China Botanic Reports Solid Fourth Quarter and Fiscal Year 2011 Results

HARBIN, China, Jan. 30, 2012 /PRNewswire-Asia/ -- China Botanic Pharmaceutical Inc. (NYSE AMEX: CBP) ("China Botanic" or the "Company"), a developer, manufacturer and distributor of botanical products, bio-pharmaceuticals and Traditional Chinese Medicines ("TCM") in China, today announced financial results for the three months and fiscal year ended October 31, 2011.

Fourth Quarter 2011 Highlights and Recent Events

• Net sales increased 12.8% year over year to $18.8 million
• Gross profit increased 18.5% to $10.8 million from $9.1 million in the fourth quarter of fiscal year 2011 Gross margin increased to 57.1% from 54.4% in the year ago period
• Net income was $5.4 million, or $0.14 per diluted share, as compared to $5.6 million, or $0.15 per diluted share in the fourth quarter of fiscal year 2010
• In October 2011, the Company appointed Mr. Zack Zibing Pan as an Independent Director and Chairman of the Company's Audit Committee
• In December 2011, China Botanic successfully developed a new Siberian Ginseng (Acanthopanax) Polysaccharide Extract Powder and was awarded the Scientific and Technological Achievements Appraisal Certificate by the Science and Technology Bureau of Heilongjiang Province

Full Year 2010 Highlights

• Net sales increased 31.8% year over year to $72.7 million
• Gross profit increased 46.8% to $43.2 million from $29.4 million in fiscal year 2010
• Gross margin increased to 59.4% from 53.3% in the year ago period
• Net income was $25.9 million, or $0.69 per diluted share, compared to $17.9 million, or $0.47 per diluted share in fiscal year 2010
• $14.1 million invested in exclusive 30 year Siberian Ginseng resource use right and cultivation rights
• $9.1 million invested in purchase of five new patents

"During the fourth fiscal quarter and fiscal year 2011, we reported strong financial performance as a result of increase in average selling prices of our existing range of products and our ability to introduce successful new products ," stated Mr. Shaoming Li, Chairman and Chief Executive Officer of China Botanic. "We engaged in aggressive sales and marketing efforts to promote our new products and increase market penetration of our existing product portfolio. We also continued to generate strong cash flow from operations, which allows us to capitalize on attractive growth opportunities, including acquisition of patent rights, Siberian Ginseng cultivation rights and invest in our Ah City phase two expansion plan. We believe such investments will strengthen our market share and generate long term shareholder value in years to come."

Fourth Quarter Fiscal Year 2011

Results During the three months ended October 31, 2011, net revenue increased by 12.8% to $18.8 million from $16.7 million in the same period of 2010. Such revenue increase was primarily attributable to the increase in average selling prices (ASP) of China Botanic's products and greater market recognition of the Company's new products and its Siberian Ginseng Series products as a result of its marketing efforts.

Gross profit increased 18.5% to $10.8 million compared to $9.1 million in the fourth quarter of fiscal 2010. Gross margin increased to 57.1% as compared to 54.4% in the same period of 2010. The significant increase in gross margin during the quarter was mainly due to the increase in ASP across all of the Company's products, which was partly offset by the increase of raw material prices. China Botanic anticipates the cost of raw materials will rise in 2012 due to inflationary price increases.

Operating expenses for the fourth quarter of fiscal 2011 were $3.9 million, as compared to $3.5 million in the same period last year. Sales and distribution expenses rose 24.9% to $1.6 million from $1.3 million a year ago. The spending increase reflected the Company's efforts to expand its distribution network across China and increase market share and awareness of its products. General and administrative expenses decreased slightly to $1.3 million from $1.4 million in the year ago period. Research and development expenses were $1.0 million, up 27.3% from $0.8 million in the year ago period, reflecting the Company's continued commitment to invest into new product development and other research efforts.

Operating income in the fourth quarter was $6.9 million, up 22.3% from $5.6 million in the fourth quarter of 2010. Operating margin increased year-over-year to 36.4% from 33.6%.

The Company incurred income tax expenses of $1.5 million in the fourth quarter of fiscal 2011, compared to no taxes paid for the comparable period in 2010, due to the 15% tax rate imposed effective January 1, 2011. As a result of the increase in income taxes applicable for the fourth quarter ended October 31, 2011, net income declined 4.7% to $5.4 million, or $0.14 per diluted share, from $5.6 million, or $0.15 per diluted share for the same period a year ago.

Fiscal Year 2011 Results

For the twelve months ended October 31, 2011, total net revenue was $72.7 million, an increase of 31.8% from $55.2 million from fiscal year 2010. Gross profit in the twelve months ended October 31, 2011 rose 46.8% year over year to $43.2 million, representing a gross margin of 59.4% as compared to 53.3% in the fiscal year 2010. Operating income grew 65.9% year-over-year to $29.5 million. In the fiscal year 2011, net income was $25.9 million or $0.69 per diluted share, up from $17.9 million or $0.47 per diluted share in the twelve months ended October 31, 2010.

Financial Condition

As of October 31, 2011, China Botanic had cash and cash equivalents of approximately $15.3 million and total current assets of approximately $51.1 million. The Company had working capital of approximately $40.8 million on October 31, 2011, as compared to $47.1 million at the fiscal year ended October 31, 2010. The Company had no long-term debt on its balance sheet at the end of October 31, 2011. Shareholders' equity stood at $99.7 million, compared with $69.8 million as of October 31, 2010. Net cash flow from operating activities for the twelve months ended October 31, 2011 was $21.1 million compared to $23.8 million for the same period of 2010.

Investment Activity

• During 2011, the Company paid $14.1 million for 30 years of exclusive usage rights covering approximately 6,667 hectares of undergrowth resources, which is rich in wild Siberian Ginseng plant and approximately 67 hectares of Siberian Ginseng GAP cultivation base in Heilongjiang Province. A final payment of $1.6 million is due in January 2012 bringing the final investment to $15.7 million. With this acquisition of cultivation rights of rich Siberian Ginseng resources, China Botanic estimates it has access to over 75% of the Siberian Ginseng raw materials in China, providing the Company a competitive edge and strengthening its dominant market share in Siberian Ginseng products.
• In the fourth quarter of fiscal year 2011, the Company paid $9.1 million in cash to acquire patent rights to a preparation for Parkinson's disease; a patent for ingredients and preparation for XiangDousu; a patent for Mudouye Extract; a patent for Hongdoushan Extract and a patent for ingredients and preparation for Jizhi Pills. This payment was part of a total investment of $18.1 million for these rights. The remaining $9.0 million is due in one year of using these patents. The Company's R&D team will develop new products for treatment of Parkinson's disease, bronchitis, and drugs to help fight cancer.
• In addition the Company continued to invest in the development of its Ah City phase two plant. An additional $1.9 million was invested during the fiscal year 2011. The Company expects to invest approximately $16.9 million with approximately $9.4 million paid in fiscal year 2012 and $7.6 million paid in fiscal year 2013. The project is expected to be completed in 2013, at which time the new plant will begin operations. The new Ah City Phase II plant is expected to double the Company's annual production capacity facilitating growth in market share and product portfolio expansion.

Business Outlook

 "Looking into the fiscal year 2012, we believe the market demand for botanical and pharmaceutical products will continue to grow as a result of growing awareness of conditions like depression and melancholy and the government's mandate to enhance healthcare coverage by the public insurance system. In addition, consumers are increasingly making a conscious decision to live a healthy lifestyle and avoid western medicines which pose other side effects. Driven by such market dynamics and our aggressive sales and marketing efforts, we believe our all natural plant based products will achieve greater market acceptance in fiscal year 2012, in particular our Siberian Ginseng (Acanthopanax) Series. We also expect our recently launched product, Ginseng and Venison Extract to make meaningful revenue contribution in fiscal year 2012."

"We expect to be listed as one of China's essential medicine suppliers as the PRC government moves forward with its Health Reforms in 2012. We have also established a Medical Reform Sales Department as a dedicated resource focused on capturing this tremendous growth opportunity," added Mr. Li. "In the longer term, we expect Ah City phase two plant and new products which are currently in our R&D pipeline to provide sizeable contribution to our future revenue and net income growth."

For fiscal year 2012, the Company expects revenues of between $91.6 million and $93.1 million, representing an increase of 26% to 28% over fiscal year 2011 revenue of $72.7 million. Revenue growth is expected to be driven largely by sales volume increases from the existing product portfolio. The Company expects net income to be in the range of $32.7 million to $33.2 million, representing an increase of between 26% and 28% over fiscal year 2011 net income of $25.9 million.

FBI Search Offices of 'Reverse Merger' Player

Article WSJ

China Loves Chocolate And You Can Profit

Article Seeking Alpha

China Shandong Industries (CSNH) Worthy To Look?

To be honest I am sick to look to US-listed Chinese OTC stocks or Pink Sheets. Despite that I am looking already one year to China Shandong Industries (CSNH).

Why? The company delivers to international retailers such as Ikea and Zara Home and has Chinese bank loans.

This company is a Reverse Merger.

They are priced at bankruptcy level ($0.15), while EPS First nine months is $0.35 fully diluted.
Cash Position $0.07 per share. P/E below 1. Also Control and Procedures are good.

As of September 30, 2011, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2011.
 

See 10-Q

See 10-K

Overview
We are a designer and contract manufacturer of household furniture in the Peoples Republic of China (“PRC”). We produce a variety of indoor and outdoor residential furniture and wicker products that is sold and exported to more than 30 countries. Our products are sold through well known domestic and international retailers such as Trade Point A/S Direct Container (Denmark), Zara-Home, Habitat UK Ltd., ABM Group Inc. and US; Fuji Boeki Co. Ltd. The product depth and extensive style selections we offer we believe allows us to be a strong resource for global furniture, retail chains and retailers in the discounted price range.

Our subsidiary, Shandong, manufactures over 20,000 different products. We focus on providing high quality products at competitive prices. For the calendar year ended December 31, 2010, approximately 4.2% of our products were sold in the PRC and 95.8% of our products were sold to companies in countries and places such as Denmark, the United States, Germany, the United Kingdom, Spain, Italy, Sweden, Canada and Taiwan.

Because straw, wicker and handicraft products are relatively easy to produce and do not require a significant investment in technology or equipment, we do not produce such products in our manufacturing facilities. Instead, we employ local people to manufacture such products in their homes in Cao County, Shandong Province, PRC.

All of our four existing industrial parks are engaged in producing wood furniture. Our four industrial parks consist of 19 plants, which produce a full line of residential furniture products, including kitchen furniture, office furniture, living room furniture, outdoor furniture and general living furniture. In order to respond quickly to customer orders, we have designed our facilities and developed manufacturing practices that allow us to be highly flexible so that certain of our plants can be used to produce several types of furniture.

Our products are divided into 3 categories based upon their features and producing methods, which are (i) furniture products, (ii) straw-wicker products, and (iii) wooden crafts products.

Our furniture products are primary indoor furniture products made of poplar and paulownia, including chairs, barstools, tables, bookcases, cabinets, lamps and similar items.

Following are pictures of our sample furniture products:

 

Our straw and wicker products are weaved and interlaced by hand into various products with different sizes and shapes, such as wicker basket, straw drawers. Straw and wicker products are cheaper to produce than wooden crafts products and furniture products because the price of the raw material used in such products is less expensive and more common in PRC households.

The following are the pictures of certain of our straw and wicker products:

Wooden crafts products mainly refers to decorations and accessories, “knick-knacks” and ornamental objects made of poplar wood in a semi-manual and semi-mechanical way. Such products include photo frames, gift boxes, bottle boxes, jewelry boxes, and bird nests, which can be used for decoration or as functional products in houses, offices and public places. 

The following are pictures of certain of our wooden crafts products:

Because straw, wicker and handicraft products are relatively easy to produce, and do not require a significant investment in technology or equipment, we do not produce such products in our manufacturing facilities. Instead, we employ local people to manufacture such products in their homes in Cao County, Shandong Province, PRC.

All of our four existing industrial parks are engaged in producing wood furniture. Our four industrial parks consist of 19 plants, which produce a full line of residential furniture products, including kitchen furniture, office furniture, living room furniture, outdoor furniture and general living furniture. In order to respond quickly to customer orders, we have designed our facilities and developed manufacturing practices that allow us to be highly flexible so that certain of our plants can be used to produce several types of furniture.

WHAT DO YOU THINK? PLACE A BET OR LEAVE IT.

  

Cummins A Decent Growth Stock That Profits From China

Article Seeking Alpha

Another US-listed China Company Goes Dark

This time China TMK Battery Systems (DFEL) listed on the OTC filed a Form 15.

China TMK Battery Systems Inc. to Explore Strategic Options
Company to Suspend SEC Reporting
SHENZHEN, China , Jan. 3, 2012 /PRNewswire-Asia-FirstCall/ -- China TMK Battery Systems Inc. (OTC Bulletin Board: DFEL) ("TMK" or "the Company") (formerly, Deerfield Resources, Ltd.), a Chinese manufacturer and distributor of customized rechargeable battery solutions to global consumer product companies, today announced that on December 30, 2011 , it filed a Certification and Notice of Suspension of Duty to File Reports with the Securities and Exchange Commission (the "SEC") in order to reduce substantial legal and accounting expenses. The Company was eligible to deregister its common shares because it had fewer than 300 holders of record of its common shares at the beginning of its fiscal year.

The Board of Directors is in the process of evaluating strategic alternatives for the Company including a sale, merger, privatization, or other business combination, however, the Company has not set a timetable for completion of this evaluation process and there can be no assurances that this review will result in any action. The Company does not expect to make any further comments unless the Board of Directors has approved a specific course of action or otherwise deems disclosure appropriate.

The Company's Form 15 filing on December 30, 2011 immediately suspended the Company's obligation to file certain reports with the SEC, including Forms 10-K, 10-Q and 8-K, however, the Company's common stock will continue to be quoted on the OTCQB and eligible shareholders may continue to avail themselves of legend removal under Rule 144 until the deregistration becomes effective. The Company expects that the deregistration of its common stock will become effective on or before March 31, 2012 . Following deregistration, the Company's common shares will only be quoted on the OTC Pink Sheets and its shareholders may no longer avail themselves of Rule 144.

READ Going Private Or Going Dark Opportunities And Risks For US-listed China Stocks

Lotus Pharmaceuticals Announces Business Reorganization and Provides Updates on the Beijing Headquarters Building

Press Release

A once promising stock is getting a new start. The land rights of their Inner Mongolian property was the big hangover investors didn't like at all.

See GeoInvesting

The following hypothetical actions could be the case.

LTUS was convinced by a company called Genesis Technologies (GTEC) to become a publicly traded company via reverse merger. GTEC was paid for their consulting with shares in the newly formed LTUS.

Someone (GTEC) then consulted LTUS to inflate earnings in order boost the share price. The retained earnings needed a place on the asset side of the balance sheet to hide so the accounts receivables ballooned.

Well you can only inflate accounts receivable so long before it become fishy, so one year LTUS "collected" millions and millions in back receivables and immediately paid a similar amount for a piece of land in Inner Mongolia, which was worth far less then the reported price, effectively transferring the inflated retained earnings from accounts receivable to a physical asset.

Meanwhile, LTUS builds a huge building in Beijing from cash flow. However, cash flow is still inflated so in reality the money comes not from profits, but from a shadow lender. The money "borrowed" has to show up as a liability (unpaid taxes).

Meanwhile, the auditors are applying pressure to clean up the income statement and balance sheet. No longer will the old ways be tolerated.

Today with one bold stroke, LTUS has paid off their bookie, removed the inflated assets and liabilities from the balance sheet and, with the sale of Liang Fang, allow for the future justification for realistic results on upcoming income statements.

LTUS is left with actual assets and liabilities on the balance sheet and actual revenues and profits on the income statement. Only of course much lower than it used to be.

How To Benefit From China In 2012

Article Seeking Alpha

Investors Avoid Chinese IPOs In The US

The value of Chinese companies delisting from US exchanges in 2011 exceeded the amount Chinese companies raised via intial public offerings in the US, a strong sign of how high-profile fraud allegations and slowing growth have made many foreign investors bearish on Chinese companies.

Chinese companies with a combined equity value of $3.5bn were taken private in 2011 by management, strategic buyers and private equity groups, according to data compiled by Roth Capital Partners, a California-based advisory firm. A further $4.3bn of potential deals remain in progress. In 2010, almost no such deals were completed, according to Roth.

In contrast, Chinese companies raised only $2.2bn through IPOs, about half what they raised in 2010, according to Dealogic and Thomson Reuters. No Chinese companies made it to market in the fourth quarter. According to Dealogic, $41.9bn was raised in total on US exchanges last year, down from $44.5bn in 2010.

Share prices of US-listed Chinese companies tumbled last year amid concerns about the sustainability of China’s growth and allegations of accounting fraud at some Chinese companies listed overseas. Sino-Forest, for example, was suspended by the Canadian regulators after being accused by shortseller Muddy Waters of accounting fraud, which it denied.

The USX China Index, which tracks US-listed companies that derive most of their revenue from China, fell 27 per cent in 2011. For management teams and some private equity groups, the falls created opportunities to buy out companies in order to build them up with private funds and then relist them, potentially in Hong Kong or the mainland where Chinese groups typically command higher valuations than in the US, according to bankers who have worked on some of the transactions.

“The chairman or founders of these companies saw their listed vehicles falling 70 to 80 per cent in value [in the US] so they said, ‘Why am I listed?’”, said one banker who has worked on some take-private deals. “The cost of being listed versus the benefit of being there is hard to justify.”
One of the most high-profile deals was the $750m buy-out of Harbin Electric by the CEO, backed by Abax Global Capital. The company had been accused of fraud by a shortseller, which it denied. Its stock on Nasdaq fell below $6 before shareholders accepted the CEO’s offer of $24 a share.

These buy-outs are in addition to a handful of delistings by Chinese companies forced of US exchanges for violating regulations, such as failing to file financial reports.
However, the pace of dealmaking could slow as sharp fourth-quarter falls in Hong Kong and mainland exchanges reminded investors that being able eventually to relist in Asia at a higher valuation is not always a given, said Mark Tobin, co-director of research at Roth.

Despite that I think more private deals are under way and it's just a matter of time when the next one will occur. There are still many Chinese companies listed in the U.S. with compelling valuations. Management teams and Private Equity Funds are seriously looking how to go private!

Longwei Petroleum (LPH) Provides Corporate Update

Longwei Petroleum Provides Corporate Update
1/4/2012 9:15:00 AM

TAIYUAN CITY, China , Jan. 4, 2012 /PRNewswire-Asia-FirstCall/ -- Longwei Petroleum Investment Holding Ltd. (NYSE Amex: LPH) ("Longwei" or the "Company"), an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China ("PRC"), today provided a year-end 2011 corporate update.

"We are pleased with our strong operating results year-to-date," stated Mr. Cai Yongjun, Chairman and CEO of Longwei. "Our revenues for the first five months of our fiscal year ending June 30, 2012 are up 6.1% year-over-year to $204.8 million . We are also on track to close on our third facility as soon as possible. We are working with the seller and local officials to finalize the asset transfer."

To date Longwei has paid a RMB 550 million (approximately $86.3 million USD ) deposit toward the total purchase price of RMB 700 million (approximately $109.9 million USD ) for the purchase of the assets of Huajie Petroleum, a fuel storage depot in northern Shanxi Province with a 100,000-metric-ton storage capacity. "With the closing of our third facility, Longwei becomes the dominant private storage facility operator in the central region of the PRC," stated Mr. Cai. "We expect continued strong demand and have become more selective in our customer base to maintain our profit margins."

" China 's economy is still expected to generate significantly more growth in petroleum consumption [in 2012] than any other major market in the world," according to IHS CERA (Cambridge Energy Research Associates), a leading global energy research and advisory firm. "In particular, we expect demand for diesel and gasoline - the two key oil products in China - to remain relatively strong and underpin the country's overall oil demand growth," IHS CERA forecasts. "Power shortages are also expected to worsen and could lead to significant incremental diesel demand."

"We believe the Company is well positioned to capitalize on the continued rising demand for petroleum products in the PRC, and we believe the addition of the new facility assets will further accelerate our revenue and earnings growth in fiscal 2012," stated Michael Toups, CFO of Longwei.�"We are also working to improve our level of transparency with our shareholders to keep them informed on our corporate developments during the year."

Happy Investment Year To You

Hopefully this year will be better than last year for investors. Especially investors in US-listed China stocks have suffered tremendous losses. My China portfolio was more than 70% down in 2011.

The year 2012 started well with a rally in American Lorain (ALN).

If someone would ask me what are your 10 amigos in the US China space for 2012, I would say:

American Lorain (ALN)

China Botanic Pharmaceutical (CBP)

China Green Agriculture (CGA)

China Marine Food Group (CMFO)

China Shengda Packaging Group (CGPI)

China XD Plastics (CXDC)

Guanwei Recycling (GPRC)

Longwei Petroleum Investment Holding (LPH)

Winner Medical Group (WWIN)

Yongye International (YONG)

I really think there is value left, despite the fraud charges many US-listed China companies had to face in 2011! If we will see a broad recovery this year only God knows!