Those who had the opportunity to see any part of the 2008 Beijing Olympics, observed the sophistication of the world's most populous country. A country with a long and great culture and currently with the fastest growing economy in the world.
Along with this rapid growth has come numerous environmental issues, as evidenced for example, by the terrible smog problem in Beijing. Fortunately, as living standards have improved, China's leaders are now beginning to get serious about environmental sustainability. One of environmental issue makes China Green Agriculture (CGA, $15.00) a compelling story, in my opinion, is the overuse of chemical fertilizers that is has prolonged long term negative implications on soil quality and sustainability. As a result, the obvious concerns of China's ability to feed its population puts CGA in an enviable position.
CGA develops, manufactures and distributes humic acid liquid compound fertilizers in 21 provinces, 4 autonomous regions and 3 municipal cities in China. Humic acid is an essential natural and organic material needed for well balanced fertile soil. CGA gets all its humic acid from from weathered coal, a cheap and abundant material in China. The primary value of CGA's franchise lies primarily in its significant research and development program. CGA's research program is unique in that is self financed. CGA tests and formulates its compounds in intelligent greenhouses and actually sells the produce it grows during the process to finance its R&D costs. CGA has a healthy balance sheet with no long term debt, very healthy margins and sells at a forward P/E of only 10.
CGA's recent shelf offering, that raised $24.5 million to finance its expansion plans, have put pressure on its share price making for a very attractive entry point, in my opinion. At these levels (around $15), the market is overlooking the very favorable news that China Green Agriculture released on November 18, 2009 that will be a catalyst for earnings improvement on top of its growth potential. The Chinese government gave CGA a 5 year exemption from a 13% value added tax due to the organic nature of its product. This tax relief goes right to the bottom line in the form of a 3-5% margin improvement, according to Mr. Tao Li, Chairman and CEO. The benefits of this exemption seem to have been overtaken by the usual concerns of dilution following to the company's recent private placement. This represents an opportunity, IMHO.
China Green Agriculture has extensive resources on its website for those interested in doing their own due diligence. Here are a couple of links I found useful:
CGA Fact Sheet
CGA Investor Presentation
I've been purchasing CGA this morning at these levels but I urge all those considering an investment to do their own due diligence.
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Titan, right on target with CGA. A very good entrance price at this time. I subscribe to Investors Business Daily and I noticed CGA made their IBD 100 (number 35 in todays issue dated Dec. 21). Another Chinese stock to watch (I own it) is NEP (China North East Petroleum).
bullsibob
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