Bodisen Biotech Inc., - BBC

Wanted to quickly profile this company as I embrace the new motto of just getting the message across and not worrying about the format.

Bodisen Biotech is not a Biotech firm (I guess one should be happy about that of late or at least until there is much anticipated reversal of the biotech slump - mainly driven by money coming out of the sector and into Gold, Copper and other metals that are enjoying a fascinating bull market!). Bodisen Biotech, Inc. engages in the development, manufacture, and sale of pesticides and compound organic fertilizers in China. The company manufactures approximately 60 packaged products in 4 product categories: organic compound fertilizer, organic liquid fertilizers, pesticides and insecticides, and agricultural raw materials. Its products address grains, vegetables, and fruit crops. Bodisen Biotech sells its products to wholesalers.

The stock enjoyed a great bull run until yesterday benfiting from being profiled on Jim Cramer's Real Money radio show in November 2005 and the market being enthralled with the company's proclamation of "accelerating growth," along with the comment that Bodisen does not anticipate any need to tap the equity markets to fuel future growth. Here are some useful links and required reading about this company if you are planning an investment in this one:

Bodisen Biotech Sees Accelerated Earnings Growth in 2006, Company Has a Strong Balance Sheet with Approximately $26 Million in Cash

The company owns a stake in China Natural Gas Inc. that announced that it will report record revenues and profitability for 2005

And the company has been doing very well, beating estimates consistently and recently announced that they see 'record' 1Q earnings on strong sales

Combine all this with a new product launch and it leads me to believe that BBC's potential market is huge. The company is currently a very small player in China, but if its products really do boost yields by up to 35% while being competitively priced, this could be a lovely story that will unfold over the next decade. This is not a stock for the faint of heart though, as there is loads of volatility and uncertainty, but it could be a massive gainer over time.

Why profile BBC all of a sudden? Well, after having been in and out of BBC for a 2400% annualized return in 2005, I have watched the stock's uptick and languished about having taken it all off the table. But the market presented this retail investor with a second chance yesterday - A top poster in StockArena.com brought the significant downward action on BBC on Monday to my attention and I wanted to share some of his discussion here (edited)

***
BBC's stock got hammered yesterday thanks to an article in the NY Post which questioned the legitimacy of the company because of its relationship with a NY investment firm. The article questions how the company's margins can be so strong if it is selling organic fertilizer, and also questioned motives of a director (a former mayor from Massachusetts) who is serving on the boards of several China-based companies.

With Chinese companies there is always greater potential for corporate malfeasance, but this article did not really raise any true red flags (several points in the article have already been changed - one of the most important being that the article claimed that the company's private placement was "under the table," when in fact it was completely legitimate).

I do not want to completely discount the chance that there could be something ugly going on with the company but I am counting on the fact that there are an awful lot of eyes on the company -- D&T is the reporting accountant, Forbes has twice listed the company in it's "Fastest growing China list," the company is current with its SEC filings, the corporate website is very professional, the company is listed on several stock exchanges (domestic and London), and the private placement previously mentioned was gobbled up quickly. This company just doesn't seem like the farce the article suggests it to be. The CBOE also recently listed options on this equity.

With the precipitous drop yesterday, the company now trades at 9 times analyst earnings estimates for the year. With revenue growth in the 100% range, if the company delivers on its guidance and this article is proven largely innocuous, this stock could be a great pick. There is a great deal of speculation in this play, but for disclosure purposes, I am viewing this as the market giving me a second chance and am grabbing this opportunity.
***

Disclosure: Initiated a position in BBC at market open today at $10.18 and wrote naked puts with a Strike of $10 and a May expiry for a $0.45 premium.


Last Updated: May 2nd 2006


SeekingAlpha: This blog also appears in the China Stocks Blog of SeekingAlpha at http://chinastockblog.com/article/10063