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The Company through its wholly owned subsidiary Feihe Dairy, produces and distributes milk powder, soybean milk powder, and related dairy products in China.
Lets recap: China + food = poison pet food, counterfeit Colgate, executed head of whatever the chinese equivilent to the FDA is. "American" Dairy has warning signs all over it.
I understand you skepticism with the Chinese food trade and the lack of quality. However that being said, American Dairy should benefit from this as China regulators will make sure that companies such as ADY with a quality products (as it won two awards for it's quality) will benefit from this. They can actually benefit from the food problem in China in a greater way then that. Regulators will force the closing of their competitors that don't have the same quality control as dose ADY. Furthermore they can benefit from further government perks (since the lack of competitors, and Chinas clear interest in supporting the health of their newborn population) such as TAX rebates and free financing (the Chinese government gave ADY TAX rebates until 2009 and the purchases of sum several hundred cows). The one risk that I see with ADY is that it has a management team that owns more then half the company and dose not necessarily care about shareholder value. I am still weary about their Citadel deal as the terms are convertible at $24/Per share and if the stock price is trading below that by 2012, ADY is going to have to pay 18% per annum on the $80M they borrowed. That noted, another one of my holding CSCT.OB has the same deal structure as ADY dose with citadel (300BPS lower interest per annum) and that has not stopped the stock from rising from $3.50 to now $18.
The reason you don't like ADY is the reason that I do! With the spotlight on improving the quality of food manufacturing in China, a company like American Dairy that has been building a business based on quality would seem to be in high demand. In fact their quality products command a premium price in China today. You could lose your shirt by shorting this one.
vinney11 - I think you are right on point. 1 rec for you!
You could lose your shirt by owning this one.
You probably should change your rec before you lose anymore points. This one will most likely trade in the $30+ range for a while. If it get's above $40, I'll sell unless new #'s support that kind of pps. This one had a case of over zealous analysts and the recent hair cut allowed me to get in at a great price around $21. Here's some numbers just to make the case. I figure the pps is going to be big on this one in a few years uless Obama wrecks our economy worse than Bush did with his spenditus. Obama has it worse than Bush did. Sheesh, when will we get someone in the white house who stops spending like there is no end to the money. Chew on these #s (Notice my very conservative number on the growth rates)...FIGURING FAIR VALUE at 18% Growth rates CURRENT EPS 2.1Earnings Estimate next 5 Yrs 18Number of Years takes to Double 4Number of Doubles in 10 years 2.50ESTIMATED EPS GROWTH RATE 5.25ESTIMATD FUTURE P/E 36Estimated PPS in 10 years $189.00TODAY'S FAIR VALUE PRICE $47.25MOS PRICE (50% of Fair Value) $23.63
You are right in what you say; wrong in understanding what it means. China Inc is hell-bent to change those aspects of its business. The melamine scandal is proof positive of that. That it occurred is proof of what you wrote; that the corrupt business executives were beheaded and their companies now gone are proof of the extreme market penalties for this kind of conduct. This is one of the winners in China's march from a rural to an urban economy.
Well, clowns? Still feeling good about ADY?
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