Feihe International, Inc. (NYSE:ADY)

CAPS Rating: 1 out of 5

The Company through its wholly owned subsidiary Feihe Dairy, produces and distributes milk powder, soybean milk powder, and related dairy products in China.

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Member Avatar peanut081981 (< 20) Submitted: 4/5/2008 1:17:02 PM : Outperform Start Price: $10.71 ADY Score: -86.95

Just a guess.

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Member Avatar thross (20.46) Submitted: 3/24/2008 8:54:10 AM : Outperform Start Price: $8.46 ADY Score: -74.00

n/a

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Member Avatar elbrundo (< 20) Submitted: 2/29/2008 1:21:36 PM : Outperform Start Price: $8.85 ADY Score: -76.87

Lots of new executive hires, lots of revenue growth, lots of capital investment, and a good ROI in the past. Just bought 120 shares for fun before my RRSP deadline.

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Member Avatar uniqque2006 (< 20) Submitted: 2/29/2008 2:17:12 AM : Outperform Start Price: $9.25 ADY Score: -79.51

Outperform.

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Member Avatar jayrrice (< 20) Submitted: 2/17/2008 11:44:37 PM : Outperform Start Price: $9.24 ADY Score: -78.16

This stock is only temporarily down, give it six months or a year and investors will see the method to the CEO's madness. They have a great business model and are executing on it. Grant Thornton, the new auditor, will affirm that the company is the real deal, healthy and strong.

The $80M they borrowed last year is going to a useful cause and will be money well spent, but in the meantime is hurting their earnings until the pland and equip. starts producing revenues.

Be patient and buy.

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Member Avatar MJKpayday (99.76) Submitted: 2/10/2008 11:39:30 AM : Outperform Start Price: $10.20 ADY Score: -89.94

http://biz.yahoo.com/prnews/080128/lam083.html?.v=101

If there's one thing I love about CAPS it's the way I can vicariously experience a stock pick that I wouldn't otherwise make in my real portfolio.

ADY is a Chinese company (Don't get me started on the way the Chinese name their companies) that brings dairy related products to the mouths of the largest populated country in the world. They've been focused on capital investments and increasing their capacity and for years it's done them well. But a good business doesn't mean much if you can't account properly and that's why we're 60% off highs. The company had an auditor that made too many mistakes, had a bad reputation, etc... Since then they've moved on to Grant Thorton, an international auditor with a strong reputation. It also leads me to believe that company is legitimate otherwise Grant Thorton wouldn't want them as clients. My outperform pick wouldn't be possible with out a.) A good business with products Chinese people need and will need more of (growth) b.) Accounting mishaps sending the stock 60% off highs c.) Choosing Grant Thorton, a highly regarded accounting firm, to be your auditor. Give it a year or so and that 60% loss a yesterday's price will turn into a 100% gain at today's prices.

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Member Avatar ToKValue (26.33) Submitted: 1/28/2008 11:58:26 AM : Outperform Start Price: $8.98 ADY Score: -79.11

"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."- lecturing to a group of students at Columbia U. He was 21 years old.-Buffett

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Member Avatar fcharles81 (66.17) Submitted: 1/24/2008 9:51:19 PM : Outperform Start Price: $8.48 ADY Score: -71.21

Got Milk? Get this stock.

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Member Avatar godwinslaw (44.74) Submitted: 12/15/2007 2:42:58 PM : Outperform Start Price: $12.55 ADY Score: -89.31

The market has overreacted to recent news. This company produces a quality product for a huge market with rapidly increasing demand. The opportunity is enormous, profitability is increasing, and the product will never go out of style.

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Member Avatar DrLeopold (20.88) Submitted: 12/5/2007 1:58:02 PM : Outperform Start Price: $18.81 ADY Score: -106.89

Milk producer in china.

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Member Avatar navydog11 (< 20) Submitted: 10/17/2007 7:11:16 PM : Outperform Start Price: $23.00 ADY Score: -109.43

ADY's production capacity will increase steadily over the next 1-5 years. The market value of the stock does not fully reflect the increased capacity (even though capital expenditures are all described in detail in ADY's SEC filings). ADY is also taking the time to ensure no loss in quality of their dairy products as they expand. Behind all this is virtual guarantee of increased demand. Only 1 in 10 Chinese children has access to adequate supply of dairy products and the Chinese government has issued a mandate that every child have access to milk/dairy products. 2007 is a building year, but long-term this stock is loaded with upside.

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Member Avatar ballout (< 20) Submitted: 10/3/2007 5:16:14 PM : Outperform Start Price: $18.93 ADY Score: -101.92

as population grows, good health will become increasingly more important

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Member Avatar ryanman0 (< 20) Submitted: 9/21/2007 3:57:22 PM : Outperform Start Price: $19.98 ADY Score: -105.64

I did some research. They are borrowing heavily to grow. They are in china which is also growing. They make high end products and I read that they plan to diversify into other products. I am worried that new stock may be issued or cashed in from the debt, but overall if you are very patient. This should be a good long term pick. Risky, but I am bullish on it.

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Member Avatar amateur06 (< 20) Submitted: 9/15/2007 12:57:51 PM : Underperform Start Price: $17.63 ADY Score: +105.25

95% people here said this is a good company while the price continues to decline. So the wisdom of the crowd is not wisdom at all?

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Member Avatar rackled (< 20) Submitted: 9/2/2007 3:56:11 AM : Outperform Start Price: $19.06 ADY Score: -109.25

I am focused on finding micro caps that I expect to crush the market. ADY is currently perhaps my favorite. I present to you American Dairy.

Profile:

AMERICAN DAIRY, INC. conducts operations in the People's Republic of China ("China") through its wholly owned subsidiary Feihe Dairy. Founded in 1962, Feihe Dairy is one of the leading producers and distributors of milk powder, soybean milk powder, and related dairy products in China. Feihe Dairy's 99% owned subsidiary Sanhao Dairy produces and supplies processed milk to Feihe Dairy.

American Dairy is seeking to accelerate its strong track record of growth through production facility expansion in China and through ongoing product development and diversification. With Chinese consumer s' demand for milk and milk products growing faster than the supply in China, American Dairy intends to grow its business to accommodate this increasing demand and build its market share.

See for yourself their products, they seem pretty intuitive winners in a nation with a huge and burgeoning population that is growing economically at an obscene pace. The products are oriented towards providing efficient and healthy nutrition in a nation plagued by poor food quality. http://americandairyinc.com/2007/products/ , http://americandairyinc.com/2007/products/soymilk.... . As you can see, a key selling point is that these products are produced WITHOUT pollution.

Backdrop/ Recent News:

http://www.irpage.com/ady/investor/releases.htm

The Chinese government is actively promoting milk and soy products for nutritional reasons. As evidenced by recent Chinese comments on its growth, China is increasingly concerned about sustainability of its population and economic growth and making sure that economic growth does not occur at the expense of the Chinese environment and national health. In order to promote this transition, the Chinese government recently recognized ADY for its contributions to agricultural industrialization and granted/extended the company tax exemption through 2010 (big deal for shareholders). You would think this would eliminate a huge risk with most Chinese companies, ie. government intervention and regulation. Nothing better than having a very powerful and controlling govt on your side.

The company is attempting to acquire a 50% interest in another Chinese milk producer. Smart given the growth prospects.

The company also closed debt financing for 100 million dollars. There is currently debt equal to cash. The debt was not on particularly good terms, but oh well. The companies' balance sheet is quite good.

Most recent results: Outrageous revenue growth driven by high margin products; Growth in operating income despite interest expense and more promotional activities to drive market share and sales (I consider this smart and a good thing; sacrificing ST for LT); operating leverage as shown by reduced distribution expense by %; projected 30 million in operating income for this year (yikes!). Management's statements that ADY is developing a powerful brand seem to be very confirmed.

Key Highlights from the Second Quarter of 2007 include:

· Revenue up 61% year over year to $41.5 million from $25.7 million in 2Q06

· Gross profit up 43% year over year to $18.3 million from $12.8 million, gross margin of 44.1%

· Operating income increased 21% to $5.2 million from $4.3 million in 2Q06

· Non-cash interest expenses of $1.2 million

· Net income of $4.1 million, or $0.24 per diluted share

”Our financial results for the second quarter exceeded

our expectations. Our revenue growth of 61% on production increases of 37% demonstrates the fantastic pricing power

associated with our high end products. Our second quarter 2007 financial results reflect the growing popularity of the Feihe

brand as more and more Chinese consumers seek our trusted brand for quality and consistency."

” We are proud to operate a brand that is quickly accepted in

new markets due to our effective promotional efforts. Approximately $3.1 million of our cost of sales reflects these in-store

product promotion efforts, which we execute in new geographic areas to grow our market share. Please keep in mind that

our year over year gross margin comparison is skewed because we didn’t incur any similar promotional expense in cost of

goods in the second quarter of 2006."

"Gross margin of 44.1%, down

year over year from 50.1% in the second quarter of 2006, reflects the increase in sales volume offset by $3.1 million in

product incentives, which did not occur in the year-ago period."

"Importantly, American Dairy has begun to recognize operating leverage, reflected in distribution expense as a percentage of

sales, which declined 123 basis points to 26.7% of sales, and general and administrative expenses as a percentage of

sales, which declined 34 basis points to 4.6%."

"Net income for the six month period in 2007 was

$10.1 million, or $0.58 per diluted share. Excluding $1.2 million of non-cash interest expense, net income in the first six

months of 2007 would have been $11.3 million, an increase of 13% from net income of $10.0 in the first half of 2006."

"As of June 30, 2007, the Company had $106.3 million of cash, compared to $39.5 million at December 31, 2006 and $37.8

million at March 31, 2007. American Dairy had working capital of approximately $103.5 million at June 30, 2007. The

Company had long term debt of $98.3 million as of June 30, 2007."

“2007 is a year in which we are making planned, strategic investments in our future growth, as we focus on increasing our

capacity, enhancing our brand recognition, and expanding our portfolio and distribution reach,” continued Roger Liu, Chief

Financial Officer of American Dairy. “Excluding any potential incremental benefits from acquisitions and strategic

partnerships, we expect revenues for the full year 2007 will reach $150.0 million, a 22% increase over 2006, and we expect

to realize income from operations of $30.0 million for the full year 2007, a 58% increase over the full year 2006 results.”

"American Dairy, Inc. conducts operations in The People's Republic of China ("China") through its wholly owned subsidiary,

Feihe Dairy. Founded in 1962, Feihe Dairy is one of the leading producers and distributors of milk powder and soybean

products in China."

The Financials (Again, awesome):

Share Related Items

Market Cap 313.0 M

Shares Outstanding 16.0 M

Float (Mil) 7.0 M

Mgmt Effectiveness

Return on Equity (ROE) 35.7

Return on Assets (ROA) 16.8

Return on Invested Capital (ROIC) 29.6

Profitability

Profit Margin (TTM) 46.40%

EBIT Margin (TTM) 15.90%

Profit Margin from Total Operations (TTM) 13.50%

Valuation Ratios

P/E Ratio (TTM) 16.40

Price / Sales Ratio (TTM) 2.11

Price / Book (Equity) 4.26

Price to Cash Flow (TTM) 14.10

Per Share Data

EPS (TTM) 1.16

Revenue Per Share 9.00

Book Value Per Share 4.46

Cash Flow Per Share (TTM) 1.35

Cash Per Share 6.45

Financial Strength

Quick Ratio 3.40

Current Ratio 4.10

Debt / Common Equity 1.34

Total Debt / Equity 1.52

Historical Numbers, strap yourself in (2003 to 2006):

All dollar amounts in millions except per share amounts. 2006

Operating Revenue 122.80 68.02 37.42 26.64

Total Revenue 122.80 68.02 37.42 26.64

Operating Profit 17.70 9.92 4.56 1.20

Operating Income After Depreciation 17.70 9.92 4.56 1.20

Net Income from Continuing Operations 19.91 11.63 6.26 2.04

Total Net Income 19.91 11.63 6.26 2.04

Diluted Normalized Net Income/Share 1.14 0.74 0.47 0.19

Analyst Coverage: ZERO! Company is seeking listing on NYSE (deservedly).

Insider Ownership:

Leng You-Bin(1) 8,881,135 62.8 %

Liu Hua(1) 19,000 *

Hui-Lan Lee(1) 23,000 *

Liu Sheng-Hui(1) 269,576 1.8 %

Dr. Kevin L. Tseng(1) 4,500 *

Kirk Downing(1) 4,900 *

James Lewis(1)(2) 30,000 *

Pike Capital Partners LP

275 Madison Avenue

Suite 418

New York, NY 10016 2,331,519

(3) 16.7 %

Charles Hung (4) 249,956 1.7 %

American Eastern Group, Inc.(4) 964,039 (5) 6.1 %

American Eastern Securities, Inc. (4) 914,039 (5) 5.8

All executive officers and directors as a group (6 persons) 9,153,211 67.5 %

Conclusion:

This is a company in a hyper growth industry that is demonstrating hyper growth. Its products make absolute perfect sense. It has absolutely sterling financials by every single measure. It

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Member Avatar ashlissa (47.48) Submitted: 8/23/2007 11:56:33 PM : Outperform Start Price: $19.07 ADY Score: -110.25

28-32% growth projection over the next five years. Low PEG, undervalued, and unnoticed. This is a great hidden stock, with fantastic potential. As soon as the new plants are completed, shareholders will reap the rewards of patient investment.

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Member Avatar gavinsblog (63.63) Submitted: 8/15/2007 5:03:22 PM : Outperform Start Price: $17.63 ADY Score: -114.22

Following TMFMmbop

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Member Avatar hjxandly (< 20) Submitted: 8/13/2007 11:05:34 PM : Outperform Start Price: $21.42 ADY Score: -115.30

This is a great stock still at Bargain price

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Member Avatar mikeklug1 (< 20) Submitted: 8/12/2007 2:23:42 AM : Outperform Start Price: $21.74 ADY Score: -114.99

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.

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Member Avatar hanknTikrit (< 20) Submitted: 8/1/2007 8:46:30 PM : Outperform Start Price: $17.59 ADY Score: -105.26

When ADY gets to full production on their new factory, it'll be full speed ahead, look out below (for the nay-sayers getting flung off). Catching this one on a price dip, I couldn't resist picking it up for the long haul. It'll be a good'n.

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