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Tuesday, June 9, 2009

SKBO.OB vs. ADY - Compare These Two China Growth Stocks

All the usual disclaimers - This Blog is not investment advice but documents my stock ideas/positions. Some of my ideas do not work. I never think it is a good idea to chase stocks. Low float stocks in particular can be dangerous and volatile. See disclaimer at bottom of blog home page.

ADY is a stock that has been on a tear recently. They reported earnings after the close on May 14, 2009 when the stock closed in the $18's. They had a blowout quarter, helped by the recent melamine crisis in China Read Press Release. The stock took off and has not looked back, closing at $42.10 today, June 10, 2009.

SKBO.OB is my latest position/idea Read Blog Post. I wrote how I am in this stock because I think this stock has potential to be the next EFUT (EFUT went from $11 to $49 in 2006). SKBO.OB closed at $16 today, June 10, 2009.

Although they are in completely different industries, they are both Chinese growth stocks and I decided to do a comparison in certain categories.

1) Float and Outstanding Shares -

ADY - 17.2m shares outstanding and 7.5m Float per Bloomberg Bloomberg - ADY

SKBO.OB - 1.9m current shares Outstanding per Bloomberg and there is an S-1 filed to sell 1m shares whcih would make approximately 2.9m shares outstanding. Page 39 of the S-1 states that between managemnt and two funds they own approximately 1.5m shares. By my calculations, after the 1m share offering the float would be approximately 1.5m and must be like 400-500k right now pre-offering.
Bloomberg - SKBO.OB
S-1 Filing

2) EPS -
ADY - Current estimates are for $3.34 this year and $4.49 next year per yahoo finance See Estimates

SKBO.OB - Per the S-1 filing, they reported $3.07 EPS in 2008. They are now increasing outstanding shares by 1m per the S-1 filing. In 2008 Skystar had $5.6m of net income that included $1.1m of non-recurring expenses, or $6.7m adjusted net income. See SKBO.OB Presentation If I divide that by the new post-IPO share count of approximately 2.9m, I get EPS of $2.31. Now, in the first quarter of 2009, net income was up 72% YOY. If the Company hypothetically can even grow net income by 30% for all of 2009 over 2008, that $2.31 would go to $3.00 EPS with the new shares offered. Q1 2009 Press Release

For next year, the S-1 filing talks about the opening of a new facility at the end of 2009 and the potential revenue opportunity that would provide. By my calculations, with the addition of these two facilities the Company will have the potential to add up to $14m additional revenue at 60-70% gross margin rate from vaccines and approximately $3m in feed additives (facility increases capacity by 49% and they did $5.9m in this category in 2008 at a 65% blended gross profit margin - see Presentation). If they can produce and sell this extra capacity I calculate that as an additional $10m in gross profit. In Q1 2009 the Net Income margin was around 28%. So this extra capacity (if produced and sold successfully and at these same margins) could add another $1 EPS in 2010 by my calculations.

So, if SKBO.OB can grow Net Income by at least 30% this year and open the new facilities and sell the product at the disclosed and historical margins (hypothetically as neither guaranteed), then by my calculations, they also could be in the $3 EPS range this year and the $4 EPS range next year, similar to ADY's estimates on yahoo finance.

3 - Analyst Price Targets

ADY - Targets are out there from a low of $30 to a high of $50 per yahoo finance See Targets For ADY

SKBO.OB - None that I could find

Another reason I am long SKBO.OB

No comments:

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Welcome to super-trades.com, blog home of Superman. Purpose of this blog is for me to discuss my trades and stock ideas (As well as opinions and rants on stock market related issues). I will mention the date and price I enter. As far as exits, I always try to take half off when I have some profit and if I believe in the stock, let the rest run further. I always also use mental stop limits, at which time I would exit and minimize any losses. I do not like to give price targets unless I can support them by P/E in some way or by comparison to another stock. I just post stock trades and ideas that I believe will go higher (or lower for shorts) and the reason I believe that. Individuals should have their own strategies for managing profits and losses. My stock picks tend to NOT be daytrades at all and many take time to move. I am not an investment advisor and this blog should not be considered or followed as investment advice.