Surprise Surprise !!! Nice News !!!To be frank, prior to this news release, I had no idea how to estimate underlying earnings and a fair value for CNOA, given that the ErMaPao division was being sold off, the winery hadn't produced a bottle and the acquisition hadn't closed. I had just 3.5 cents in eps as a holding figure for annual earnings.
Now it appears that Q3 earnings (and therefore underlying earnings) will be significant. Very significant. My revised estimate of underlying annual earnings - using the full post-dilution share count - is something in the neighbourhood of $.18, and that's without any contributions from either the acquisition (which should close soon) or the winery (for which I have included routine maintenance expenses but no wine sales).
This company could prove to be rather interesting after all. With some modestly good numbers from the acquisition and winery, we could be looking at a $3-4 stock.
It's nice to get some good news during these tough economic times. (I can't help but add here that I've been getting nothing but good news from the Chinese companies in my portfolio - and plenty of it - so I can't wait until Q3 earnings are reported. That should give us investors with large Chinese holdings a little to cheer about, methinks.)
Regardless, here's the body of the news release:
China Organic Agriculture, Inc. (OTCBB: CNOA), a growth-driven agricultural products company, today announced preliminary results for the third quarter 2008. The Company anticipates revenue between $34 million and $36 million, net income between $8 million and $9 million, and earnings per share of $0.14 to $0.16.
“I’m happy to report solid estimates for the third quarter 2008,” said Jinsong Li, Chief Executive Officer of China Organic. “Revenue of over $30 million in a single quarter will be a record for CNOA. With a majority of these sales coming from our Ankang subsidiary, we can be assured our business model’s focus on trading opportunities will provide strong growth for shareholders.”
As discussed in previous reports, this large jump in revenue for the quarter compared to the first two quarters of 2008 is largely due to the cyclical nature of rice sales. Since harvest takes place in the third and fourth quarters of the year, sales tend to be higher in these quarters. Nevertheless, CNOA’s recent sales are still considered quite large, compared with last year’s third quarter results of $22.4 million.
“I look forward to releasing more updates about China Organic shortly” said Mr. Li. “I will be detailing our vision for China Organic Agriculture in a strategic initiatives outline next week. Under my leadership I hope to mold CNOA into a purveyor of premium international food products, not only to our existing Chinese customers, but to the broader consumer market throughout Asia as well.”