12/20/2010
Current price for CGA 8.40
Back in May 2010 I said:
Still with it's great name, for American investors, I can see why it's popped up again as an investment opportunity. Since then they've announced that they'd improve their auditing practices and since then, bum-bu-bu-BUM, are under scrutiny following allegations of accounting improprieties ("The investigation concerns allegations that certain statements issued by the Company between November 12, 2009 and September 1, 2010, concerning China Green financial performance were materially false and/or misleading. "). Allegedly they'll be having Ernst & Young help improve the process. However the suggestion comes with the tip that these problems will be easily dealt with and the stock dip they've caused created a buying opportunity.
To review what they do here's my clip from Yongye International (YONG):
So what good will fertilizers do them? Well even though I don't like the food play, and it's certainly there, they could turn to industrial production of fuels and organics not for human consumption. I don't think they have the technology for that, but it's potentially an option.
I'm not clear what part of their processes is "green" but the Chinese government has excluded them from the Value Added Tax (VAT) as part of a government subsidy for "green" industries.
This creator of 55,000 metric tons just bought another fertilizer producer which produces 300,00 metric tons annually with an established distribution system. I actually like this move, as it gives them access to the distribution chain of rural farmers and allows them to provide them with a low and high end product, a Toyota and a Lexus if you will. Perhaps it's more like a GM & a Lexus, but you get the idea. However with it comes the news that they'll be switching to a commodity driven (low market potential, high competition) product. I wouldn't touch this stock unless I could get it around $3 a share or less, but it has the potential for someone to really get burned. If you want to touch the pan in a dark and hope you use it to burn someone else and not yourself, be my guest.
Price/Earnings (TTM) . . . 8.71x
Price/Sales (TTM) . . . . . 2.71x
Price/Book (MRQ) . . . . . 1.45x
Price/Cash Flow (TTM) . . 8.03x
Saxon . . . . . . . . . 2.9
Benjamim. . . . . . . 2.8
Marcel . . . . . . . . . 3/5: Mildly Improving, Not worth buying. Hold current shorts, no new shorts.
Insiders . . . . . . . . notable for a few sales and no purchases.
Positives:
Low debt
Strong earnings growth
Excellent return on equity
Earnings Per Share actual/consensus (percent growth)
2009: 0.78
2010: 0.91 (+17%)
2011: 1.32 (+45%)
2012: 1.74 (+32%)
CGA is on the stove and the heat is on, though I just wonder if I should short it. If it was ~$15 as of this writing, I would be sorely tempted to pull the trigger. Right now, it's not worth any more attention. If you like the China ag play, Yonge is probably a safer option. This is not a "high risk, high reward" situation this is a "High risk of being fucked" situation.
Current price for CGA 8.40
Back in May 2010 I said:
I don't like CGA $11.25 (China Green Agriculture): China's people are more worried about having food then being green, and are very price sensitive. If their products are cheap this isn't that bad, but I expect they're not. This isn't a terrible move, except it's china and after the false earning reports from FUQI I'm very hesitant to suggest holding anything that isn't part of a fund. It's name is clearly a gimmick, and it will get their stock price up but I'm still not sure who is (and who's supposed to be) buying their product. China's rich haven't moved back to the ag land like ours have, they're moving to the mega cities and the poor can't afford these designer fertilizers and the agricultural industrial complex doesn't give a fuck about this product. So I don't see anyone buying this other then American "investors" trying to get in on the "green movement" unfortunately this is the wrong country for it.Since that evaluation, the stock has fallen 25%.
Still with it's great name, for American investors, I can see why it's popped up again as an investment opportunity. Since then they've announced that they'd improve their auditing practices and since then, bum-bu-bu-BUM, are under scrutiny following allegations of accounting improprieties ("The investigation concerns allegations that certain statements issued by the Company between November 12, 2009 and September 1, 2010, concerning China Green financial performance were materially false and/or misleading. "). Allegedly they'll be having Ernst & Young help improve the process. However the suggestion comes with the tip that these problems will be easily dealt with and the stock dip they've caused created a buying opportunity.
To review what they do here's my clip from Yongye International (YONG):
While Yong is specialized in fulvic acid-based fertilizers it competes in the same space as Dupont, Dow, and other major chemical companies. It's a one trick pony that stays in business because it does it's trick very efficiently. What is that trick? If you take an organic (decomposed or decomposing) substance such as peat, coal, etc you can extract a strongly basic continuous liquid full of solid particles (like blood or paint) called a Sol. If you add hydrochloric acid to this Humic Acids precipitate out (fall out of solution as a sort of sediment) leaving Fulvic acid, which is soluble independent of pH. That can then be used as a spray fertilizer or dehydrated and sold as a water soluble fertilizer. It can also be mixed with animal feed.
That's what YONG sells, a chemical it extracts from organic compounds. There are many uses for organic compounds which can serve as a base for this extraction, items such as coal and oil obviously are used as energy sources. This makes the price of the product heavily dependent on the market fluctuations of items of value to the market and an increase in those prices or the prices of energy will affect production and sales.
. . .
I'm not sure that I buy the idea that the Chinese will need a lot more food going forward, but they will need more crops. That is because crops can be used for both food & fuel and China currently imports much of it's food. While it's population isn't growing out of control anymore China would rather meet domestic demand with a domestic product. A very sound financial plan, but limited. The Chinese don't trust food stuffs from China, imported food is almost unilaterally regarded as safer and people with money tend to buy that. But much like the American poor, when funds are limited you buy and eat whatever is available. So the reputation of Chinese food will have to improve if they intend to process it and achieve wide distribution. This could be accomplished by increased regulation and improved labeling, and will likely be necessary for China to begin exporting food stuffs (where I believe the real money for them will be). They can reduce their external dependence on food stuffs, but I don't see food production being a real money maker rather simply a national security issue.
So what good will fertilizers do them? Well even though I don't like the food play, and it's certainly there, they could turn to industrial production of fuels and organics not for human consumption. I don't think they have the technology for that, but it's potentially an option.
I'm not clear what part of their processes is "green" but the Chinese government has excluded them from the Value Added Tax (VAT) as part of a government subsidy for "green" industries.
This creator of 55,000 metric tons just bought another fertilizer producer which produces 300,00 metric tons annually with an established distribution system. I actually like this move, as it gives them access to the distribution chain of rural farmers and allows them to provide them with a low and high end product, a Toyota and a Lexus if you will. Perhaps it's more like a GM & a Lexus, but you get the idea. However with it comes the news that they'll be switching to a commodity driven (low market potential, high competition) product. I wouldn't touch this stock unless I could get it around $3 a share or less, but it has the potential for someone to really get burned. If you want to touch the pan in a dark and hope you use it to burn someone else and not yourself, be my guest.
Price/Earnings (TTM) . . . 8.71x
Price/Sales (TTM) . . . . . 2.71x
Price/Book (MRQ) . . . . . 1.45x
Price/Cash Flow (TTM) . . 8.03x
Saxon . . . . . . . . . 2.9
Benjamim. . . . . . . 2.8
Marcel . . . . . . . . . 3/5: Mildly Improving, Not worth buying. Hold current shorts, no new shorts.
Insiders . . . . . . . . notable for a few sales and no purchases.
Positives:
Low debt
Strong earnings growth
Excellent return on equity
Earnings Per Share actual/consensus (percent growth)
2009: 0.78
2010: 0.91 (+17%)
2011: 1.32 (+45%)
2012: 1.74 (+32%)
CGA is on the stove and the heat is on, though I just wonder if I should short it. If it was ~$15 as of this writing, I would be sorely tempted to pull the trigger. Right now, it's not worth any more attention. If you like the China ag play, Yonge is probably a safer option. This is not a "high risk, high reward" situation this is a "High risk of being fucked" situation.
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