AMERICAN ORIENTL BIO (NASDAQOTH:AOBI)

ride the save

The stock will be de-listed if it doesn't post an average close price of over $1.00 for 30 days. The deadline is March 21st, 2012 so it could push the price up artificially.

99.99 percent of Chinese RTO's are frauds. I'm being conservative when I say 99.99 percent, its most likely 100 percent. The only thing these companies are good at is extracting cash from American investors.

Here is a great article published on gurufocus.com about Chinese RTO's:

http://www.gurufocus.com/news/130207/confessions-of-a-chinese-rto-investor

Profitable, Pharmaceutical AND Traditional Chinese Medicine, looks cheap to me, in at 1.18

ug-ly.

Extremely cheap.

As you can see, I made the wrong call on AOB, which at one time was a Motley Fool Million Dollar Portfolio (MDP) holding. MDP impressively sold it 2-3 years ago before it tanked, but I unfortunately did not follow them with this move. On a positive note, this has been a very small investment for me (less than 0.5% of my portfolio). Where does it stand now? AOB is still making a profit, although a much smaller profit than in the past. In an effort to increase profitability, it appears that AOB's management has been shuffling the product portfolio to eliminate some high pharmaceutical ingredient costs and to work around some of the China Government's regulations. If they are successful, the stock price could rebound dramatically. I am willing to take a speculative gamble with an amount equivalent to 1/2 of my original investment. I can buy twice as many shares with 1/2 the original amount. If it tanks from here and I lose all of the money invested in AOB, that will be OK. This amount is not enough to lose any sleep over. I made a similar speculative bet with Sirius Sattelite radio when it was $0.12 per share that worked out nicely. I am mostly a dividend focused investor but a little speculation makes it interesting!

The CEO accompanied Premier Hu to the USA. If their CEO is on positive terms with the premier, AOB should have no trouble with unpredictable government moves. Also, the book value of this stock appears to be 25 times its price.

This is a tracking portfolio of all CAPS-ratable tickers in the Chinese RTO/SPAC space (i.e., companies that listed without filing an IPO).

American Oriental Bioengineering, Inc. went public via a reverse merger in 2002. The company is based in China.

Price/earnings of 6.41, Price/book of 0.27, Debt/equity ratio of 0.29, pharmaceutical and healthcare products in China.

Oversold.

At this price, stock is way undervalued. They have some of the best recognized medical brands in China. However, they lack pricing power due to new govt reforms, and have shown that they have trouble allocating capital (constructing an expensive headquarters that decreased margins significantly). Despite this, strong brand in a growing economy and a booming middle class with disposable income = profitable company.

Chinese firms are not governed by financial reporting rules or good governance standards. It is a fundamentally flawed notion that one can be a minority shareholder in a Chinese company. The financial reports cannot be trusted, nor can management. Unless you have a personal connection with the owner managers chances are money invested in Chinese firms will be lost and you will never find out why.

Adding 20.5¢ for research and developpement, earning per share becomes > 42.5¢ for a return of more than 24 % !

Because it is valued as if it couldn't possibly grow, even though they are well into R&D spending that should yield results.

kd

I believe the Market is undervalueing AOB's shares at .4 book value and expect an upswing from here. AOB is one of China's top drug companies. They have a stabilizing cost of revenue down from 26% over the last few years to 6%. Management is investing more in R&D than in the past and allocatig less capital to purchasing other businesses to gow market share. Government regulations play a part in keeping revenues down. Products such as Jinji Capsules and Boke nasal spray both won awards as China's top branded drugs in 2009. Read: http://seekingalpha.com/article/243664-is-american-oriental-bioengineering-s-business-model-sound?source=yahoo , for more detailed analisys on AOB.

Great value, great ratios, a steal

aob is undervalued