Yongye Conference Call
Just got off of Yongye's conference call, which reported full year 2011 results and issued 2012 guidance. Here are some of the high-level key take-aways:
- Rev estimate of $500MM in '12 is up 30% from the $390MM in '11
- Adjusted NI of $115MM in '12 is up 50% from the $90MM in '11 (adjusted for non-controlling interests - i.e. exec comp and warrant fair value)
- 2 new products are planned to launch in '12. One for seed growth and one for root uptake.
- A/R balance remains, and YONG has issued an allowance for $15MM of bad debt in '12.
Overall, the sales growth continues, and the new products should help support that (expect ~ 5% of revs to be from the two new products). Yongye sandbags every conference call, and I fully expect that they will beat their own guidance again in 2012. There was no mention of the results/expectations of the animal nutrient Shengmingsu product, which was Yong's last product launch. I would like to know to what extent the new product has contributed to the top/bottom line thus far (they did not get to my question about this on the CC).
YONG admits that it has been aggressively growing, and is shifting its priority in '12 from top-line Rev growth to 'distributor management'. Basically, they are trying to manage cash flows and prevent any write-offs for the coming year. I'm a bit confused by this shift in strategy though. YONG has continuously claimed that their distributors are reliable and that they never have to write off any bad debt. I wonder if that's not entirely the case any more -- or if they truly are just being a bit more conservative to ensure that they can manage the phenomenal growth of the company thus far.
They also said that they are in-line with the expectations from MS, and that they even plan to do a road show in the US to stir up institutional investment. If they get some big hits, that could prove to be huge for current investors (i.e. the initial announcement from MS).
Big picture, we've got a business here that has been historically growing at 100%/yr, continues to expand its proven distribution network and launch innovative products that have won awards from the Chinese government. And they are selling for a forward P/E of under 2. Unbelievable.