SGTI a nice buy here IMO.
NOTE: It's not going to double in a day or anything...and is not a daytrader's stock (see the cart!). But I think it makes a nice 3-6 month hold at current prices and have been buying off an on for last few weeks.
Positives and Negatives as I seem them.
SGTI Shengtai Pharmaceutical = No. 1 with a moat.
Positives:
China's No. 1 manufacturer of IV dextrose solutions, with 40% market share.
Only 2 other companies besides SGTI are licensed to provide IV dextrose monohydrate + high cost of entry for any new competitor = moat.
Margins should improve with corn starch costs down (as discussed in the most recent filing)
Health care stimulus spending by government- especially in more rural areas.
Large sales network with contacts in all provinces (excluding Tibet).
DSO under 30 days/no collections issues that plague many other China pharmas
Large expansion completed and currently ramping up production as demand increases
No history of dilution
Shares still priced for failure: SGTI had $90M in revs in 2008 and has a market cap of about $20M here.
Negatives
Decline in revenue/income due to reduction in sales during recession and lower margins due mostly from higher cost of corn starch.
Highly leveraged with short term bank loans. Current ratio 0.5
___________
I think when SGTI reports their annual fy 2009 report soon it will show multiple positives. When that happens the stock won't be near $1.
I'm not a big fan of paid research, but Dutton said back in December they wree looking at about .58/share net income for fy 2009. I doubt they'll get there this year, but next fy (which has started May 1) they'll be doing at least that IMO.
“The 19th century belonged to England, the 20th century belonged to the U.S., and the 21st century belongs to China. Invest accordingly.”
Warren Buffett
AI
