March 13, 2008
Knobias Clip Report (03-12-2008)
By admin
Submitted By Knobias ClipReport
FEED: Earnings and Guidance Growth Feeds Investors a 20% Gain
The rally continued on many names in the market on Wednesday following Tuesday’s enormous rally on the Fed’s decision to swap government securities for mortgage backed securities. The overall sentiment seemed positive even with healthcare benefit providers, Humana and Wellpoint, cutting guidance in recent days.
One hot area in recent weeks has been Chinese agriculture and one of the names in the sector reported some fairly positive news to investors on Wednesday. AgFeed Industries, Inc. (FEED) shares saw increased action on heavy volume following their earnings report for the year.
The Company reported revenues that grew 321% to approximately $36.16 million from $8.59 million in 2006. Diluted earnings per shares grew to 25c a share which was an increase of 257%.
The Company also released 2008 guidance which estimated revenue to be about $135 million which would represent an approximate increase of over 250% from the previous year. Earnings per share were expected to be between $0.96 and $1.10.
FEED is engaged in China’s fast growing pre-mix animal feed and hog raising industries. The pre-mix market in which the Company operates is an approximately $1.6 billion segment of China’s $40 billion per year animal feed market, according to the China Feed Industry Association. There are approximately 600 million hogs raised in China each year, compared to approximately 100 million in the U.S. Approximately 75% of China’s total hog supply is from backyard individual hog farmers, while approximately 65% of China’s total meat consumption is pork.
Songyan Li, Chairman of AgFeed, commented in the earnings release, “In early 2007, AgFeed projected record sales and earnings for fiscal year 2007. We have delivered such results. AgFeed is now the largest premix animal feed company in China in terms of sales in a highly fragmented industry. We anticipate our feed business will continue to grow at a significant rate in 2008. We also anticipate doubling our independently owned exclusive AgFeed product chain stores to 1,000 stores in 2008.”
Dr. Li continued, “Our feed segment and hog production are vertically integrated to produce the maximum efficiency between our two business lines. AgFeed’s in-depth knowledge about the feed and hog raising industries, sufficient funding, favorable market environment and high quarantine standards at our hog farms will position AgFeed as a well managed, highly profitable market leader in China’s vast feed and hog raising industries. We look forward to another year of success in 2008.”
With the Company experiencing huge growth in the hog industry, Wednesday’s 20% gain may be just a glimpse of things to come. With that in mind, investors would be wise to watch.
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