EPS 2009 $0.09 one cent under my expectation but OK 2009 was a transition year.
Net income for the year ended December 2009 was $2,093,688, compared to $1,652,513 in 2008, an increase of $441,175 or 27%. The increase is mainly due to the significant increase of net income in the waste service business of $377,670 or 20% although net income in the material recycling business decreased $73,305 or 83%. The dramatic decrease in SG&A expenses in the waste service business was the main reason for the increase of the net income. Net profitmargin for the year ended December 31, 2009 was 19% while it was 16% for the year 2008.
Some highlights of the 10K report that gives us some idea of the future.
In order to meet the environmental initiatives set for 2010 Shanghai World Expo and promote the concept of "waste separation and conserve resources," Shanghai Municipal Afforestation Bureau launched the "More Green for Shanghai" campaign. Sancon is the only commercial enterprise that has been invited to participate in this campaign. Sancon will place specially made bins for the collection of waste paper from college campuses and office buildings. New copy paper will be given free of charge to the campaign-participating outlets to encourage and reward recycling. The waste paper collection is expected to reach over a thousand tons in 2010.
Sancon has been also awarded a license from the local Chinese Government to collect and process electronic waste such as computers, printers and copiers, as well as electric white goods.
A new market for the company.
During the next twelve months, the company expects to take the following steps in connection with the development of their business and the implementation of their plan of operations:
Sancon intends to continue with their marketing strategies to deliver their products in China and provide their waste management service to clients;Along with the continued plastic and glass materials products the company is now processing, Sancon is also developing to process other materials, such as electronic materials, waste battery and new energy.
During the next twelve months, Sancon expects to set up larger network of collection and sales in China.
During the next twelve months, the company is planning to raise additional US$3-4 million cash to facilitate their processing capacity. The capital will be used to some or all of the following activities:
1) acquisition of other companies running similar business in China and the USA;
2) purchase of new equipment to satisfy increasing new type of materials requirements;
3) marketing and general administrative expenses for new operation in China.
The company may raise such capital through issuing common stocks or warrants.
The aggressive expansion plan will be replied on such capital support.
My conclusion is still that the company is undervalued and I believe they will show a big turnaround this year. The stock is thinly traded but has enough upside potential. My projections of EPS 2010 are still intact.
Wednesday, March 31, 2010
Monday, March 22, 2010
Sancon (SRRY) undervalued environmental player
Sancon Resources Recovery, Inc. is an environmental service and waste management company that operates recycling facilities in China and Australia. Sancon specializes in the collection and recovery of industrial and commercial solid wastes such as plastic, paper, cardboard, and glass. The recycled materials are re-used by Sancon's manufacturing customers in China to make a wide variety of new products including outdoor furniture, construction materials, building materials, road surface, and various new products. Sancon's China operation is licensed by the Chinese government for waste management services, and is certified with ISO9001 and ISO14001 standards.
Environmental industry facing significant opportunities Due to the serious environment pollution problems faced in China, recently Chinese government emphasis energy saving, emission reduction and environmental protection at the highest level ever. China Bureau of Environment Protection budget 2%-2.5% of GDP ($4billion) per year for environment protection projects starting from 2006. Chinese waste management market is estimated at $35 billion by 2010.
Net income for the nine months period ended September 30, 2009 was $1.61 million, or $0.07 per share, compared to $1.45 million, or $0.07 per share in the year ago period, an increase of $164,131 or 11%. In order to control the cost, the company has eliminated numerous outsourced services and consulting fees. This contributed greatly to the increase of net income for the nine months period ended September 30, 2009.
Earnings per share for 2009 could be around $ 0.10.
In 2010 Sancon can profit more because their operations in Australia and China are both emerging out of the global economic crisis with more efficiency. The fourth quarter of last year the company concluded a preliminary memorandum of understanding with an electronic waste processing company in Hunan, China. Relying on this company's R&D team, the MoU also include building China's largest waste battery recycling site on a 10-hectare land. In Australia, Sancon founded the Algal Fuels Consortium together with the Government of South Australia, South Australian Research & Development Institute (SARDI), Flinders University, Commonwealth Scientific Industrial Research Organization (CSIRO), and Flinders Partners. The consortium is finalizing a technology for generating biomass from Captured CO2 emissions. Sancon has the right to commercialize this renewable energy technology in Australia and China.
My expectations in 2010 are much higher revenues and earnings. In my opinion net income per share could be between $ 0.14 - $ 0.16. The current stock price doesn't reflect the potential of this promising company.
POSITION: LONG (ENTRY: $ 0.42)
Friday, March 19, 2010
Where is Rodobo (RDBO) standing?
2009 is one of the most unusual years of China’s diary industry in nearly 10 years. The melamine incident in 2008 and the negative impact of the world financial crisis were still in continuity in 2009, although at a somewhat reduced level. The online quote price of the natural whole milk powder, the “barometer” in the world diary market, sustained downturn, which brought a major impact on China’s milk powder and even the entire diary industry. Facing tough market conditions, under the impact of various support and regulate policies, China’s diary industry is struggling to pick up, at a recovery speed faster than the expectations of internal and external expectations.
Viewing from the international market environment, the international financial crisis was still exerting a negative impact on global diary market in 2009. Due to insufficient demand for diary products, diary industry in developed countries, especially the EU and the USA, raw milk prices continued to slump, leading to decline in diary herds and reduction in aggregate supply. Bulk diary products like skim milk, cheese, butter, whey power in the world market fall into the valley of recent years in the first quarter of 2009, although slowly began to rebound in the second quarter, the price had a significant decline compared with the second half of 2007.
For example, in the US, food-grade nonfat dry milk bottom-price is USD 1795/mt (factory price), down 60.6% compared with the peak price of USD 4559/mt. The bottom price of butter is USD 2358/mt, down 60.69% compared with the peak time price of USD 3789/mt. The bottom price of dry whey is USD 338/mt, down 80.56% compared with the peak time price of USD 1739/mt. 40-pound block of cheddar cheese bottom price is USD 2461/mt, down 49.51% compared with the peak time price of USD 4874/mt. Since natural whole milk powder quotation system online started in August 2008, a total of 13 rounds of trading are transacted. In the first three quarters of 2009, full cream milk powder factory prices are roughly around USD 2200. Even though in the first half of 2010 the online transaction prices had risen considerably, the average CIF price of full-fat light milk powder imported by China from New Zealand in 2009 is at approximately USD 2200-2500/mt, roughly half the price of the peak time in recent years. Low price seriously blew the world cattle breeding industry and diary product prices.
From domestic market environment, China’s diary industry faces a very severe environment. Domestic diary industry is under a major impact and challenges of the world market. As diary prices in the international market are low, especially full-cream light milk powder and whey products that have a greater impact on China’s market prices are low, full-cream light milk powder and whey products imported by China from the world market soared. According to China Customs data, from 1-10 months in 2009, China has imported 136,189 tons of full-cream light milk powder from abroad, 484.42% up compared with the same period of last year. Imported whey products reached 241,530 tons, an increase of 42.08%. In addition, due to the melamine incident impact as well as the lack of cost advantage, China’s milk powder export shrunk dramatically. Exports volume in the first 10 months of 2009 dropped by nearly 80% compared with the same period of last year. Blocked exports and soared imports brought great impact on the production of China’s raw milk powder and raw milk. Milk stock once reached 300,000 tons. The lowest price of raw milk powder had reached RMB 15000/mt, much lower than the cost of RMB 28,000/mt. In the first three quarters of 2009, the average price of China’s raw milk showed a downward trend, fell about 15% year on year, resulting in decline of diary cattle herds and raw milk production.
Facing the severe market conditions, the Chinese government issued a series of supporting policies for diary industry development, such as the extension of central government loans for the acquisition of raw milk on the discount, the central budget subsidies for seed cows, milk station machinery and development, the expansion of state purchasing and storage size and so forth. Diary processing enterprises, especially the major enterprises, have more investment in the quality of raw milk and diary products, the consumer confidence in milk consumption significantly increased, these factors promote China’s diary market gradually pick up, the recovery is faster than expected.
According to the data provided by the National Bureau of Statistics, in the first 10 months of 2009, China’s diary production increased by 10.2%, more than the same period of last year, in which liquid milk output rose by 10.6%; per capita diary consumption of urban residents in the first three quarters respectively increased 15.84% and 4.07% compared with the fourth quarter of 2008 and the first quarter of 2009, broadly in line with the second quarter. From the point of market competition and industry consolidation, the trend of the private turning to the state is strengthened. Formula milk, especially infant formula milk powder industry became the most competitive sub-sector in 2009. Many brands compete for market space left over by Sanlu. Meanwhile domestic brands launched new impact to the high-end market.
In 2009 the melamine incident has brought a profound lesson to the entire industry. The industry is having reflection and criticism. A growing number of diary companies are rethinking the way for survival and development, especially major diary companies are adjusting their corporate strategies and tactics in order to respond to new market and policy environment.
This year China’s diary industry will face a market environment very different from 2009. High raw milk price and milk products prices will be the most important market features. In addition, the issuance of the new diary safety and quality standards will bring an important impact on cattle breeding farmers, diary companies and government regulatory authorities.
After reading this you will think: Where is Rodobo (RDBO) standing?
I really don't know but I am positive about it. Everyone who has a recent presentation or other interesting information regarding the company is invited to post.
POSITION: LONG (ENTRY $ 2.40)
Viewing from the international market environment, the international financial crisis was still exerting a negative impact on global diary market in 2009. Due to insufficient demand for diary products, diary industry in developed countries, especially the EU and the USA, raw milk prices continued to slump, leading to decline in diary herds and reduction in aggregate supply. Bulk diary products like skim milk, cheese, butter, whey power in the world market fall into the valley of recent years in the first quarter of 2009, although slowly began to rebound in the second quarter, the price had a significant decline compared with the second half of 2007.
For example, in the US, food-grade nonfat dry milk bottom-price is USD 1795/mt (factory price), down 60.6% compared with the peak price of USD 4559/mt. The bottom price of butter is USD 2358/mt, down 60.69% compared with the peak time price of USD 3789/mt. The bottom price of dry whey is USD 338/mt, down 80.56% compared with the peak time price of USD 1739/mt. 40-pound block of cheddar cheese bottom price is USD 2461/mt, down 49.51% compared with the peak time price of USD 4874/mt. Since natural whole milk powder quotation system online started in August 2008, a total of 13 rounds of trading are transacted. In the first three quarters of 2009, full cream milk powder factory prices are roughly around USD 2200. Even though in the first half of 2010 the online transaction prices had risen considerably, the average CIF price of full-fat light milk powder imported by China from New Zealand in 2009 is at approximately USD 2200-2500/mt, roughly half the price of the peak time in recent years. Low price seriously blew the world cattle breeding industry and diary product prices.
From domestic market environment, China’s diary industry faces a very severe environment. Domestic diary industry is under a major impact and challenges of the world market. As diary prices in the international market are low, especially full-cream light milk powder and whey products that have a greater impact on China’s market prices are low, full-cream light milk powder and whey products imported by China from the world market soared. According to China Customs data, from 1-10 months in 2009, China has imported 136,189 tons of full-cream light milk powder from abroad, 484.42% up compared with the same period of last year. Imported whey products reached 241,530 tons, an increase of 42.08%. In addition, due to the melamine incident impact as well as the lack of cost advantage, China’s milk powder export shrunk dramatically. Exports volume in the first 10 months of 2009 dropped by nearly 80% compared with the same period of last year. Blocked exports and soared imports brought great impact on the production of China’s raw milk powder and raw milk. Milk stock once reached 300,000 tons. The lowest price of raw milk powder had reached RMB 15000/mt, much lower than the cost of RMB 28,000/mt. In the first three quarters of 2009, the average price of China’s raw milk showed a downward trend, fell about 15% year on year, resulting in decline of diary cattle herds and raw milk production.
Facing the severe market conditions, the Chinese government issued a series of supporting policies for diary industry development, such as the extension of central government loans for the acquisition of raw milk on the discount, the central budget subsidies for seed cows, milk station machinery and development, the expansion of state purchasing and storage size and so forth. Diary processing enterprises, especially the major enterprises, have more investment in the quality of raw milk and diary products, the consumer confidence in milk consumption significantly increased, these factors promote China’s diary market gradually pick up, the recovery is faster than expected.
According to the data provided by the National Bureau of Statistics, in the first 10 months of 2009, China’s diary production increased by 10.2%, more than the same period of last year, in which liquid milk output rose by 10.6%; per capita diary consumption of urban residents in the first three quarters respectively increased 15.84% and 4.07% compared with the fourth quarter of 2008 and the first quarter of 2009, broadly in line with the second quarter. From the point of market competition and industry consolidation, the trend of the private turning to the state is strengthened. Formula milk, especially infant formula milk powder industry became the most competitive sub-sector in 2009. Many brands compete for market space left over by Sanlu. Meanwhile domestic brands launched new impact to the high-end market.
In 2009 the melamine incident has brought a profound lesson to the entire industry. The industry is having reflection and criticism. A growing number of diary companies are rethinking the way for survival and development, especially major diary companies are adjusting their corporate strategies and tactics in order to respond to new market and policy environment.
This year China’s diary industry will face a market environment very different from 2009. High raw milk price and milk products prices will be the most important market features. In addition, the issuance of the new diary safety and quality standards will bring an important impact on cattle breeding farmers, diary companies and government regulatory authorities.
After reading this you will think: Where is Rodobo (RDBO) standing?
I really don't know but I am positive about it. Everyone who has a recent presentation or other interesting information regarding the company is invited to post.
POSITION: LONG (ENTRY $ 2.40)
Wednesday, March 17, 2010
Wednesday, March 10, 2010
China Agri-Business (CHBU) heading for a new start
China Agri-Business, Inc., through its operating company in China, Shaanxi Xin Sheng Centennial Agriculture and Technology Co., Ltd. manufactures and sells non-toxic fertilizer, bactericide and fungicide products used for farming in China. The Company has a total of five brands and produces more than 50 different applications, including products designed to stimulate plant growth, condition soil, and prevent and cure plant diseases and parasites. The Company has products for a variety of crops, including potatoes, vegetables, cotton and fruit plants, and orchard trees. The products can be used either alone or to supplement other products. The Company's Xinsheng's manufacturing facilities are located in Xi'an, Shaanxi Province, China.
The company celebrated the anniversary of its "New Agriculture-Generator" initiative, in Xi'an, China. As of December 31, 2009, China Agri-Business had established 103 branded super chain stores, a majority of those stores are located at Shannxi Province (where the company is based) and Hunan Province. In addition, the Company established 49 direct sales stores, which are controlled and managed directly by the Company. The direct sales stores are located in the Shannxi Province. For the year ended December 31, 2009, about one third of the Company's revenues were generated from those super chain stores and direct sales stores.
Liping Deng, President and Chief Executive Officer of China Agri-Business, commented on the Company's outlook for the year 2010, stating, "As an effort to expand our business and offset the influence of weather conditions, we launched a 'New Agriculture - Generator' initiative in the fourth quarter of 2008, which includes the super chain sales partner program and direct sales stores program. The purpose of this campaign is to establish our own sales network by creating a closer relationship with farmers through our super chain and direct sales stores in the rural areas of China in addition to the traditional sales network. We anticipate continuing to focus our efforts on establishing direct sales stores in 2010. From the beginning of the year to today, we have opened about 150 new direct sales stores in Shannxi Province and Hunan Province. Total direct sales stores are over 200 now. We expect that the super chain stores and direct sales stores will generate growth for the Company in 2010."
In addition to the Company's continued market expanding efforts, the Company acquired a new product license to produce potassium and magnesium fertilizer on February 14, 2010. The license cost is approximately $117,000. The estimated cost relating to associated production equipment is approximately $293,000. The Company believes that acquiring licenses to existing products will enable the Company to increase revenues more quickly than by solely relying on developing its own new products. The Company will continue to look for such licensing opportunities in the future.
If we look to the financials of this company we see a cash position per share of $ 0.70. Earnings per share for the first nine months were $ 0.05. Severe weather conditions in China during 2008 had a continued negative impact on the company's sales. The farmers in the disasters affected areas are reluctant to buy organic fertilizer due to poor income in 2008. Also in the remainder of 2009 sales in the disasters affected areas will continue to be negatively impacted. Despite that I think that the change in strategy will lead to increased sales in the coming years.
EPS 2010 of $ 0.12 must be possible. I think this stock is a nice pick between $ 0,50 and $ 0.60.
POSITION: NO POSITION
The company celebrated the anniversary of its "New Agriculture-Generator" initiative, in Xi'an, China. As of December 31, 2009, China Agri-Business had established 103 branded super chain stores, a majority of those stores are located at Shannxi Province (where the company is based) and Hunan Province. In addition, the Company established 49 direct sales stores, which are controlled and managed directly by the Company. The direct sales stores are located in the Shannxi Province. For the year ended December 31, 2009, about one third of the Company's revenues were generated from those super chain stores and direct sales stores.
Liping Deng, President and Chief Executive Officer of China Agri-Business, commented on the Company's outlook for the year 2010, stating, "As an effort to expand our business and offset the influence of weather conditions, we launched a 'New Agriculture - Generator' initiative in the fourth quarter of 2008, which includes the super chain sales partner program and direct sales stores program. The purpose of this campaign is to establish our own sales network by creating a closer relationship with farmers through our super chain and direct sales stores in the rural areas of China in addition to the traditional sales network. We anticipate continuing to focus our efforts on establishing direct sales stores in 2010. From the beginning of the year to today, we have opened about 150 new direct sales stores in Shannxi Province and Hunan Province. Total direct sales stores are over 200 now. We expect that the super chain stores and direct sales stores will generate growth for the Company in 2010."
In addition to the Company's continued market expanding efforts, the Company acquired a new product license to produce potassium and magnesium fertilizer on February 14, 2010. The license cost is approximately $117,000. The estimated cost relating to associated production equipment is approximately $293,000. The Company believes that acquiring licenses to existing products will enable the Company to increase revenues more quickly than by solely relying on developing its own new products. The Company will continue to look for such licensing opportunities in the future.
If we look to the financials of this company we see a cash position per share of $ 0.70. Earnings per share for the first nine months were $ 0.05. Severe weather conditions in China during 2008 had a continued negative impact on the company's sales. The farmers in the disasters affected areas are reluctant to buy organic fertilizer due to poor income in 2008. Also in the remainder of 2009 sales in the disasters affected areas will continue to be negatively impacted. Despite that I think that the change in strategy will lead to increased sales in the coming years.
EPS 2010 of $ 0.12 must be possible. I think this stock is a nice pick between $ 0,50 and $ 0.60.
POSITION: NO POSITION
Sunday, March 7, 2010
Rodobo (RDBO) ready for take off
Rodobo Int. the dairy producer who recently did some new acquisitions is an attractive play in the consolidating Chinese dairy market. As a producer and distributor of high quality formula milk powder products for infants, children, pregnant women, nursing mothers, middle aged and the elderly this company could benefit from the switch to a higher standard of living in China. More and more Chinese consumers get into the habit of drinking milk every day because they have realized that "milk is a kind of almost perfect food". Despite the great impact on the dairy industry, the nutritive value is still essential for the improvement of people's health and physique. As a token of the nutrition necessities and an upgraded consumption structure , dairy products are definitely indispensable for the solid market demand.
The current price of this OTC stock is $ 2.90. Diluted earnings last year were $ 0.42 with a book value of $ 1.33. The acquisitions will expand the production from 200 tons to 1.200 tons per day. A triple of sales and net income could be a possibility which could lead to an EPS of around $ 0.80 this year. A possible uplisting to a mayor exchange could lead us to a higher price. The main problem right now is the lack of liquidity.
So my target price would this year between $ 5.00 - $ 6.00
POSITION: LONG
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