Moriarty's a fan of CHOGuess this explains the recent strength in the market. For a guy like Bob Moriarty to recommend a non-resource deal speaks volumes for China Health Labs. I particularly like when he says he expects this to be over a billion dollar market cap. This should be a very good year for investors.
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China Health
Bob Moriarty
Archives
Feb 5, 2011
Our readers have been well served with the companies who haveadvertised over the last 10 years. Home runs started with Novagoldand continue with Rio Alto, Endeavour Silver and Gold Canyon.
Someone asked me if non-resource stockswould do well with our readers and my response was yesif it's something interesting. Well, the company he was talkingabout is one of the hottest fliers in the Chinese healthcaremarket. I like it a lot.
The company began operations in 1993 and today serves a majorityof the top 1000 hospitals in China. China Health Labs(CHO-V) designs and sells its own branded as well as 3rd partydiagnostic medical products to health facilities in China.
In the United States, some 16% of GDPis spent on health care. Chinais a tiny 4.6% according to Wikedpedia. Clearly China hasa long way to go to catch up with the Western World. CHO hasa sort of franchise as China spends $125 billion US on the healthcare system over the next three years. Some 40,000 new diagnosticfacilities will be built in mainly rural areas that lack medicalcare facilities at present.
The company has a tremendous competitiveadvantage in that it is the only domestic supplier of Point-Of-CareTechnology (POCT) to the Chinese military.
As you can expect, sales and profitsare climbing like a cat going up a tree with its tail on fire.Gross margins are 25-30%. In the last year, 2010, they estimatesales of RMB 211 million compared to RMB of 145 million in 2009with gross profit more than doubling from RMB 24 million to RMB50 million.
China's medical device market is growingat a rate of 17% per annum. China spends currently $38 per capitain comparison to the G8 average of $2,431. China Healthis estimating growth for the company to be at 50% yearly forthe next 5 years.
The record of sales growth and profitis set to expand rapidly as governments in China invest heavilyin health care. Investors can look forward to a regular seriesof announcements of new contracts.
As much as I like the resource companiesat this point in time in world financial history, a $200 milliondollar gold company is a pretty fair size and a billiondollar gold company is giant. This is healthcare and there isunlimited demand.I expect China Health Labs to go way beyonda billion dollar market cap. Unlike resource companies, thereis no reason for them to be constantly diluting. They can financetheir operations and growth internally.
The company has only been public sinceOctober. Insiders and institutions own a majority of the sharesand there is only a small float. With estimated earnings for2011 of $.15, the company is selling at a tiny 7 times forwardearnings.
Investors should think of this as a savingsaccount with a big interest rate. Unlike resource stocks, CHOcan't hit a 500-meter intercept of 2 ounce gold tomorrow andgo up 10-fold but they are cheap now and growing rapidly. Thisis a stock you can buy and go to sleep on.
We are biased. We do own shares and theyare an advertiser. Their website has been updated and is current.The company is responsive and will be happy to answer any questionsyou might have. It's your money, do your own DUE DILIGENCE.
China Health Labs
CHO-V $1.35 (Feb 4, 2011)
CHLBF-PK 64.7 million shares
China Health website