AI
Wednesday, November 04, 2009 8:27:26 PM
ADY: Milk is hot in China
Consider the following:
1.) Kohlberg Kravis Roberts invested 150MM in Modern Dairy in the middle of this year.
2.) Carlyle Group bought >17% of Yashili in September.
3.) Sequoia made a >$60MM investment in FEIHE in August.
#3 is the point that interests me most. FEIHE is publicly traded in the US as ADY or American Dairy...a bit of a misnomer. Sometimes it's hard to perform thorough due diligence on some of these China Stox because of the language barrier and disclosure customs in China. So it's good to use a third part as a stalking horse to identify sectors and companies.
Well, who do you think does better due diligence, KKR, Carlyle, and Sequoia....or us? Remember that Citadel financed ADY in recent years as well. I ask again, who does better due diligence: Citadel or us?
Ok. Maybe it's too close to call!
ADY has been a big, big beneficiary from the melamine scandal in China. Melamine was injected into milk products by middle men so that milk could be watered down without reducing its protein analysis. ADY has integrated the collection process so there was zero exposure to melamine in any of their product lines.
Talk about a brand building opportunity! 'Feed your baby our milk! It won't kill your child!'
Milk is seasonal in China. The strongest quarter is the fourth quarter and business picks up as temperatures drop. ADY is poised to report some good numbers this year. 2010 make good number in the Sequia deal is $4.30. Based on 2h09 revenue guidance and last quarter's margins, ADY will earn $3.70 in 2009.
I've heard analysts with $50+ price targets. ADY seems like a great company in the correct place at the correct time. Again, nothing is a sure thing, but ADY has so many positive things going for it that it's worth taking a position in.
Earnings due 16nov!
Consider the following:
1.) Kohlberg Kravis Roberts invested 150MM in Modern Dairy in the middle of this year.
2.) Carlyle Group bought >17% of Yashili in September.
3.) Sequoia made a >$60MM investment in FEIHE in August.
#3 is the point that interests me most. FEIHE is publicly traded in the US as ADY or American Dairy...a bit of a misnomer. Sometimes it's hard to perform thorough due diligence on some of these China Stox because of the language barrier and disclosure customs in China. So it's good to use a third part as a stalking horse to identify sectors and companies.
Well, who do you think does better due diligence, KKR, Carlyle, and Sequoia....or us? Remember that Citadel financed ADY in recent years as well. I ask again, who does better due diligence: Citadel or us?
Ok. Maybe it's too close to call! ADY has been a big, big beneficiary from the melamine scandal in China. Melamine was injected into milk products by middle men so that milk could be watered down without reducing its protein analysis. ADY has integrated the collection process so there was zero exposure to melamine in any of their product lines.
Talk about a brand building opportunity! 'Feed your baby our milk! It won't kill your child!'
Milk is seasonal in China. The strongest quarter is the fourth quarter and business picks up as temperatures drop. ADY is poised to report some good numbers this year. 2010 make good number in the Sequia deal is $4.30. Based on 2h09 revenue guidance and last quarter's margins, ADY will earn $3.70 in 2009.
I've heard analysts with $50+ price targets. ADY seems like a great company in the correct place at the correct time. Again, nothing is a sure thing, but ADY has so many positive things going for it that it's worth taking a position in.
Earnings due 16nov!
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