Hi everyone,
Interesting you mention other Chinese drug companies since I have some numbers from another of those that I believe put Jiangbo in a very positive light. But before I get to that, I'll share the answers that Elsa sent back to the questions I e-mailed her after the conference call. (And before you get too excited, I have to say that the answers were rather general and didn't really provide as much detail as I had hoped, but I'll let you decide how to interpret them).
My first question was about the problems transferring cash out of China. Here was her response: "The problem is common for companies located in the PRC due to the stringent foreign exchange regulations in China. The Company has engaged a China based legal firm experienced in this area to assist us in working through this issue and hopefully this issue could be resolved soon."
My second question more or less asked her to speculate on whether or not the convertible debentures would be converted or paid off, and if converted, when, since that would impact the fully diluted EPS number, although not certain in which direction. Here is her answer: "Like you have mentioned, we do anticipate the convertible debt should be converted by the holders prior to the expiration date since the stated conversion price is far below the market price ;though, prior to the maturity, the convertible debt is to be converted at the holder’s option. While it is hard to guess when the conversion would actually happen, one would assume that the higher Jiangbo’s stock price goes, the more likely the holders would elect to convert."
My third question asked about factory capacity since I recall from a previous PR release or conference call that they were runnning at 70% factory capacity. Here is her answer: "The Company currently has two factories, the original Jiangbo one and the Hongrui one we acquired in the January acquisition. The Hongrui factory is mostly used for Chinese traditional medicine and the current renovation/expansion work done on the Hongrui will increase the Company’s capacity on manufacturing the TCMs including Isatidis to meet the future demand of the TCMs."
My last question was about the Chinese government's healthcare initiative, whereby they are increasing insurance and coverage for more of the country, and I wondered if Jiangbo was seeing any benefit from that yet. Here is her answer: "We believe the healthcare reform initiative in China would increase overall sales volume for drugs including both prescriptions and OTC drugs. However, we also anticipate certain degree of the pricing control pressure especially on the drugs listed on the National Essential Drug list. Our announced sales forecast have included the estimated impact from those factors. Fiscal 2010 is a critical year for Jiangbo; as the macro healthcare environment continues to revolve, we will continue to monitor and adjust the Company’s directions and strategies. Shall there be any material changes, we will update our shareholders."
Okay, now back to the other Chinese company. The call letters are TPI, and they only make TCM (Traditional Chinese Medicine) products. They have the same fiscal calendar as Jiangbo and for 2009, they had revenue of 43 million, and profits of 7.9 million, so way below JGBO. Not sure how much cash they have but they are issuing a quarterly dividend of 2.5 cents/share. The big thing is that they trade on the AMEX and they are currently priced at $3.70, 9X their 2009 EPS of $0.41/share. Obviously the dividend is part of that price but given Jiangbo's cash reserves, I imagine we can expect a similar valuation once the stock uplists to the NASDAQ, which would mean the price would roughly double from the current levels. Hopefully the uplist will happen soon.
GLTA! Eric
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