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.


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