Just quick summary to bring this to your attention; more detail will hopefully follow.

This stock floated yesterday at 10p and has since doubled. It has, needless to say, suddenly become very popular on another BB.

The company is profitable already and trading on an estimated (by yours truly) forward PE for the current year of 9 at SP 20p. EDIT: Hoodless Brennan estimate EPS for Full Year 2006 will be 2.18p - see article (link below).

Free float is 11.4% of the 81.2 million shares in issue - most are held by the directors.







Extremely useful Investegate article LINK


Extremely useful Hoodless Brennan analysis LINK


PDYOR, etc.

If you want to make a summary you could as follows :

Overall margins were falling at the last results due to increased costs.

Costs are going to continue to increase, through wages rise pressure in China, increasing energy costs in China, increasing transportation costs.

Sales pricing levels are somewhat fixed in US$ terms (as from the AGM statement), which means on top of the rising costs and falling overall business margins, means actual margins on the products is going to fall too due to selling in US$ and not be able to account for the strength of the RMB against those set US$ prices, increasing pressure on the overall margins and making them fall more.

Problems with TCM's in China meaning production and/or marketing of certain types is "suspended" pending review.

Problems in Canada with stricter proposed government controls of TCM's, which may spread.

They are going to spend all their cash on new production facilities and likely go into debt to fund completion.

If and when they get EU/US approval they then still have to break into those markets against the already in place suppliers - that will mean much more marketing spend, likely lower margins, lots of up front costs, which may or may not translate into increased revenues 6 to 12 months after the attempt to break into the market.


One could therefore say, there is now lots of uncertainty ahead for TAIH, a potentially difficult phase is coming, and its likely why many people have been selling out.


All IMO, DYOR !!

Copy of a post by JTCod from the dark side..




JTCod - 20 Aug'08 - 10:34 - 5899 of 5901

Here's an interesting exercise and one where you can play around with the figures to suit your own assumtions.

Estimate for 2012:

Take EPS 3p based upon current exchange rate for 2007.

Split the 2007 revenue into 3 products (Pac, HH, TCM's) as per 2007 accounts to estimate the balance of profit for each product.
Revenue
47% HH
33% Paclitaxel
20% TCM’s

Then adjust TCM portion of profits up by +25% to accomodate superior margins and deduct from the other 2.
Should give Profits as a proportion of the 3p IRO:
44% HH,
31% Paclitaxel,
25% TCM's

Now you can project each one seperately:

HH
Until further approval's are granted on this drug in the US and EU allowing use for less chronic sufferers of leukemia, the management seem to be of the opinion that growing HH revenues will be easier if they deliver an injectable product. This seems a good strategy to me as even if the demand were there, not much more than 20kg could be produced pa even with a harvest of the whole region right now. If demand were increased, prices could rise quite rapidly. Though this is a double edged sword because suppliers of harvest would demand their share I am sure and of course have a captive market.

Injectable prices are something like 10x raw ingredient prices. So assuming 20kg ceiling (perhaps with the help of our own nursery in 5 years time) and delivered in injectable form, that should deliver something like 10x the raw ingrediant price. For prudence lets allow just 5x:

2007 profit 3p x 44% for 12kg + 66% to 20kg x 5 for injectable (discounted by 50%) = 11p (excluding any allowance for upward pressure on prices).


Paclitaxel:
This one is where the real action should happen because we are already well down the line with the EU application and the US should follow shortly after.

Paclitaxel sales are showing solid growth YOY and the company are yet to see the benfit from Korea, EU and US (approvals notwithstanding). If EU approval is forthcoming, I would expect the company to announce a plan to expand Paclitaxel production (already mentioned at in previous statements) by at least 3-400% (approx. 60-80kg pa). The reason being, we already have 50kg pa comfortable capacity (55-60kg at a pinch) so if they are proposing expansion at this stage when we only produce 20kg logic would say it must be beyond current capacity. The EU is a very large mature market after all. For these purposes though, lets assume the lower of those 2 figures.

Injectable prices are currently between 8-12x raw ingrediant prices. For prudence though, I have again allowed a 50% discount at just 5x the raw ingredient price we currently receive:

3p x 31% x 4 = 3.72p x 5 for injectables = 18.6p



TCM's
Grew 400% in 2005, 100% in 2006 and 29.6% in 2007.

Clearly this year has been disrupted and until we receive further guidance I wouldn't assume more than 10% growth this year for safety. However, with the Chinese government culling producers of TCM's across the country, I would anticipate upward pressure on growth and pricing for Taihua from 2009. Especially as the management have been so pro-active on developing large numbers of links with hospitals and clinics. Growth of TCM volume alone in China has been double figures over recent years without gaining market share and on top of this Taihua have launched new products and plan more over time. So for the following 4 years lets go with 25% annual growth. I don't think this assumption is beyond Taih. In all probability I think it could be too low.

With 25% of earnings in 2007, 3p (at current exchange rate) x 25% = 0.75p + 10% for 2008 + 25% for 2009/10/11/12 = 2p on a 5 year plan.

TOTAL: 31p
This would be equivalent to almost 1000% growth over 5 years. Which sounds fanciful until you check back and see Taihua have already achieved 1000% over the last 4 years.

My current 5yr earnings target is 25p though, as I have allowed for some dilution and + a little to cover unforeseen costs. I feel comfortable with that having already taken a hatchet to assumed injectable prices 5 years out. On top of that, I have made no allowance for the geared factor of revenue growth over that of fixed overheads. I could possibly be substantially out on the downside in this respect.

25p EPS would equate to 50% compound growth going forward and set that against a PE of less than 4x earnings right now, it would seem an attractive proposition.

25P on a PE of 12 would deliver a 26 bagger. (On 15x a 34 bagger)


Other possible value added opportunities:
One avenue open to Taihua once they establish an injectables plant should be 'outsourcing'. This could become a whole new earnings driver imo, whilst at the same time delivering economies of scale for Taihua's own injectable production. The overheads are so low in this company and their area in general that any big pharma looking to sell their own drugs into China would surely be tempted by such a proposition. Food for thought at least right now.

For Taih the above 5 year 'back of a fag packet' estimate is just a plan waiting to be put in motion imo. Though the injectables could be done anyway, the trigger should be when gain approval of the EU application. That's assuming they do gain approval which is of course not guaranteed.

Possibly some exciting times ahead though I think.

As ever all IMHO and of course DYOR

Dont forget to mention the dividend.

Nice to see this pile of **** exactly where it should be.

In case anyone wondered I have been enjoying a superb holiday and have been away from the net a lot, apart from the occasional post on III.

I refuse now to post on A DVFN, its has got terrible in terms of abusive rampers this year, totally pathetic and not worth anything now. The good thing is of course they are all now losing money, and I really hope some of those abusive idiots lose everything in the ongoing crash.

Some of us did warn back in January that it was best to sell anything and everything, and we were ridiculed by the abusive rampers, and now it comes to pass...........LOL :)

With what is going on, you can be sure that Asia will be into severe problems come 2nd half 2009, going into 2010.............not a time to be loaded up with "China" exposure stocks..........now people can see why everyone has been selling these "bargains" and not buying them.

The ultimate sign was China dropping interest rates, in the face of inflation, that was a real admission that they are now heading into severe problems :) ho ho ho.

Lots of Chinese Stock (rampers) trapped into this one I am told from all the postings there on the dark side (AFN BB's which are now ramper infested).

Does not look very interesting, margins falling, committed to expansion with falling margins, poor PR.

Tiddler, Chinese, Illiquid, Big Spread, AIM etc..

This one is about as unattractive as a normal stock could be made to look. Certainly not an investment, there are so many much better companies around, loads of this.

On top of the GNG admission that things are slowing down, today also saw ZTC (Chinese telecoms) say this which again is more evidence to say that things in China are under pressure, and those who said 2009 would be a bad year for anything China related, might well be proven correct :

"As has been widely reported, trading and credit conditions for SME's in the PRC have become increasingly difficult throughout the third quarter of 2008. This is due to deteriorating macro economic conditions outside the PRC and slowing economic growth and restrictive credit policies in China. As a consequence, our markets have become increasingly competitive, disruptive and oversupplied. ZTC has therefore achieved sales significantly below those seen in the same period last year.

As a consequence, the Company's working capital available to operate and expand its business has become constrained, as has been previously announced. The Company continues to review all aspects of its operations to reduce costs and improve efficiencies to improve the availability of working capital for new model and market development. The possible sale of assets referred to above is one example of a potential method of cash generation that is being actively considered."

From the recent TAIH update :

30th Sept 2008

http://www.investegate.co.uk/Article.aspx?id=200809301317376908E

"That production gap, combined with the effects of a strengthening Renminbi exchange rate on export sales, meant that although our sales of the anti-cancer active pharmaceutical ingredients, Paclitaxel and Homoharringtonine, remained strong, revenues for the half slipped by 11% to RMB 29.8 million, pulling pre-tax profits back to RMB 14.6 million from RMB 18.1 million for the same period a year earlier."


Those currency issues will be even worse now, look at the Chinese Yuan exchange rate since that update - how badly are export sales falling off now ?




The old saying, it can take years to gain a customer, and only seconds to lose one. How many are TAIH losing due to the currency issues ?

Bad update out.

I did warn and warn again over at AFN in the past that things were going to be bad, and currency movements will hurt sales for TAIH, but they were all abusive to me.

Now who has the last laugh..........serves them right.

i have always reckoned this share was crap too .... it's another kate barnes special, so no doubt she'll be posting shortly telling us all how marvellous the company really is and how it will come right in due course .... rather like TMC (which actually has a better chance)

cynic, yes, agreed.

I saw it coming for a long time, as you can read from my posts.

Must say I would love to read the AFN thread (but I do not go to the "dark side" now), all those numpties who were so sure the future was great and who were ramping like mad (like 8trader, Shaid1, Dorset64, yobstol and many others) they must have had a bit of a shock today to see their ramp crash and burn.

the minusculke volume also indicates that if you wanted to unload even a modest slab, it would either not be possible or MMs would murder you on the offer

Taihua will go to 1p.

nice interesting thread this, first time i have read it.
a lot of sensible and helpful comments from some posters and some not so sensible by others.
please read and decide for yourselves which are which.
regards
jkd

Someone asked me about "EU licenses" and isn't that going to change things for TAIH.

So in reply, I have said for a long time that it is my view that EU approval means exactly what it says, its approval to sell within the EU and nothing more.

However, all of their problems now (which is losing market sales to cheaper synthisised, and losing sales due to the Yuan strength) will be the same problems that stop them selling into the EU even after approval.

As an event itself EU approval means nothing in terms of revenue or profits, it simply opens another route to sell, it does not mean they can or will sell any significant volume.

So quite simply, the "rampers" of AFN have in the past tried to pick an event "EU approval" and ramp this as the "blue sky" event for TAIH.

Thats all the talk is, pure ramping as simply it opens a door, and given the rise of sythentics and the Yuan strength, I think its quite clear the existing doors are closing, let alone breaking into new sales area's (which needs big spending on marketing and promotion).

With Yuan strength still there, and with synthetics (the big competitor to natural TAIH products) riding a wave sales due to their lower cost and greater acceptance as just as effective.......the outlook for TAIH remains, IMV, very bad.

DYOR !

You get the feeling this pile of "ex-ramped" poo (imo) is heading for say 3p levels ?

Very undervalued and screaming buy

Its totally overvalued and a sceaming sell ??????? ;) LOL

What is the Value of net assets per share?

bugger all on a good day i would venture

15.67p