Shengtai Pharmaceutical (fka SGTI)

[Brennus]

Seeking Alpha article:

http://seekingalpha.com/article/56105-shengtai-pharmaceutical-attractive-at-current-levels

Shengtai Pharmaceutical (SGTI.OB) is the largest domestic producer of pharmaceutical grade glucose in China. In 2006 SGTI began the process of bringing production of their primary raw material, corn starch, 'in house' by building a cornstarch manufacturing facility. This serves to increase margins & provide a steady supply of quality raw material required to reliably expand glucose production. SGTI are expanding existing glucose production by 50% to 90000 tons/year by mid 2007. They are also building a new glucose production facility that will have annual capacity of 150000 tons per year. SGTI have make good clauses in place related to a private placement that call for 2007 FDEPS of 0.33 & 2008 FDEPS of 0.43. However, based on their last calendar quarter ASP & margin along with projected capacity expansion they will probably earn 60 cents per share or more over the next 4 quarters. At a modest 10x multiple, that represents >100% total return given the stock's current price of $3.30