CAGC is a Possible Triple Bagger Sympathy to SEED

CAGC (http://www.chinaacgritechinc.com/) is a leading liquid organic fertilizer manufacturer based in Beijing, China.  The Company is effectively China’s leading developer, manufacturer and distributor of liquid organic compound fertilizers.

China Agritech has developed a unique solution to the current challenges facing Chinese farmers today, the Lulingbao and Tailong liquid organic compound fertilizers. The Company's proprietary formulae of humic acid and other amino acids has proven to have a significant effect on crop yield and quality without the harmful side effects of chemical fertilizers and at a fraction of the cost of imported products.

The Company main products are as follow: http://www.chinaagritechinc.com/operations2.htm

•  Lulingbao III - specially formulated for fruits and vegetables

•  Lulingbao IV - formulated for large scale crops and suitable for jet-spray

•  Tailong I - a highly customizable fertilizer for a wide variety of crops and plants that can be tailored to local soil conditions

•  Green Vitality – a new premium line that will be marketed in the central and southern regions of China and can be applied to a large variety of crops.

China Agritech's products contain over 30 active ingredients. The fertilizer formulations are comprised of organic elements (humic acid and amino acid), inorganic elements that are region specific combinations of nitrogen, phosphorus and potassium, microelements (boron, iron, zinc, manganese and molybdenum) and other active and stimulative agents. The application methods are flexible, ranging from seed soaking, root dipping and irrigation to sprays via machine and plane. Based on sophisticated agricultural technologies, the Company's formulas are highly concentrated, blendable with pesticides or water for easy application and facilitate better absorption rates due to low sedimentation.

The Lulingbao and Tailong products can be used on a wide range of crops including vegetables, fruits and grains and have been proven to be effective in increasing crop yields between 15-40%.

Corn and soybean prices are on a tear.  Agriculture and fertilizer companies are on a tear (MON, MOS, TNH, POT, AGU, etc).  The agriculture sector is the new solar sector of 2008.  Money has been searching for the next plays in the sector.  I reviewed SEED in my last article and it’s been in a breakout mode.  COIN which is still a developmental company has broken through new highs and attracting institutional investments.  Within this environment, we look for sympathy plays.  The closest and most attractive sympathy play is CAGC.ob.  I’ve rarely even gotten involved with bulletin board stocks, however, this company seems to be solid with impressive growth.  It’s also in the two hottest markets, China and Agriculture. 

Taking a look at the numbers: http://phx.corporate-ir.net/phoenix.zhtml?c=144878&p=irol-newsArticle&ID=1078396&highlight=

Growth rate is 30% annually as first 9 months in 2007 total revenues was $30.1million up 27.9% from 23.5 million in 2006.  Net income grew + 68.1% to 7.1 million (.34 eps) for first 9 months of 2007 vs $4.2 million the prior year (.23 eps) in 2006.  On October 9^th, the company just closed a $7.8 million deal with SinoChem Fertilizer Co.Ltd (the largest fertilizer distributor in China covering 80% of the market) to supply a minimum of 1,000 metric tons of liquid organic fertilizer.  The Chinese Government is pushing more toward organics products free of toxins.  Fertilizer market is a $49 billion industry with 10% organic.  Organic food demand is growing at a 50% annual rate in China.  1st Q 2008 looking to add 200,000 tons of granular organic fertilizer.  China has 5.7 mil acres of certified organic land making if 3^rd largest in the world. China Agritech’s liqiuid organic fertilizer is certified by the Ministry of Agriculture.  China Agritech is also began exporting it’s products to Russia in January of 2007 of 300 tones worth $375 million usd.

P/e at 5 with 13.7 million cash.  No long term debt.  This is a thin trading stock that can move fast with any significant volume.  Downside is the monthly lower bbs at $2.10, upside is a retest of its highs $6.09 with a breakout possible to 8-10 level especially IF SEED ramps into the 15-18 level.  This one moves with SEED and COIN as a sympathy play on China, Organic and Agriculture.  We're in from low 3s.  Good trading!