While the United States continues to waddle in the recessionary times, we will see the global economy grow. The best way to play the future is through countries that have people working and growing rapidly. China is the main country with this type of growth. Jim Rogers stated that China would be the next future to boom. He stated United States ‘time is over’. The question is how do we invest in China. The country being overseas and in a foreign language make it hard to learn about stocks. However, I have done a little research and I found a gem that’s a good play.
CPHI, China Pharma Holdings, Inc., is at a low $3.50 price. It has dropped recently from a high of $4. There was a lot of jumping in after their annual report. Now, it’s a nice bargain price to get in for a long run. They are a generic Pharmaceutical based in China. They have a low PE at 7.31. They have had increased EPS for the past 10 years. The past 4 years have been positive EPS. They have no debt. They also sell nutritional supplements.
What to look forward to?
They have reported 23% growth in sales year-over-year. They have a 70% growth in EPS. As China continues to grow, more people will buy supplements and medicines from their local pharma companies. This is a micro-cap stock so there is a bit of volatility, but it seems like a pretty safe play in the long-term.
Here’s some quotes from their annual report from early March 2010:
“Clear Strategy for Growth – We are positioned in a rapidly growing industry in the fastest growing economy in the world. Within the Chinese economy, as medical care expenditures represent only about 4.5% of the Chinese GDP (compared to 15% in the United States), the healthcare segment will experience faster growth. Furthermore, the recently announced Healthcare Reform in China implies significant additional revenue opportunities for pharmaceutical enterprises supported by government initiatives. The increase in demand from these sources should allow us to grow organically at a healthy pace. Aside from our current portfolio of products, new products from our pipeline (such as Candesartan and the generic version of Crestor, or Rosuvastatin) present us with very healthy growth opportunities once these products come on line.
Finally, the Healthcare Reform will change the current landscape of the Chinese pharmaceutical industry which we think will create many attractive acquisition opportunities. We plan to use these opportunities to the fullest extent possible and hope to continue our rate of growth in the future.”
“Gross profit for the 12 months period ending December 31 2009 was $25.65 million and the gross profit margin was 42%. For the same period in 2008 gross profit was $25.29 million with gross margin being 50%. From a product-sales structure perspective, we sold more lower-margin products in 2009 compared to 2008, including products that are listed on the EDL. Going forward we expect gross margin to balance out more evenly as some of our higher margin products (such as newly launched Tiopronin and Omeprazole Sodium) achieve higher sales volume as they ramp up.”