Hogs In China- A Special Report*

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stonedinvestor

Ostrich Investments-today looks at Agfeed. @ $12.40

There is a hog shortage in China folks and this should not be taken lightly... sure the free world is falling apart around us but today also one of Agfeed's farms got a direct export license for the Hong Kong Market! Probably in all the Bear Sterns news you may have missed this momentous event.

AgFeed Industries Receives Hog Export License for the Hong Kong Market and AgFeed Experiences Higher Than Estimated Profit Margins From Hog Sales

Hog Prices in China Have Reached Historical Highs Due to Hog Shortage While the Cost of Hog Feed Remains Stable

SHANGHAI, CHINA--(Marketwire - March 17, 2008) - AgFeed Industries, Inc. (NASDAQ: FEED), a market leader in China's premix animal nutrition and hog raising industry, today announces that one of AgFeed's hog farms, the Wannian Xiandai hog farm, has been granted a direct export license by the Chinese Ministry of Commerce for hog export to the Hong Kong market.

Hong Kong is one of China's most prominent international cities. The export license allows AgFeed to directly supply hogs to the Hong Kong market. Hong Kong typically commands the highest quarantine standards during the hog production process as well as pays premium prices for hogs to those producers that have met stringent quality requirements.

Due to continued hog shortage in China, hog prices have recently reached historical highs. AgFeed is currently selling its hogs at approximately $250 per hog, which is higher than the Company's previously estimated $221 per hog.

AgFeed has also observed that the cost of corn, which is a major hog feed component, has remained stable despite rising hog prices. China's hog raising industry is an income tax exempt business.

Songyang Li, PhD., Chairman of AgFeed commented: "AgFeed's hog raising business benefits from a favorable market environment and expanded profit margins due to China's severe hog shortage. We anticipate China's hog shortage to continue throughout 2008. We are on track to complete our planned hog farm acquisitions by mid April towards our target of producing 400,000 hogs for sale in 2008."

>>>>> Ok folks 400,000 x $250 per that = 100 MILLION which might be a billion, I get confused up at these levels but no matter how you slice it that's a lot of pork! Also it may be a clever ratio to use to raise estimates! With FEED we have a limited competition situation/ environment, an avid need, stable high paying customers, stable to I would argue about to decline input costs (corn feed) AND tax exemption..... Hummm.

I know, I know I'm the idiot who just took a bath in JRJC, my Street.com of China so why oh why would this Chinese pig play save me? And maybe it won't; truthfully most of these Chinese plays aren't working any more. Still in a Brave Head In The Sand moment we here at Ostrich Investments are looking at FEED today.

Earnings are good, AgFeed reported 2007 net income rose to $6.7 million from $1.2 million in the year-ago period. Earnings per share more than tripled to 25 cents.
Revenue for the fiscal year ended Dec. 31 rose to $36.2 million from $8.59 million in 2006.
For 2008, AgFeed Industries affirmed its outlook for earnings of 96 cents to $1.10 a share on revenue of about $135 million.

The chart is super and when it kissed $12.00 this morning I just missed. watching it today for movement ~ stoney
 
Buying @ $12.52.

Closing my eyes and going to see Horton hears A Who if this blows up on me like SEED please do not reply to this thread it will only spiral me into self abuse and worse. If by chance this wants to be like COIN and reward me please let me know... because at Ostrich investments our motto is.... once we make the trade, we hide our heads in the sand until it starts going up! ~ stoney
 
Sometimes I hate those I advise. Now that the stock market has stopped free falling and they have cashed in their commodity chips now they come lapping around my feet... what was that Hog play in China again Stoney?, we are ready to invest now... now we are not scared.... Where the H were you when the walls were crumbling down? Bastards.... now you come to me.... now.... well you ET'ers know of this name first- I will be returning my phone calls only after I sign my will today (seriously) so you all have some morning time to get in. After that look for a big move out of FEED. ~si
 
Quote from stonedinvestor:

.... once we make the trade, we hide our heads in the sand until it starts going up! ~ stoney
More...

did you do the same with EJ ? if yes, do not pull your head up :p cause I am not....

But I still like this FEED thing, but at 8.5 - 9
 
You should those China friendly ticker symbols of COIN, SEED, FEED, etc...

There moves have been made for multibaggers already and are being flushed down to where they came from. Strictly Momo stocks that have lost their luster.
 
Nice to be back and have the same name working bought FEED again this morning and again it rewards... three in a row Pump but don't let that stop you...

FEED moves quickly on heavy volume thru 12.90 resistance & is now 13.35 +66c.....

Hopefully we can now take this to the $16 level by next week so I can regain my Chinese credibility! ~ stoney
 
It has come to my attention that a newsletter for bi sexuals has now picked up on this thread and is now recommending our stock to the free-thinking masses.

"As the standard of living in China rises and the middle class swells, one of the things that comes along is an increase in meat consumption," says small-cap growth stock specialist Tom Bishop, editor of the BI Research newsletter.

As a play on this long-term trend, the advisor has chosen stonedinvesting's pick AgFeed Industries, Inc. (Nasdaq:FEED) as the latest featured stock in his publication. AgFeed, he says, is a market leader in China's fast-growing premix animal feed and hog-raising industries.

The latter is particularly important, he says, as 65% of meat consumed in China is pork.

"Pork sales are four times greater than either beef or chicken, with annual per capita consumption at around 53 kg and rising," he says.

China produces about 600 million hogs annually, he says, accounting for 50% of worldwide pork production. This compares to about 100 million in the United States.

Pork is such an important part of the diet in China, that Bishop says "China actually has a strategic pork reserve as well as a strategic grain reserve." Further, he says that as an incentive to produce pork, China does not tax profits from this sector. REPEAT NO TAX!!!!

This small-cap company (with a market cap of $381 million) operates in the "premix" market. This market, he says, is an approximately $1.6 billion segment of China's total $40 billion dollar animal feed market.

Within this market the higher-tech, higher-margined premixes are growing at 14% to 15% per annum, Bishop says. According to the advisor, these markets have historically accounted for 85% of AgFeed's business and are nutritional supplements high in essential vitamins, amino acids and minerals that are blended into the bulk feed (corn, wheat and sorghum).

"These premixes reduce the time for a hog to reach 220 pounds from one to two years to a little over five months," he says.- (this happens to be a key point I missed in my research fatter faster!)

Meanwhile, Bishop says the company has made a strategic decision to enter the hog-raising arena as well. In November, the company purchased a 90% interest in the largest breeder farm in Jiangxi Province. And in December, he says, AgFeed closed the acquisitions of five hog farms, purchasing 50% to 100% interests at 2.5- to 3-times earnings.

Overall, he forecasts that the company currently has the capability to raise 120,000 hogs per year and targets total production of 400,000 hogs for sale in 2008 through additional targeted acquisitions that AgFeed anticipates completing by mid-April. At that point, he says, AgFeed will become the second-largest hog producer in China!!!!!

He adds that the company recently announced that one of its farms was granted a hog export license by the Chinese Ministry of Commerce that will enable it to ship hogs to the Hong Kong market.

In connection with these acquisition and working capital requirements for raising all those hogs, says Bishop, the company also announced that it has completed a $41 million financing that would suffice for the balance of 2008.

And because pork is a cash business in China, Bishop says, there are no accounts receivables associated with booking revenue. Also, he adds, AgFeed has put in place state-of-the-art vaccination and quarantine programs to prevent the outbreak of diseases.

Bishop reports that AgFeed has projected hog-production revenues will total $90 to $100 million in 2008 with associated net income of $21.5 million to $24 million (a 24% profit margin).

"On the traditional feed side of the business, 85% of which is premix, the company expects 25% growth to about $45 million yielding net income of about $9 million (a 20% profit margin)," he says.

The company released Q4 earnings, which he says were on target: $36 million and $0.25 a share. In addition, forecasts for 2008 were reiterated.

This market demands the highest quarantine standards and pays premium prices to those producers that have met stringent quality requirements, which doesn't hurt AgFeed either. The company says that hogs are now commanding $250 in the Chinese market place versus the $221 the company used in its 2008 guidance.(Hummmm anybody noticing all stony's bullet points here?)

Meanwhile as I am, Bishop is impressed with management, emphasizing that they are well-educated, and know both the business and its nutritional aspects. He adds that the company's board is "well-heeled" and the advisory committee includes the former CEO's of Purina and E. F. Hutton.

The stock has recently shown strength, says Bishop, on news that it had engaged a U.S. hog industry expert to explore strategic options for partnering with selected global agricultural companies to provide them with an entry platform into the Chinese pork market......

"Presumably one alternative that would have to be on the table would be to be acquired by a U.S. company," he says. He emphasizes that this is personal speculation, but says "it would certainly be one way for a U.S. pork company looking for entry into the Chinese market to go about it."

For disclosure, the advisor notes that he owns 2,000 shares, but that he suspended buying additional shares when he decided to recommend the stock. He also emphasizes that this is "a riskier company" as its hog operations are a new segment for its business. Adding to its risk, he says, are commodity-price issues as well as the company having its operations in China.

Despite these risks, he says, "With growth exceeding 100% and a P/E of 12, purchase is recommended to $13."

~stoney
 
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