Tag - Aob

Small-cap stocks hovered near steady levels into mid-session trading, up from the morning lows amid optimism over the fiscal stimulus plans that were put into greater detail today by President-elect Obama. The stimulus cheer helped offset gloom over sloppy retail sales from discount giant Wal-Mart, which put an early pall on the morning activity. At 12:23 p.m. ET, the Russell 2000 (NYSE:IWM) was up 0.27, or 0.05% at 497.36, outperforming the Dow and S&P 500.

Wal-Mart’s same-store sales were up in December, but short of expectations, which rekindled worries about consumer spending in the recession. Wal-Mart Stores Inc. (NYSE:WMT) was one of the few bright spots during 2008, but if discounters start to struggle, does that mean rising unemployment is forcing consumers to close their wallets altogether right now?

Speaking of unemployment, today’s weekly claims data served up a bullish surprise for the second consecutive week, with the headline figure coming in at 467,000, some 75,000 below the forecast. However, continuing claims were at 26-year highs, which took some of the bullish edge off the number. The market is still bracing for a potential ...

With 1.3 billion citizens benefiting from a growing economy, it's hardly a stretch to understand investor enthusiasm for stocks that combine "China" and "food." Add to the mix the buzzwords "natural," "organic" and "environmentally-friendly," and we have a pair of intriguing plays on the rise in demand by Chinese consumers for higher quality — and healthier — foods.

The first, China Agritech (Nasdaq:CAGC), is a distributor of fertilizer, and has products that are designed to be environmentally friendly. I would emphasize that with a market capitalization of just $57 million, this issue should only be considered by those comfortable with buying micro-cap stocks.

The second is American Oriental Bioengineering (Nasdaq:AOB), a player in the market for natural foods and herb-based products. The company is a relatively large play ($809 million market cap) among small caps in general.

Jim Trippon, editor of The China Stock Digest, says that "China Agritech is a relatively new and rapidly expanding player in the Chinese agricultural scene."

The company is a leading developer, manufacturer and distributor of environmentally friendly liquid organic fertilizers. "China Agritech's unique, proprietary fertilizers are the result of over 12 years of research and development," Trippon says.

The firm's ongoing growth strategy, he says, includes geographic expansion throughout China as well as exports to other Asian countries.

Listed in the United States in February 2005 through a reverse merger, Trippon believes that China Agritech is uniquely positioned to become one of the "leading" agricultural products companies in the People's Republic of China.

"Due to the continuing decrease in the amount of available farmland in the China, along with the projected increase in population, and the growing demand for organic foods around the world, there is a considerable increase in the use of . . .

Not so long ago, the mention of biotech immediately conjured up thoughts of multibillion-dollar powerhouses like Amgen Inc. (Nasdaq: AMGN), Genentech Inc. (NYSE: DNA) and Biogen Idec Inc. (NYSE: BIIB). But like any sector, change in biotech is inevitable, particularly as makers of cheaper generic and herb-based drugs seek to cut into Big Pharma's market share.
 
Steeped in the 5000-year-old practice of Traditional Chinese Medicine (TCM), Chinese drugmakers and biotech companies combine age-old herbal remedies with high-tech Western medical science—drawing on millenniums of trial and error and the latest advances in technology—to create new drugs for domestic and international markets.
 
Up-and-comer American Oriental Bioengineering, Inc. (NYSE: AOB), a China- and New York-based maker of pharmaceutical and nutraceutical products, is suddenly squarely on the radar of investors. The company develops, manufactures and markets pills, vitamin drinks, patches, gels and powders to treat everything from arthritis to impotence. The pharmaceutical segment creates plant-based prescription and over-the-counter drugs (for pharmacies, clinics and hospitals), while the smaller nutraceutical segment (accounting for 20 percent of company revenues) focuses on developing unregulated natural medications often found in health-food stores, supermarkets and alternative medicine clinics.
 
Analysts, all of whom kicked off coverage with bullish outlooks, have maintained their ratings: on July 9, Piper Jaffray initiated coverage with an "outperform"; analyst Elliot Wilbur with CIBC World Markets issued a July 13 initial "sector outperform" rating; and on Aug. 9, analyst Julie Chen of Brean Murray reiterated her "buy" rating and raised her target price from $14 to $16, while analysts at Lazard Capital maintained their "buy" rating and also raised their estimate. 
 
Second-quarter earnings, reported on Aug. 9, showed the company's profit rose 67% to $9.67 million, or $0.15 a share, from $5.83 million, or $0.09 a share, last year. Revenue increased 48.7% to $33.9 million from $22.8 million in the same period in 2006 (Revenues from pharma products were $26 million, while nutraceuticals brought in $8 million.) Company executives anticipate third-quarter revenues of approximately $42 million, a 55% increase compared with third quarter 2006 revenues of $27.1 million. Analysts, who expect continued growth, have raised EPS estimates for both 2007 and 2008.
 
American Oriental has been aggressively snapping up rivals (four in the past five years, with a fifth on the horizon), allowing it to quickly grow its business. In June, American Oriental bought Changchun Xinan Pharmaceutical Group for $30 million and will soon close a $40 million deal to acquire competitor Guangxi Boke Pharmaceutical Co. Ltd., which will allow the company to double its current offering of about 20 products.
 
"The China pharmaceutical market is very large with approximately $28 billion in sales in 2005 and, importantly, over 20 percent of this market is in Traditional Chinese Medicine products" Wilfred Chow, senior vice president of finance, said at the UBS Global Life Sciences Conference in New York on Thursday. "TCM has been a very important part of the health-care system in China for thousands of years and today many of these proven remedies have been modernized with formulations and manufacturing processes similar to those used in the Western pharmaceuticals."
 
"Our market is not only large but also growing very rapidly. With 1.3 billion people aging and improving their standard of living, health care is our top priority. By 2010, we forecast that China is going to be the fifth largest pharmaceutical market in the world," Chow said.

Chow explained that the PRC government is committed to improving the health-care system in China and named the modernization of TCM as one of its key objectives.

“TCM will remain a mainstream in China health care given the population's preference for green products and the relative affordability of these products compared to Western medicines,” he said. “We think the market will continue to grow rapidly."
 
Chow added: "Because of the platform we have built, we believe that we are well positioned to be a leader in the large and growing market of modernized Traditional Chinese Medicine and nutraceutical products in China."
 
China's General Administration for Quality Supervision, Inspection and Quarantine is taking active steps to clean up its recent problems with food and drug safety issues, which may leave investors more confident in Chinese-made products. A recent PricewaterhouseCoopers report pointed toward Asia as the emerging center for biopharma.

According to the report, titled "Gearing up for a Global Gravity Shift: Growth, Risk and Learning in the Asia Pharmaceutical Market," multinational corporations will be forced to move their operations to the region (from the United States and Europe) to find less expensive places to manufacture drugs, while Asia-Pacific biopharmaceutical companies will increasingly consolidate to penetrate international markets. 
 

The stock closed at $11.43 on Thursday. Shares have traded between $5.67 and $14.19 in the past 52 weeks. Analysts' consensus median target price is $14.50. CEO Shujun Liu holds more than 40% of the company's stock.