such as the $100 million in cash, and the continuing top and bottom line growth, rather than the absurd diluted EPS; and b) unfortunately, many people won't spend the time, will see that low number, and move on, thereby inhibiting some of the potential price appreciation.
Here are some 3rd qtr vs 4th qtr comparisons that I found interesting, by comparing the annual report with the 9-month numbers from the 3rd qtr report:
3rd Qtr 4th Qtr Total
Revenue 25.7m 31.2m 117.1m
Operating Income 13.3 17.7 49.8
Net Income 8.9 11.4 28.8
Cash ?? (didn't calc) 22.0 104.3
Someone else probably knows for sure but I thought their 3rd qtr was traditionally the strongest due to the winter illness season, yet we see better numbers top to bottom in the 4th qtr than 3rd qtr this year. Some of that may have to do with the economic conditions but I view it as a positive indicator on this company's growth prospects.
Aside from the weird diluted numbers and lack of mention of uplist (which I didn't expect anyhow), I'm very, very happy with this report.
GLTA!
Eric
I'm not sure what the significance is (perhaps someone else might know) but I recall at some point that someone said one of the conditions or qualifiers for the uplisting was to have $500K in daily trading activity. I think we have gotten close to that threshold before but never quite reached it, but it looks like today may finally be the day.
Again, I may be confused in terms of this having any significance regarding uplisting, and in fact Crocker already said a couple weeks ago that Jiangbo already meets all of the criteria for uplisting but still thought I would point it out; if nothing else, it indicates a definite uptick in investor interest in the company.
GLTA -- this could be a very interesting day by the time things are through.
Eric
I too was concerned about the lack of any mention of the uplisting during the presentation, since that would obviously be one of the biggest selling points for potential investors. So, I wrote Crocker an e-mail on that and this is the key text of his reply:
"The company is actively working on the upgrade process and meets all the requirements to be accepted. I would expect that they will complete the upgrade by the end of this year."
I was out of the office yesterday so didn't see the reply until this morning. I sent a follow-up question confirming that "end of this year" refers to calendar year and not fiscal year, since I can live with the former whereas the latter would be extremely disappointing.
I guess I missed the part about 17 million shares fully diluted but I'm wondering if that is simply a calculation related to the convertible debenture, having to take into account the possibility of conversion at some point, rather than repayment of the debt. I don't believe they actually sold 6 million shares for a $30 million loan, as somebody put it, but I will be the first to say that I don't have a very good handle on how the debenture was set up, and how much risk there is to the shares being converted. I also don't know if there problem with getting cash out of the PRC increases the risk that the debenture will get converted or not.
At any rate, I think the final numbers for 2009 will be good, especially if the profit margin for quarter 4 is similar to quarter 3, and I think the top and bottom line forecasts for 2010 should be compelling.
GLTA!
Eric
I didn't go back and look at the numbers for FY08 myself but one thing that I think is important to bear in mind in terms of this year versus prior years is that JGBO drastically changed their distribution model beginning in the 3rd qtr of this year (or at least that is when we saw a dramatic difference in both top line sales and operating profit).
The reason for the differences is that they negotiated large sales deals with distribution networks for lower prices. This resulted in lower gross sales but also much lower selling expenses, because it eliminated a sizeable chunk of the sales commissions that they used to pay their internal salespeople. Thus, the overall result was a large increase in operating profit margin and a decent bump in net profit
In terms of applying that change to the prediction of 4th qtr numbers, I'm not sure how that might work. I know that 3rd qtr is traditionally a big qtr for them because the winter season means more illness and a higher demand for their drugs. I'm not sure how the 4th qtr stacks up in terms of sales but if you say it is normally good, I'm happy to take your word for it. I do believe, based on their change in distribution model, that we will see higher operating margins compared to previous years but as far as net profit goes, it depends on whether or not their are one-time charges, tax effects, etc., etc. so it becomes hard to predict. I do remember Crocker saying at some point this summer that 2009 sales numbers are tracking to the prior forecasts so I believe we will at least be generally pleased with the numbers, if not blown away (and of course I'm hoping for the latter).
Shouldn't be much longer.... GLTA!
Good point. I agree that getting the cash out is big, and as other people have commented in the past, it seems like it should be a relatively easy issue to fix since there are plenty of other companies with US offices doing all of their business in China.
I'm hoping that if we don't hear anything before then, that Elsa will be able to provide at least preliminary 4th qtr and final year numbers at next week's presentation, along with the status of the uplisting.
Cheers,
Eric
Thanks for the link, 996. I really like the estimate of $2.75/share in profits for fiscal 2010. Using your 10x earnings PE number, that would get the stock price to 27.50 sometime next year, after the uplisting.
However, I keep seeing different numbers for this year's earnings and I wonder how these guys do their math. It seems like they are saying that they are estimating that 4th qtr will be $0.55/share, and then they estimate final year earnings to be $1.43. But since Jiangbo already reported fully diluted earnings of $1.27 for the first 9 months (just looked it up again), how can they come up with $1.43 if they are estimating 0.55 for the 4th qtr? Perhaps the 0.55 is basic earnings and they are only estimating $0.16 fully diluted but if so, that would be on the extremely low side compared to their 3rd quarter results.
In terms of the list of 3 things that need to happen to help boost the stock (forget who posted that), I would add a 4th: finish paying off the convertible debt so that they can stop with these weird "fully diluted" earnings numbers that are hiding their true profitability to the casual observer.
GLTA!
Eric
Anyone have any analytical thoughts on the SEC filing which just showed up? It sounds like they are issuing shares (restricted?) in lieu of the ~$600K payment, but I didn't see any mention of the specific number of shares, so would that mean ~50-60K shares at current prices or some other number?
My other question is regarding the wording about this letter agreement seeming to address all other obligations (don't remember exactly what it said) which makes me wonder if they will no longer have to report the much lower fully diluted EPS numbers?
I was a bit concerned when I first read that they missed their interest payments (after all, they are sitting on a mountain of cash) until I got to the end and saw the explanation about the difficulty in moving the funds out of China.
Thanks in advance for any interpretations of the meaning of this new agreement with Pope, or if anyone talks to Crocker and reports back.
Cheers!
Thanks, bbb, for providing the charts. One thing I can't understand (and this is no criticism of you, since you are just copying the charts) is how they arrived at earnings of $1.23/share. Last year's fully diluted earnings were over $1.80/share and even just the first 9 months of this year, fully diluted, were a little higher than their number ($1.27). By using such a low number, they arrive at a P/E of almost 10, which is more than reasonable for an OTCBB stock, and that in turn leads to less interest in the stock than there otherwise might be.
Thanks also, 996, for pointing out that the blogger was not an actual analyst -- I guess I got carried away with the positive coverage.
Hopefully, this stock will provide college tuition AND retirement for all of us!
Regards,
Eric
That is the best quote I have heard from any analyst yet about Jiangbo. It means that all of us longs are sitting on a stock that is an absolute steal at the current price.
Basically, he is saying that given the amount of cash the company has, and the current P/E ratios, the only way the current price makes sense is if the company is headed for bankruptcy, whereas in reality the company is growing tremendously with exceptional margins.
I really believe this stock is going to take off once it uplists and thereby gets on the radar of institutional investors who will understand immediately what the analyst is talking about.
I wish I had accumulated more when the prices were lower and I had money to invest. I would still be accumulating at these prices if only I had some spare change but now I have 2 kids in college :(
GLTA!
I don't think $80 or even $100 is out of the question for this stock in the next few years, as wild as that may sound at this point. Especially when you consider that $80 amounts to a P/E of 20 (not unreasonable for a steadily growing NASDAQ China Pharma stock) on annual earnings of $4/share.
The $4/share part might sound unlikely but that boils down to roughly $40 million in annual profits, once they are beyond the accounting restrictions that are affecting the fully diluted earnings numbers. Even now, with those restrictions still in place, I would imagine that analysts, fund managers and other big investors will see past them once the company uplists and starts to get noticed.
In my view, $40 million in profits is not a big stretch for fiscal 2010 considering they posted almost $9 million in the 3rd quarter of this year. The 4th quarter numbers obviously will give us a better picture of how profits are tracking since 3rd quarter is normally their best but barring some kind of calamity with their factory or the overall situation in China, I think $80 is quite possible within the next two years.
It will be very interesting to see where this stock is at this time next year. My guess is that the board will have a lot more activity than it does today.
Good luck to all!
I wonder if we hit 45K+ in volume today? It seems to me that one of the criteria related to the uplisting (but perhaps not a mandatory or crucial one) was to reach $500K in daily trading. Getting to 45-48K shares at the current price would get us there, but again, I don't know if there is any significance to that or not, other than as a sign of increased interest in the stock.
Thanks very much for the explanation.
I read through all of the discussion of the debenture in the the filing, trying to understand how many shares could potentially be added to the current 10+ million shares outstanding, if the debentures were converted, thinking that is why they had to show the fully diluted earnings as a much smaller amount. But by that reasoning, cutting the EPS in about half (from 0.86 to 0.44) implied that the outstanding shares would roughly double if the debentures were converted.
Based on your answer, I now understand that they are withholding a sum of money from the net income (roughly 4-5 million $US) to calculate the fully diluted EPS, rather than adjusting the shares outstanding. But just to be clear, at what point in time can they stop doing that on their income statement, and show the basic income as the fully diluted income? Is it when the debentures become due?
I fully appreciate and agree with your point that the main concern for us as shareholders is the PPS, but coming at it from the standpoint of potential investors evaluating the company and buying in, obviously the higher the EPS, the better chance of getting the PPS to go higher as well. Of course, if these potential investors do their due diligence, and go beyond just looking at the diluted EPS and P/E, then they would understand that the company is earning a lot more money than superficially meets the eye.
Thanks also, long, for the analysis of the effect of uplisting, and the discussion of the moving averages. It looks like the patience of the long-term "strong buy" crowd is finally beginning to be rewarded.
Regards,
Eric
I was glad to hear that they expect to submit the application for uplisting this summer, but I wonder how long a process that is? I suppose that is why there was a projection a little while back (if my memory is correct) that the uplisting would happen sometime between Aug and Nov.
A separate question I have is regarding the convertible debenture, which apparently is the reason for the big difference between basic earnings and diluted earnings. I see that they have 2 debentures that expire in Nov 2010 and May 2011 respectively. Does this mean that we will continue to see those big discrepancies between basic and diluted earnings for the next 18-24 months? Or, can the debentures be paid off sooner, since they have so much cash? It is frustrating to have their diluted EPS numbers drop so much from their actual earnings, since that drives their P/E and by extension, the expected share price.
All of that said, I'm still in this for the long haul and only kicking myself that I didn't load up more back in the old days when the price was under .10 / share.
Good luck to everyone!
Yeah, I saw that news item and noticed that there were a couple other OTC Pharma companies in the list, so I thought I would do a little comparison. Now I'm very frustrated after looking up the financials for China Medicine Corp. (CHME.OB). They have a current price of $1.80 but only had revenues of $10 million in the last quarter, net profit of about a million (9 cents per share) and cash on hand of just 1.5 million!!
Jiangbo's revenues and profits are at least 3 times more than this company but Jiangbo also has 80 million in cash on hand (maybe more when the new statement comes out next week)so based on that, it would seem like Jiangbo's price should be double what it is right now, even without trading on the NASDAQ. Of course, I already knew this having owned shares for a long time but the comparison makes me wonder what is keeping Jiangbo's price down relative to other competitors in their space.
Hopefully, other people at the Investor conference next week will feel the same way.
No need to take the blame for any delay in uplisting, since there are a lot of factors that go in to that, and even if closing prices had stayed above $3.99 for the next couple months, there might have been something else (such as the transfer of capital out of China) to hold up the process. I certainly don't fault you for grabbing shares as low as you can get them, since I did the same today, but just wasn't lucky enough to get $3.75.
I asked Elsa in an e-mail today if there was any consideration of the other market exchanges besides NASDAQ and whether that would change any of the uplist requirements but no answer so far. I'll let you know if I hear anything.
Yes, the price is certainly right for all of the longs who want to keep stocking up (I got some today at $4.00).
Unfortunately, the close below $4 may add at least another month to the uplisting process, since the NASDAQ apparently has a requirement of 90 days of closing prices at or above $4. Previously, Jan 22 was the last time the stock had closed below $4. Ironically, the CFO had just told me last week in an e-mail that she felt they would have no trouble meeting the $4 criteria.
Oh well, the uplisting is bound to happen eventually.
Hi Randy,
Thanks for the info, as always. I wasn't able to read the whole report carefully but in scanning it, I didn't see any reference to Medico. To my mind, that represents one of the biggest potential payoffs with this stock, if they can get approval. Did you see anything about it or have you heard anything new?
I am encouraged that in spite of the tough retail environment, they managed to do pretty well with sales, margin, and cash position.
Regards,
Eric