Stock Alert for AgFeed Industries Inc. (FEED)
  • AgFeed Industries Inc. (NASDAQ: FEED)
  • Stock Alert for AgFeed Industries Inc. ($FEED)
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    Stock Alert for AgFeed Industries Inc. (FEED)

    AgFeed Industries Inc. (NASDAQ: FEED)

    AgFeed Industries Inc. (FEED) is engaged in the research and development, manufacturing, marketing, distribution and sale of pre-mix fodder blended feed and feed additives primarily for use in China’s domestic pork husbandry market. FEED operates through wholly owned subsidiaries, Nanchang Best, Shanghai Best, Guangxi Huijie, Shandong Feed and HopeJia. On June 24, 2008, the Company acquired premix feed company. On January 3, 2008, the Company acquired a 70% interest each in Wannian Xiandai Animal Husbandry Ltd. Liability Co. (Wannian) and Jiangxi Huyun Livestock Co. Ltd. On January 4, 2008, FEED acquired a 60% interest in Ganzhou Green Animal Husbandry Develop. Co. Ltd. On January 7, 2008, it acquired Gang Feng Animal Husbandry Co. Ltd. On January 9, 2008, the Company acquired a 55% interest in Yichun Tianpeng Domestic Livestock Farm Ltd. (Yichun).

    The Company was founded in 1995 and is headquartered in Nanchang City, the People’s Republic of China.

    Share Statistics (9-Jun-10) FY

    2007

    FY

    2008

    %

    Chg

    Q4 2008 Q4 2009 %

    Chg

    Symbol FEED Revenue, $Mn 36.2M 143.7M 297.0% 46.5M 56.1M 20.6%
    Current price $2.97 Gross marg. 28.8% 24.0% 16.7% 16.6% 14.4% 13.2%
    52wk Range: $7.96-2.82 Oper. margin 17.5% 17.2% 1.7% 10.5% 6.1% 41.9%
    Avg Vol (3m): 1,244,130 Net margin 18.5% 11.8% 36.2% 8.4% 5.7% 32.1%
    Market Cap. 133.81M
    Dil. Shares Outst. 45.1M EPS, $ 0.54 0.26 107.7% 0.12 0.07 41.7%

    Source: Reuters.com, SEC Filings.

    Financial Summary

    FEED recently announced its results for the first quarter of 2010. Revenue for the first quarter reached $52.9 million an increase of 58% compared to the first quarter of 2009. Production volumes increased by 24% in the Company’s hog division and 119% in the animal nutrition division, as compared to the same period in 2009.

    Financial Strength (9-Jun-2010) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 2.85 1.01 0.80 0.81
    Current Ratio (MRQ) 4.11 1.37 1.08 0.97
    Long-Term Debt to Equity (MRQ) 0.63 24.62 26.96 132.66
    Total Debt to Equity (MRQ) 3.59 39.44 40.97 197.79

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    Buy Outperform Hold Underperform Sell No Opinion

    This is the consensus forecast amongst one polled investment analysts. Against the AgFeed Industries Inc company.

    Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
    Latest 0 1 0 0 0 0
    4 weeks ago 0 1 0 0 0 0
    2 months ago 0 1 0 0 0 0
    3 months ago 0 1 0 0 0 0
    Last year 0 1 0 0 0 0

    The one analyst offering a 12-month price target expects FEED share price to rise to 5.00 in the next year from the last price of 2.92.

    Source: www.ft.com

    Consensus Estimates Analysis

    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Quarter Ending Jun-10 1 55.40 55.40 55.40
    Quarter Ending Sep-10 1 57.20 57.20 57.20
    Year Ending Dec-10 1 224.70 224.70 224.70 216.30
    EARNINGS (per share)
    Quarter Ending Jun-10 1 0.04 0.04 0.04
    Quarter Ending Sep-10 1 0.04 0.04 0.04
    Year Ending Dec-10 1 0.17 0.17 0.17 0.55

    Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=FEED.O

    Investment Highlights

    FEED recently announced that it has agreed to invest in a hog production project in conjunction with Xinyu City in Jiangxi province. The two-year project encompasses the building of five western model hog farms, totaling 25,000 sows. The initial phase of the project will encompass an investment of $18 million to build two 5,000-head sow farms, one 200-head boar stud farm and one 2,600-head multiplier facility. Upon completion the first phase of this complex shall have an annual hog production capacity approaching 230,000.

    Construction for the initial phase will begin in May 2010, with the goal of completing the second phase during 2012. The Xinyu complex will have annual production capacity of up to 600,000 hogs.

    As part of its agreement with FEED, the local authorities will be responsible for clearing the land and developing the necessary infrastructure for the new farms. This will include the required water supply, electrical systems and the construction of the roads and highways necessary to accommodate all of the farms.

    Of the various components that make up complete feed rations, the premix, while constituting the smallest proportion of the total blend, (4%), requires the highest attention and technology to produce. Due to technological constraints, only those companies supported by animal nutritionist with years of practical knowledge in animal nutrition and husbandry can produce the premix products that meet the needs of producers.

    Vitamin blends and premixes are used in compound feed for poultry, cattle and pigs. FEED’s pre-mix and specially blended feed for early weaning piglets utilizes the most advanced nutritional techniques resulting in a reputation for premier products in the China market.

    In terms of animal feed products, livestock producers may directly buy animal feed in finished form, referred to as “complete” feed, which contains premix, protein and carbohydrates blended together, or they may choose to buy the premix and combine it with their own protein and carbohydrates (corn, wheat and other energy feeds readily available in the market) to make their own complete feed. Premix provides the essential amino acids and other vitamins and minerals to nutritionally balance the product. Feeding pigs a balanced diet is an essential part of the pork profit equation. Feed costs comprise 60-75% of a Chinese piggery’s expenses; therefore the quality of feed and nutrition has a significant effect on piggery profits.

    FEED supplies two principle product lines: premix to balance the nutritional requirements for all stages of pig life, and complete feed specifically for the infant or piglet stage of life.

    FEED is one of a handful of companies that have received “Green Certification” from the Minister of Agriculture of PRC for its premix products under the brand label “BEST.” This means products are safe and environment-friendly, and can effectively promote the healthy growth of pigs. According to current government regulation, pork cannot be accredited by the government as “green” unless it is produced from government certified green feed. Having its feed certified as green requires FEED to adhere to strict operational controls and procedures. This green certification laid the ground for its Hog Farms to produce hogs providing green pork. It is also an incentive for other commercial hog farms to enter into sales contracts with the Company’s feed operations.

    Hog production

    FEEDs 29 meat hog producing farms generate revenue primarily from the sale of meat hogs to slaughterhouses. FEEDs meat hogs are sold primarily in Jiangxi, Shanghai, Hainan, Guangxi, Fujian, Guangdong and other neighboring provinces.

    Lushan Breeder Hog Farm generates revenue primarily from the sale of breeder hogs to commercial hog farms and, to a lesser extent, the sale of meat hogs to hog slaughterhouses. It also generates revenue by providing consulting services to hog farmers in the areas of feed production, feed formulation and veterinary services. Lushan’s customers include large-scale hog farms, mid-scale hog farms and small-scale farms. FEEDS breeder hogs are sold throughout the PRC, primarily in southeastern China.

    Source: http://www.agfeedinc.com/

    Technical Analysis

    Source: http://stockcharts.com

    FEED is below its 13-day moving average. This bearish sign is even more significant because the moving average is also trending lower.

    FEED is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

    FEED’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below zero, which suggests that the underlying moving averages are bearish.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Jun9-2010 symbol Share, $ $ Mn 2010 2011 2010 2011
    Westway Group Inc. WWAY 3.74 99.39M n/a n/a 0.53 n/a
    Origin Agritech Ltd. SEED 8.74 196.78M n/a n/a 2.31 n/a
    Ridley Inc. RCL.TO 8.81 116.85M 71.82 n/a 0.18 n/a
    Food Processing Median 137.67M n/a n/a 1.00 n/a
    AgFeed Industries Inc. FEED 2.97 133.81M 15.40 n/a 0.81 n/a

    Source: Thomson Financial

    Insider Trading Activity

    NET SHARES PURCHASE ACTIVITY

    Inside Purchases – Last 6 Months

    Shares Transaction
    Purchases n/a 0
    Sales n/a 0
    Net Shares Purchased (Sold) n/a 0
    Total Insider Shares Held 13.98M n/a
    % Net Shares Purchased (Sold) 0.0% n/a

    Net Institutional Purchases — Prior Qtr to Latest Qtr
    Shares
    Net Shares Purchased (Sold) (4,223,900)
    % Change in Institutional Shares Held (202.7%)

    Source: Yahoo Finance

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