Thursday, December 23, 2010

SEC auditor probe signals 'Buyer Beware' for China

Article Bloomberg

I think it is really positive that the SEC is investigating China's company accounting.

Management needs to be aware of the fact which responsibilities a public company has.

Next year could be interesting for the China US space. Corporate governance will be the keyword.

Wednesday, December 22, 2010

Trading opportunity in China Organic Agriculture (CNOA)?

China Organic Agriculture, Inc. Appoints Mr. Chunyan Liu as Chairman

Something had to happen so I think this is a positive step in the right direction.

"Both Liu's vision and solid experience in agricultural planning and decision making and Zhang’s relationships and extensive background in the financial markets will help the Company accelerate its growth and move to the next level”, said Mr. Qi Qian, CEO of China Organic Agriculture, Inc. “I’m glad to have them join us as Chairman and CFO of the Company. I look forward to working closely with both of them.”

Hopefully Investor Relations also improves, because I send them already twice an email with questions regarding their company and business but no answers back.

Funny article: CNOA the quiet ag monster that could go up 6-fold

Tuesday, December 21, 2010

Stock Trader's Almanac 2011

A nice gift for Christmas!!! I have been buying this since 2005 and I really enjoy the quotes, data and other stuff in the almanac.

Rodobo (RDBO) meets expectations

Q4 results and full year 2010 results

Fourth Quarter 2010 Highlights:

Revenue was $25.3 million, up 172.6% from $9.3 million in 4Q09, outperformed 4Q10 guidance range of $20 - $24 million

Gross profit was $9.4 million, up 87.5% from $5.0 million in 4Q09

Net income was $3.6 million, up 112.4% from $1.7 million in 4Q09, outperformed 4Q10 guidance range of $3.0 - $3.2 million

Earnings per diluted share was $0.13, up from $0.10 in 4Q09

Full Year 2010 Highlights:

Revenue was $69.8 million, up 101.2% from $34.7 million in 2009

Gross profit was $28.0 million, up 59.0% from $ 17.6 million in 2009

Net income was $12.4 million, up 82.5% from $6.8 million in 2009

Earnings per diluted share was up to $0.53 from $0.42 in 2009

First Quarter 2011 Guidance:

Management feels confident to give its guidance for the first quarter of 2011 for revenue to be in the range of $24 - $26 million and net income to be in the range of $3.2 - $3.5 million.

"Rodobo closed its fiscal year 2010 with strong fourth quarter results and it is our fourth consecutive top line growth quarter. Our strong revenue and net income growths demonstrated the strong market demand for Rodobo's high quality, fresh and nutritious milk powder products, the effectiveness of our strategy of expanding our production capacity, and our ability in marketing execution" stated Mr. Yanbin Wang, the Chairman and Chief Executive Officer of Rodobo. "Overall, 2010 was an extraordinary and successful year for Rodobo. The acquisition of the Beixue Group is a key groundwork of our growth strategy. As we move into 2011, we will continue to consolidate our acquisition, realign our product lines and improve our capacity utilization as we continue to expand our distribution network and further penetrate into our existing market in both formulated dairy and raw milk powder products."

I thought $0.50 for the year 2010, but they beat it with $0.03. I didn't have the time to analyse it so I will be back soon to give you some background. But at $2.15 it is a STEAL.


I wish you all already a Merry Christmas

Merry Christmas and a happy, healthy and prosperous 2011


Monday, December 20, 2010

Some life in China Green Material Technologies (CAGM)

Today there was a big buyer in China Green Material Technologies (CAGM) who drove the price to $2.30.

And no I am not the buyer, because I have them already.

Maybe the news that they appointed a new independent director caused the price increase of 100%.  

China Green Material Technologies, Inc. Appoints New Independent Director Johnson Lau

HARBIN, China, Dec. 20, 2010 /PRNewswire-Asia-FirstCall/ -- China Green Material Technologies, Inc. (OTC Bulletin Board: CAGM), a Chinese leader in developing and manufacturing starch-based biodegradable containers, tableware and packaging materials, today announced the appointment of Johnson Lau as independent director for the Company. Mr. Lau will replace Yi (Jenny) Liu, who has resigned due to personal reasons.

Ms. Liu served as independent director since June 2010. Following her resignation, China Green Material's board of directors has appointed Mr. Lau as independent director, chairman of the nominating committee, and as a member of the audit committee and compensation committee.

Mr. Su Zhonghao, Chief Executive Officer of China Green Material Technologies stated, "On behalf of our board and management team, I would like to thank Jenny for her service and contributions over the past several months. We welcome Johnson to the board and are very pleased to have someone of his caliber and financial skill set serve as independent director. We believe Johnson's experience will be instrumental as we continue to grow and introduce new branded products in the rapidly growing biodegradable products market in China."

Mr. Lau has over 14 years of financial experience in public companies and Big Four accounting firms, and is currently Director of Finance for AutoChina International Limited, and serves on the Board of Directors for Lizhan Environmental Corporation. Previously he was CFO and a Director at Haike Chemical Group Ltd. Mr. Lau has also worked at Deloitte Touche Tohmatsu, and has been a Certified Public Accountant since 1999. He holds a Bachelor of Commerce degree from Monash University in Melbourne, Australia.


Wednesday, December 15, 2010

Lotus Pharmaceuticals (LTUS) signs new distribution contracts at PHARMCHINA Conference

Lotus Pharmaceuticals ( LTUS), announced today that it signed contracts with new pharmaceutical manufacturers and distributors at the PHARMCHINA 64th National Drug Fair Conference, which was held in Nanchang, Jianxi Province from December 9-11.

Liang Fang Pharmaceutical Co., the operating entity of Lotus Pharmaceuticals, signed contracts at the conference with five additional regional distributors for the Company's products from multiple regions across China. The addition of the new distributors will increase Lotus' sales distribution network from 195 hospitals and distributors to 200. In addition, the Company entered into distribution contracts with six pharmaceutical manufacturing companies and will act as the exclusive distributor for their products in the Beijing area.

Chairman and Chief Executive Officer Mr. Zhongyi Liu stated, "Our participation in the PHARMCHINA conference was very fruitful, as we came away with six new contracts upstream and five downstream. We estimate that these contracts will contribute approximately $1.5 million to our overall annual revenue, with an incremental net profit increase of $0.6 million. We believe we are well-positioned to reach our goal of 25% top-line growth in 2011."

Lately a lot of positive news from Lotus, despite that the stock price stays depressed. This has to be at least a $2 stock, but it seems that the market is not ready for it yet. 

Nine percent growth expected to be new normal for Chinese economy

The Chinese economic growth is forecast to slow to 9.1 percent in 2011, from an estimate of 10.3 percent this year, and the 9 percent growth is expected to be a new normal for China in the post-crisis period, Bank of America Merrill Lynch said in a regional economic outlook report released yesterday.

After fluctuations since late 2008, China's gross domestic product (GDP) growth has stabilized at about 9 percent in both year-on-year and sequential terms, in comparison with the average 11-percent growth in years before the crisis, said the report.

The report, entitled "Asia-Pacific Macro Year Ahead 2011: Certain growth in an uncertain world", expected China's consumption should remain strong next year, supported by higher wage growth.

Investment will probably slow in 2011, but remain supported by government expenditure on housing and public projects. Fixed asset investment is also expected to fall on slower growth of private investment demand as a result of the government's property tightening measures and a lower loan growth, said the report.

A fall in export growth, owing to a higher comparative base and weak recovery in some major developed economies, would lead to the Chinese economic slowdown, it said.

Investment, consumption and export has for many years been driving forces of the Chinese economy.

From 2012 to 2015, the report forecast the Chinese economy is likely to expand by 9 percent, 8.5 percent, 8 percent and 8 percent, respectively. And for the subsequent five years of 2016- 2020, China's GDP growth might average at 7 percent.

Lu Ting, China economist with the Bank of America Merrill Lynch, attributed the "inevitable slowdown" to two major factors -- diminishing gain from institutional reforms and loss of demographic dividends.

"But two drivers also help buck the slowing trend: innovation as a result of rising Research & Development spending and within - country instead of outbound industrial relocation, thanks to the low capital base in China's poorer inland areas," Lu said.

Bank of America Merrill Lynch also said in the report China's consumer price index (CPI), a major gauge of inflation, is likely to rise to 4.5 percent in 2011, from 3.3 percent forecast for this year.

CPI inflation may range between 4.5 percent and 5.5 percent in the first half of 2011, and soften to an average of 4 percent in the second half, followed by a moderation in 2012 at around 3.6 percent, said the report.

Lu Ting attributed China's rising inflation to three factors -- credit supply and high broad money growth, surge in wages of migrant workers and increasing inflation expectations in the wake of the second round of US quantitative easing (QE2).

"With 9.1 percent GDP growth, nominal growth of migrant wages could just be around 18 percent to 20 percent, which will contribute to 10 percent of food inflation and 3.3 percent of CPI inflation," said the report.

It also maintained that China would have to get used to an economic slowdown in the long run with a relatively high inflation.

"Looking ahead, trend growth in China is likely to decline, reflecting worsening demographics and lower growth of labor productivity," it said.

Tuesday, December 14, 2010

China Kangtai Cactus Bio-Tec (CKGT) gives some guidance

China Kangtai Cactus (CKGT) provides shareholder update and Q4 guidance

China Kangtai Cactus Biotech Inc.(OTCBB:CKGT.ob), a vertically integrated grower, developer, manufacturer and marketer of a variety of cactus-based products in China, issued guidance for the fourth fiscal quarter ending December 31, 2010 and provided additional comment about the company’s status and plans for further growth.

In an open letter to shareholders, China Kangtai Cactus CEO Mr. Jinjiang Wang said, “We are nearing the end of our most successful year ever. Our profitable growth is accelerating as Chinese consumers and farmers increase their use of our cactus products. Fourth quarter revenue will reach a record $12.2 million. This will represent a revenue gain of 43% over revenue of $8.5 million in 2009. For the year, we are anticipating revenue of $36.0 million, a gain of 35% over 2009 revenue of $26.5 million. Although we are not yet prepared to provide specific EPS guidance for the quarter, we can point out that earnings per share in the first nine months of 2010 were $0.38 per diluted share and we currently expect good profitability in the fourth quarter.

“This shows that our valuation is extremely low and represents exceptional value for investors. The average P/E for fast growing profitable Chinese companies trading on the U.S. capital markets is approximately 8.85. Our current trailing twelve-month price to earnings ratio is 3.78.

“Our company generated cash flow from operations for the nine months of $6.9 million. We fully expect this to increase because we completed the $8 million patent payment at the end of August and our operating margins should remain in the 33% range.

“Our growth is driven by several important factors. Our cigarette business is growing even faster than we originally expected. For the first nine months cigarette revenue was $1.7 million up from $42,000 in the first nine months of 2009. In the third quarter of 2010, cigarette revenue was nearly $660,000. We believe we are going to continue to see robust growth in this segment of our business.

“Our other two strong growth segments are cactus feed, which was up 67% in the third quarter and beverages, still our largest segment, which was up 37% in the third quarter to $3.9 million. Our ability to continue to scale up our various business segments is positive,” Mr. Wang said.

Monday, December 13, 2010

China US-listed companies return to China again?

Chinese companies go back to home markets

Do they really go back? I think undervaluation will vanish in the future because there are several ways for companies to achieve a higher valuation.

Dual listing is one of them, but also M/A activity in the China space could lead to higher valations.

The most important is of course establish credibility. Geoinvesting has some suggestions for companies.


Thursday, December 9, 2010

Lotus Pharmaceuticals (LTUS) announces update on land in Inner Mongolia

The company today announced that it plans to sell or transfer approximately 165 acres (1,000 MU) of company-owned land in the Chahaer Industrial Park, Inner Mongolia. Lotus' operating entity, Beijing Liang Fang Pharmaceutical Co., Ltd., purchased the land-use rights for the property in 2008. Lotus had originally intended to build a pharmaceutical manufacturing and storage facility on a portion of the property.

In March 2010, Lotus began construction on a 250,000-square-foot facility in Beijing after receiving permission from the Beijing Chaoyang District Planning Bureau. The new building will house the Company's R&D center, manufacturing operations, storage facilities, sales and administrative offices. The building will become Lotus' new corporate headquarters following its completion. Management expects to move into the building by June 2011.

Lotus' Chairman and CEO, Mr. Zhongyi Liu, stated, "We have decided not to move forward with the construction of our planned facility in Inner Mongolia in order to focus our efforts and resources on expanding our core business in Beijing. We believe that selling or transferring this property will be a more effective use of our capital."

I found this in their last 10-Q :
If Lotus East fails to obtain all of the funding necessary to complete the construction of the new facility in Inner Mongolia, which is estimated to be approximately $52.9 million in the next five years, it could get back approximately $40.6 million spent to date, including the approximately $33.4 million for the payments on the land use rights, which is refundable if the Chinese local government would not grant it land use rights certificate.

Wednesday, December 8, 2010

Substainable packaging has the future

The global market for sustainable packaging is forecast to reach $142.42 billion by the year 2015, according to a new report.

Increased awareness about environmental hazards related to disposal and recycling of packaging wastes, government initiatives to minimize greenhouse gas emissions and stringent regulations are driving the growth of sustainable packaging, according to Global Industry Analysts (GIA).

Sustainable packaging involves the use of sustainable raw materials such as recycled materials and renewable resources. Companies are offering novel packaging designs, with improvements in several key performance areas, such as environment-friendliness, simplicity, material saving, and cost reduction without compromising on ease of use and convenience.

Unlike other segments of the packaging industry, sustainable packaging registered impressive growth during the period 2008-2009, and has been immune to the economic downturn. Sustainability helped companies as a medium to cut costs and reduce packaging waste using recycled and reusable materials.

Europe and the US represent the largest regions for sustainable packaging, together accounting for more than 70% of the global market. With sustainable packaging progressively becoming a mainstream global trend, several companies are adopting green packaging as a marketing tool. In addition, manufacturers are presently under pressure to use environment-friendly materials, and adopt methods that require low-energy consumption and reduce adverse environmental impact of packaging.

Asia-Pacific is poised to witness the fastest growth in terms of use of green packaging, increasing at a CAGR of more than 10% during 2007 through 2015.

In terms of market segmentation, the recycled material constitutes for the largest packaging category, contributing for close to 90% of the total demand in the US. However, biodegradable are witnessing growing demand from the packaging industry, and represent the fastest growing segment. Biodegradable materials are easily decomposed by microorganisms, and reduce packaging waste. Among biodegradables, bioplastics are registering increased demand in the green packaging market.

Key markets using sustainable packaging include cosmetics and personal care, food and beverage, food service and shipping markets, healthcare, and others. The increased demand for sustainable packaging in these end-use sectors is evident by the recent product launches with sustainability features. Sustainable packaging is witnessing increased demand from cosmetic and personal care industries, mainly due to growing consumer preference for eco-friendly plastic packaging materials. More than 600 new beauty products with green label were introduced in Europe alone during the past two years.

Several food companies are announcing plans to switch to compostable biopolymer packaging. Meanwhile unlike the food and beverage, and cosmetic industries, the medical sector still lags behind for sustainable packaging materials. Cost and regulatory concerns, poor recycling infrastructure, and limited consumer demand are few factors responsible for restricting the medical device and pharmaceutical industries to switch to sustainable packaging.

Key players in the global sustainable packaging market include Associated Packaging Technologies Inc., Amcor Ltd., Ball Corp. (NYSE: BLL), Bemis Company Inc. (NYSE: BMS), Biopack Environmental Solutions Inc. (UZZB.F), Constar International Inc. (QCN.F), Crown Holdings Inc. (NYSE: CCK), Earthcycle Packaging Ltd., EnviroPAK Corp., E. I. Du Pont de Nemours and Company (NYSE: DD), Georgia-Pacific LLC, Graphic Packaging Holding (NYSE: GPK), Huhtamäki Oyj, Innovia Films Ltd., MeadWestvaco Corp. (NYSE: MWV), NatureWorks LLC, Owens-Illinois Inc. (NYSE: OI), Pactiv Corp. (NYSE: PTV), Plantic Technologies Ltd. (PLNT.L), Plastipak Packaging Inc., Printpack Inc., Rexam Plc., Saint-Gobain SA, Sealed Air Corp. (NYSE: SEE), Silgan Holdings, Inc. (Nasdaq: SLGN).

But also an emerging player like China Green Material Technologies has a bright future but is still not found by the market because it is traded on the OTC-market. China Green Material Technologies, Inc. (OTCBB: CAGM) is a China-based manufacturer of starch-based biodegradable consumer products. It offers various disposable tableware consumer goods, including cups, plates, bowls, knives, forks, and spoons, as well as food package and containers used at groceries and home. Headquartered in Harbin city of China, the Company currently has 153 employees. The Company has developed proprietary biodegradable food packaging materials technologies and applied for two patents.


We expect EPS 2010 around $0.20, which could grow significantly the coming years. The stock price of $1.18 gives us a P/E below 6. A price tag of at least $2.00 would be more realistic.

Tuesday, December 7, 2010

Sancon Resources Recovery (SRRYQ) in forced Chapter 7

Sancon Resources Recovery in Chapter 7

When a troubled business is badly in debt and unable to service that debt or pay its creditors, it may file (or be forced by its creditors to file) for bankruptcy in a federal court under Chapter 7. A Chapter 7 filing means that the business ceases operations unless continued by the Chapter 7 Trustee. A Chapter 7 Trustee is appointed almost immediately, with broad powers to examine the business's financial affairs. The Trustee generally sells all the assets and distributes the proceeds to the creditors. This may or may not mean that all employees will lose their jobs. When a very large company enters Chapter 7 bankruptcy, entire divisions of the company may be sold intact to other companies during the liquidation.[citation needed]

In this case it looks like that they are forced in Chapter 7 so not voluntary.

The case
The company involved in the following litigation.

Dragon Wings Communications Limited, a Hong Kong corporation and Wong Yee Tat, an individual are the first and second plaintiff. They filed a complaint on July 25, 2008 in the District Court of the Hong Kong special Administrative Region, Civil Action No. 3251, against the first defendant, Fintel Group Limited for breach of contract. The Company is the second defendant because plaintiff claimed Fintel Group Limited is a wholly owned subsidiary of the Company. Under the writ, the plaintiff claimed that pursuant to a written stock purchase agreement, the first defendant shall purchase the first plaintiff’s common stock by common shares of Financial Telecom Limited (USA) inc. (replaced by shares of MKA Capital Inc. from June 2006) or pay to the plaintiff cash of $94,172 in lieu of the shares. Plus the interest and cost of litigation, the total amount claimed by plaintiff were $104,966. The court adjudged that the first defendant do pay the plaintiffs damages on September 08, 2008 and also adjudged that the second defendant do pay the plaintiffs damages on December 10, 2008. The Company denied all allegations in the complaint because Fintel Group Limited is no longer our subsidiary since November 27, 2006. The Company accrued $104,966 of potential liability in the accompanied financial statements based on the letter of claim received from the plaintiff.

I guess these things happen more often with RTO's, so there is nothing to worry about. Even if they have to pay the claim nothing is lost.

China Botanic Pharmaceuticals (CBP) taps the equity market

S-1 Public Offering

China Botanic Pharmaceuticals intends to raise $10.000.000 for strategic acquisitions, working capital and other general corporate purposes, as more fully discussed in the section entitled “Use of Proceeds”.

I guess they are preparing an acquisition than cannot be funded with their cash on the balance sheet, otherwise why you should raise so much.

Monday, December 6, 2010

Artificial Life (ALIF) announces launch Opus-M(TM) 2.0

Artificial Life, Inc.(ALIF), today announced the upcoming launch of Opus-M™ 2.0, a modular, carrier-grade m-commerce and e-commerce platform for business customers, content providers, and end-consumers.

The company launched its groundbreaking Opus-M 1.0 product in January 2010, which has since become the most comprehensive m-commerce platform in the mobile market. In Q1 2011, Opus-M 2.0 will be released to further serve the m-commerce community and adapt to the needs of the rapidly evolving mobile smartphone market for platforms such as Android™, iPhone, and Windows® Phone 7.

Opus-M 2.0 is an expansion upon the earlier version with several major feature groups which include:

A social community framework with a full range of social communication tools such as event management, online collaboration, and media sharing

Support for Microsoft®'s most recently released mobile platform: Windows Phone 7

Extension of the Opus-M messaging framework to support both SMS and Push Notification alerts across multiple platforms

Content Distribution Network (CDN) support for popular providers such as Amazon S3

Powerful administrative interface actions to increase productivity and usability

Highly intuitive storefront experience with user-customizable elements

The Opus-M platform is able to automate a wide range of business processes and support further customization based on specific business requirements. Opus-M already powers GluCoMo™, a telemedicine platform, and, an off-deck mobile content and distribution platform, where various modules from Opus-M are leveraged to manage the specific needs of the products.

Through Opus-M 2.0's affiliate program, affiliates may access a wide customer base in many business fields and industries while receiving full support and resources to help them generate revenues. Affiliates are informed of the latest news updates, tools and promotions about Opus-M 2.0.

The comprehensive Opus-M 2.0 product has been developed with leading-edge proprietary technology.

Opus-M modules have been used in 100+ applications across all mobile platforms, generating over 50 million downloads -- a number which is continuously increasing.

Opus-M 2.0's mobile distribution network covers more than 1000 channels spread across over 85 countries around the world.

"In the past year, we have focused heavily on products and services for the business community in addition to our mobile games and applications. We will continue in this direction for 2011 starting with the enhanced feature set of Opus-M 2.0 especially with support for social networking, communities and services," said Eberhard Schoneburg, CEO of Artificial Life, Inc.

Good news on all fronts from this company, but the stock price stays relatively behind. Ones this love baby is going to Rock&Roll. The impatient have to have patience.


Wednesday, December 1, 2010

Man Shing Agricultural Holdings (MSAH) the NEXT BULL

Today a huge turnover in China Agri-Business (CHBU) with more than 900.000 stocks traded and a closing price of $2.00, up more than 100%. In the afternoon I asked myself why such a price increase?

Simple: Unloved, Undervalued and Underowned and of course enormous potential. Not only China Agri-Business but also more companies involved in agri.

Agricultural commodities are going to surge the coming years. The prices are largely driven by supply and demand factors. A growing population, coupled with limited agricultural land, means that long term demand for agricultural commodities will increase in the long run, while supply continues to be limited. Therefore there tends to be an upward bias on prices.

The above effect is exacerbated since demand for soft commodities is inelastic. This means that the majority of these commodities are required as food (consumer staples) consumed by humans to stay alive. This dependence means that any decline in demand tends to only be marginal when there is a significant increase in price. Unfortunately, the only substitutes for most soft commodities are other soft commodities.

Demand factors
There are a number of reasons why prices in soft commodities are going to surge the coming years. One of the most important reasons is:
*Booming levels of consumption in emerging economies such as China and India.
Industrialisation of these countries has increased the wealth of their consumers leading to larger disposable incomes, a higher standard of living and greater demand for food.

The rise in income coupled with western influences has also lead to a change of diet in these countries. In line with most developed countries, the meat constituent of their diet has increased proportionately. An increase for the demand for meat leads to significant increases in the demand for soft commodities. To give us some perspective on this, one kilogram of beef requires about seven kilograms of grain.

Supply factors
The supply of soft commodities is limited by the availability of agricultural land. Although additional land can be devoted to the production of soft commodities, often the added benefits are marginal as they are often not the most suitable for farming and do not contribute significantly to global productive capacity. Modern society is trying to improve the technology surrounding optimisation of this limited land space.

Global warming and weather inconsistencies across the globe have resulted in increased environmental awareness from the general public, but there are many that argue that it has had a significant impact on the supply of soft commodities. As these commodities are grown they are susceptible to temperature and weather conditions, events such as droughts can have a massive impact in the price of commodities such as grain.

Other considerations
An important factor that must be considered when viewing the current strength in soft commodity prices is the weak US dollar. The softening of the US dollar the last years against most foreign currencies has seen $USD quoted soft commodity prices rise as purchasing power increases. Therefore despite the fundamental reasons driving the soft commodity boom, there is an opinion that the nominal price increases witnessed are overstated and will come back should the US dollar strengthen sometime in the future.

Speculative activity in soft commodity futures has also contributed to current prices. Investors have been flocking to “defensive” commodities to get away from volatile equity markets. This is also evidence of financial institutions seeking to recover from their “sub-prime” losses. becoming more involved in the sector. Unfortunately, since speculative money is often highly leveraged, it distorts the expected prices for soft commodities and increases short term price volatility. Notably, futures for the soft commodity market indicate that prices are expected to continue rising for the foreseeable future.

Broader impacts
Consumers have been directly impacted by the rises in soft commodity prices. Consumers are starting to find that a larger proportion of their income is being spent on food. Given food is a necessity, increased expenditure in this area means that the remaining disposable income available to households reduces. This leads to a reduction in consumer spending and reduces economic activity.

Companies operating within the food industry have also been affected as these commodities are required for production. The increased prices will directly affect the profit margin and hence overall profitability of this industry. There has also been a direct impact on inflation as many of the consumer basket of goods used for calculation of the CPI (headline inflation) are derived from soft commodities (such as bread and rice). High inflation will place pressure on interest rates and on sustainable earnings and disposable income. This in turn could lead to an economic downturn. Some weeks ago China planned to take price interventions to battle inflation. The measures contemplated by the State Council, ranging from a crackdown on speculation in agriculture goods to the imposition of price caps on “daily necessities” if needed.

Dealing with the prices
Although the rising prices have an unfavourable impact on the economy as a whole, steps can be taken in our share portfolio composition to mitigate or benefit from the rising prices. The key to benefiting from the price surge of soft commodities is to recognise quality companies in this booming sector with sound financial health. This will ensure that the company will still perform well even if soft commodity prices remain stable or fall.

Secondly, diversification of exposure to the sector will also reduce the risk of exposure to a specific soft commodity price. An example of this would be China Agri-Business (CHBU) which has benefited from the overall price rise of soft commodities and will be benefit more and more because of their store expansion.

Another stock worthly to look at is Man Shing Agricultural Holdings (MSAH).

Man Shing Agricultural Holdings Inc. (Man Shing) through its operating subsidiary, Weifang Xinsheng Food Co., Ltd. (Xinsheng) is engaged in the production and processing of fresh vegetables, including ginger, and others, such as onion and, garlic. Xinsheng leases 5.3 million square meters of farm land for the planting and growing of ginger in Anqiu of Shandong Province in China. It produces ginger with a focus on customers located in countries, such as Japan and European Union and are the largest ginger exporter in China.

As of June 30, 2010, the company’s product portfolio comprised: fresh vegetables and frozen vegetables.

This company is expected to earn around $0.20 and trades at $0.67, which gives us a P/E below 4. If the market is ready for it, like in the case of China Agri-Business a P/E of 10 is possible. So is Santa ready to take the price of Man Shing Agricultural Holdings (MSAH) to $2.00?

For more research about this company, visit Trading China or Geoinvesting.


Bull Run in China Agri-Business (CHBU)

High $4.95 CHBU

I don't know what is happening but I sold half my position.

Santa is early this year!