China's Stimulus Fattens Its Agriculture Firms
Lisa LaMotta, 03.18.09, 05:35 PM EDT
Consumers hitting the stores lift NY-listed shares.
Stimulus plans in China are helping consumers to keep their jobs and are providing a lift to the country's agriculture industry. Several New York-listed companies have been posting strong gains thsi week.
Among them, AgFeed Industries (nasdaq: FEED - news - people ), a Chinese-based producer of pig feed, has been experiencing a significant boost of late as the price of feed increases and hog prices come off their highs of last year -- giving it good reason to expect strong margins as China's stimulus plans begin taking affect.
The stock has jumped 134.0% in the last two weeks, trading at $2.34 on Tuesday. Over the past 52 weeks, the company's shares have traded between 90 cents and $21.31.
The company released its 2008 financial results on Monday. AgFeed reported earnings of $16.9 million, or 53 cents per share, up from $6.7 million, or 25 cents per share, in 2007. Excluding $6.26 million in one-time charges related to investor conversion of a note offering, the company posted a 2008 profit of $23.2 million, or 74 cents per share. Revenues nearly quadrupled, to $143.7 million, from $36.2 million the year before. The company acquired hog farms last year. (See "China's AgFeed Pigs Out.")
"AgFeed’s management believes that Chinese market should regain its double-digit growth rates in 2010-2011 due to increasing urbanization and growth of the Chinese middle class," wrote Rodman & Renshaw analyst Joe Giamichael in a note to investors.
In December, the Chinese commercial hog producer and premix feed company suspended a previously announced share buyback program and announced a secondary offering to raise gross proceeds of $8.75 million, citing uncertainty in the capital markets heading into 2009 as the primary reason for the need for new funds. (See "AgFeed In Need.")
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