China Dom. Bio-tech Hldgs Inc. (fka CDBH)

[Potse]

Thoughts/comments on CCKH.....

I will use this post to make a few remarks on today's posts and also address some private messages I have received.

While the reverse split is higher than I was expecting (I was personally anticipating a 1:10 split), I am taking what is probably a contrarian viewpoint at this particular moment and maintaining a tight hold on my shares at these price levels. For clarity purposes, I continue to believe that Daqing Morinaga is the target RM candidate that will be vended into the CCKH so that belief is reflected in some of my comments/observations below.

Maggot factory: I completely disagree with your assertion that no institutional investor will put money into a "stupid maggot factory". Based on what I have seen of the company so far, and if the numbers associated with that expansion project are anywhere close to being accurate, I think CCKH is going to attract significant institutional interest at some point after the RM transaction is completed. The product lineup (both existing and potential) is something I think could be relatively attractive to institutional managers (clinical and non-clinical nutrition, cosmetics, transdermal medical applications, agricultural seed coatings, etc).

It is quite possible that Daqing Morinaga is already on the radar screens of US-based institutions. One of the things that immediately caught my eye the first time I looked at the translated version of the company's website is that scrolling news item section on the right side of the page. Notice the April 2007 item makes a mention of "Morgan consortium to visit our company projects". I think the odds are fairly good this is a reference to Morgan Stanley.

http://translate.google.com/translate?hl=en&sl=zh-CN&u=http://www.dqsyjy.com/&ei=FaP8S8_4HqXMMf2n_MoB&sa=X&oi=translate&ct=result&resnum=1&ved=0CBYQ7gEwAA&prev=/search%3Fq%3D%2522http://www.dqsyjy.com/%2B%2522%26hl%3Den%26safe%3Doff

Website: One of the job advertisements that Daqing Morinaga placed was for a full-time website developer, so I don't necessarily view the company's dated website to be overly alarming. I could be completely wrong in my assessment of the company, but I happen to believe the company has probably made significant strides since that 2007-2008 time period. That progress might not be easily/readily evident to the public. For example, the "company description" text in the current job advertisements (where the revenue is listed as $7M) is almost identical to a job advertisement the company placed back in late 2007.

Reverse split and Belmont structures: The split most likely means this will a "fully-valued" type of RM and thus probably significantly limits the upside (at least from a near-term perspective).

As somewhat of an aside: If I recall correctly, about 2-3 years ago China put in place a policy that was suppose to prohibit "under-valued" RM transactions. For example, if a Chinese RM candidate was evaluated as being worth $10M then in order to complete a reverse merger that Chinese company would need to receive basically $10M worth of shell shares. You would not be allowed to give the Chinese company a small number of shares worth say $1M and then let the market "naturally" correct the share price/valuation up to the $10M level.

The "under-valued" RM models are where you get the really nice 20 cent to $5 overnight types of moves. I think LNDT and SVPE are probably two good recent examples of that. Obviously that policy has been changed or the Chinese government is no longer rigidly enforcing it because I have been seeing a number of these types of deals.

Back to CCKH: It is very difficult to speculate what is going to happen here, but it should be worth noting there appears to be a trend developing in very recent Belmont China RM plays. Meuse/Belmont drops the shell shares down to the 150-300K range (DATI, ACTN, and IDCX). IDCX hasn't entered into a RM deal yet, but in the two shells which have entered into RM transactions (DATI, ACTN), he has structured the deals so that the post-merger outstanding share count is exactly 10M, and the shell shareholders retained 1.5-3% of the new company.

It also might be worth noting that both IDCX and ACTN have seen trading at $20+ post-split equivalent levels after their splits were disclosed in SEC filings (CCKH equivalent = 43+ cents per share).

Now, in these latest two deals (DTAS, CCKH) Belmont has dropped the shell shares down even further to exactly 50K. So, I am almost wondering if maybe they are looking to structure CCKH at sub-10M levels. If that is the type of share structure that develops here, it presents a potentially interesting situation. With a post-split float of about 20K, the possibility of a 10M or less post-merger structure, and the possibility of Daqing Morinaga being vended into this shell, I don't have any great urgency to sell my shares at current prices. But that is just my opinion/viewpoint.

Belmont/Meuse 5% ownership of the new company: In the other two RM deals that were entered into (ACTN, DATI), Belmont retained about 360-860K shares (3.6 to 8.6%) of the new company. In the case of CCKH, Belmont will retain 5% of the new company, post-merger and post-initial financing. If CCKH is structured in a similiar fashion (10M or lower outstanding shares), Belmont will probably retain somewhere between 500K and 1M shares.