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China Green Agriculture, Inc. Message Board

  • stinky_perro stinky_perro May 4, 2010 4:37 PM Flag

    Forward Earnings Forecast Calculations

    Alright folks. I apologize in advance for repeating the same calculations I posted earlier this week. For those of you who missed the recent tidbit on the acquisition news release and for those of you YONG investors with less than honorable intentions (yes, that is you 'futureent'), here are my calculations, again, for CGA's FY11 (fiscal year spanning from July 2010 to July 2011) forward earnings.

    NOTE: Two methods below. The first assumes a 50% cash and 50% equity offering to effect the production facility purchase. The second assumes a 100% cash purchase (as suggested by FOSSILS on http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_C/threadview?m=tm&bn=93442&tid=3543&mid=3822&tof=12&rt=1&frt=1&off=1)
    ----------------
    Method #1

    Assumptions:

    (1) Purchase price for production facility = $22M

    (2) The acquisition is made utilizing 50% in Cash 50% and 50% by issuing additional shares. Under this assumption, the company issues an additional 1 Million shares at ~$11 PPS [($22M/2)/$11PPS. This assumption leads to a 4% increase in outstanding shares, to close the deal. In other words, the FY11 outstanding share count rises to about ~ 25.44M

    (3) $8M in additional income as a result of the acquisition (as stated by CGA on the news release).

    (4) Adjusted income assuming an already demonstrated ~44% YoY growth continues into FY11 = $30.1M (20.9*1.44 = 30.1). Note: See CGA fact sheet for FY10 income (20.1) and growth (44%) used.

    EPS = Net Income/Weighted Avg Common Shares

    FY11 forecast EPS = (30.1M + 8M) / 25.44M = $1.50

    Method #2

    All above assumptions remain the same BUT, purchase of new facility is executed via cash thus the shares remain at 24.44.

    FY11 forecast EPS = (30.1M + 8M) / 24.44M = $1.56

    Utilizing today's closing price (4 May 2010) of 11.38, the PE based on forward earnings = 11.38/1.56 or 7.3
    -------------
    Sources:
    (1) CGA Fact Sheet, January 2010. Available at: http://www.ir-site.com/images/library/cgagri/CGAFactSheet-Jan2010.pdf
    (2) CGA 27 April 2010 news release entitled: “ China Green Agriculture, Inc. Announces Intent to Acquire 300,000 Ton Fertilizer Production Facility in China”. Available at http://finance.yahoo.com/news/China-Green-Agriculture-Inc-prnews-1062927995.html?x=0&.v=13
    ---------------
    Please feel free to check my math, challenge my assumptions or whatever. As far as I am concerned, 'futureent' has ZERO class and has lost any last bit of credibility he had on my book.

    Cheers!

    -Stinky

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    • I like how Stinky Pinky has teh bad habit of always accusing people of "dishonorable intentions." Methinks the man protesteth too much.

      Like when he accused me of lying last month when I said that a brokerage was trying to sell me on CGA stock right before it plummeted while promising that it would rise to $25 by July and they were shorting the stock. Hit too close to home?

      • 1 Reply to nils.wright
      • Wow... all the bashing and no volume... I guess there aren't any more sellers left. Unlike you and the rest of the shorts trying every dirty trick in the book, I do not have any marign interest accumulating. I can wait as long as needed for you and the rest of your friends to buy back the 3.5 Million shares you have shorted. As soon as you start, you will probably drive the PPS up through the roof. You are running out of time until the company publishes its current FY (2011) guidance. If you think the guidance will be poor, I encourage you to keep selling. You will only put additional recoil action on the spring that is about to pop. But we both know the company will report 2010 earnings above estimates and a 73% growth on 2011. So I guess the bashing will continue. Keep up the good work.


        Cheers!

        SP

    • CGA met their sales volume goal 3 weeks ago. If their volume was sold without discounts, it is very likely that CGA will beat FY10 earnings by ~6 cents. That would put the trailing multiple, using today's low, at 9.5. As far as this year's multiple, (yes, it is now FY11 for CGA), using the $1.56 estimate discussed on this thread, we are now trading at a multiple of 5.86.


      The volume is somewhat low so any significant buy orders will not allow the price to remain this low (IMO). But, small investors with low volume orders can get in at a really good multiple. I bought some yesterday and might buy some more today if this PPS keeps floundering down.

      Cheers!

      SP

    • The stinky liar still has the nerve to show how shameless he/she can be.

      If investing was that easy as you've losing so big and fast, you surely deserve it. But don't ever pretend you would still have any shread of "credibility" you dream about.

      The reason I haven't put you on ignore yet, is simply b/c you represent the losers in this stock so typically, and I like to keep a tap on losers like you.

      Any newbie must do exactly the opposite what this stinky poster dose.

      Continue to short into the fake chase.

      Watch $7 - it won't hold in time.

    • With a potential forward P/E of 7 and a potential 40 to 50% earnings growth rate, no debt, and all of the other positive factors, this stock seems like an incredible bargain to me.

    • Thought I bring this old one back to add a little perspective to the later discussion.

      Cheers!

      SP

    • Why would anyone sell a $8M income plant for $22M? That is a PE of less than 3.

      • 3 Replies to waiklim
      • This is indeed very cheap, but I think this will be a privately owned company. CGA is a publicly traded company with very high margins and very fast growing and only has a forward PE of 7. When you consider this I the price isn't that unlikely. The company that they would acquire also sells traditional (chemical) fertilizer as well as organic fertilizer. Perhaps they feel they can't compete with the larger organic fertilizer companies and try to join one.I find this a good point for cga as they can try their organic fertilizers to traditional fertilizer customers.
        gr

      • I assume the $8 mil figure is based upon the plant operating at near 100% capacity. As reported in CGA's news release, the plant is currently operating at only 60% capacity and existing company's marketing resources may not be capable of creating a demand for a higher operating capacity. I'm sure the current net profit is no where near $8 mil.

      • waiklim - That is a fair question. Unfortunately, the company is keeping the details of the deal confidential until it becomes ratified. 'usomtrader' suggest on his previous post that it could be a government or government subsidized facility. As far as my own guesses... I could go a dozen ways but none leads me to suspect that the company will not be able to complete the acquisition nor that it is being dishonest by misrepresenting the potential income. Sorry about lacking specifics but, unless someone has insider info, guessing at this point is probably not necessary since even without the additional income from this facility, the company is trading at a single digit forward multiple.

        Sorry I could not be of more help.

        Cheers! -Stinky

    • Stinky,
      nice to see someone doing some calculations and fundamental reasoning about the company. Personally I believe EPS for FY11 will be 1.70. They always announced a 50% increase in volume next for next years, this will lead to a more than 50% increase in net income because more economies of scale in the new production facility and in general expenses. Also the shift to higher margin powder fertilizer just recently started,and this will have huge impact next year. I didn't checked it, but I net income for fertilizers increased about 70% with only a 27% increase in volume.
      The main driver for the company and its earnings is that they are able to sell higher margin products to their existing costumers.
      In that light any investment that is earned back in less than 3 years is great for me (like the new acquisition), but this will bring a lot of new customers and distributors that they can sell their own products to.
      gr

      • 1 Reply to jeff77d
      • gr - Your points are very valid. I peronally like to err on the side of caution but as you point out, chances are the company will beat estimates. For the immediate future though, there is a perfect storm brewing for the shorts who are out sailing around. The smart ones, if there are any left, will likely head for shore this week. The not-so-smart ones will probably end up buying some of my shares at a huge premium. Cheers! Stinky

    • looks good to me

 
CGA
1.415-0.015(-1.05%)Jul 27 4:00 PMEDT