Clayton Reeves-SA article: nice discussion of CHBT
China-Biotics Inc. (CHBT) – China-Biotics is one of the leading Chinese producers of probiotics, which are basically good bacteria for the gastro-intestinal tract. You can research probiotics on your own for more clarity, but it is a booming worldwide business that is estimated to be growing at +20% a year, and sometimes even faster in certain markets. China is one of those markets. As the middle class in China gradually rises up, there will be more demand for health foods and specialty items that could take advantage of probiotics. We already do it here in the United States, with products like Activia. There are also health food movements that use things like kefir and probiotic supplements to help keep the intestines happy. So why choose CHBT?
First, is the tremendous value. By any estimation, it seems that CHBT is vastly undervalued relative to their peers. One of their major competitors were bought by DuPont a few weeks ago for a premium on their share price. This automatically makes everyone else in the industry subject to takeover analysis, although CHBT’s price has yet to reflect this premium. This is a great opportunity to get in on a company that can a) capitalize on the increase in domestic consumption in China and b) provide both a great fundamental and relatively valued investment. There is a huge short position in the stock, amounting to over 30% according to Kapitall, but I am contrarian on that front and believe the shorts will be fruitless. It is only a matter of time before people realize that CHBT is too cheap. As a result of my confidence, I am assigning a price floor of $22 and a ceiling of $45 to CHBT. I think that there is tremendous upside to this stock, and would add it to a Chinese equity portfolio in a heartbeat.
