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Strategies & Market Trends : Greater China Junior Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Crossy who wrote (280)	9/26/2003 8:47:43 AM
From: Crossy	Respond to of 1992

re: 0399.HK - Far East Pharma - another new high HK$ 3.425 The end of the year should get an exciting time for FE Phara (0399.HK) since the annual book 2003 has already been closed late summer and the comapany will present FY2003 results late October to the interested public. The recent run-up I do think might be correlated with leaks on record earnings and exciting new projects, probably inside their supply chain... The company has been a consistent performer and has been avoiding indebtedness as far as possible (zero debt until this summer) when they took up USD $30m, probably to acquire other China based biotech opportunities.. Many smaller players on the chinese pharma market won#t have much room left until August 2004 to comply with the GMP directive (mandating GMP certification). For the bigger fish like FE Pharma this is a golden opportunity to buy in distribution networks and developmental projects cheapo.. Great timing for the line of credit. Low Interest rates, acquisition targets floating around ... etc.. Also noteworthy is the expansion of Gross Margin% last year - now almost 50%, while spending more than 5% of revenue on R&D. Their traditional operations are more like Johnson & Johnson's hertige and many cough sirups and treatment for the common cold are sold by them either. Last year they started up a cardiovascular division by introducing drugs against hypertension - the new division was an instant success, immediately accounting for 10% of revenues in 2002. What is more with the acquisition of Xiamen Talent Biotech FE Pharma will start producing rather high-value assays and reagents. Among them assays for the identification of cancer. Drug testing reagents had to be imported by China in large quantities historically. This could be a very high Gross margin opportunity for FE Pharma as it is directly aimed at import substitution. Then there was the SARS effect which had a rather positive consequence on the company's sales levels for their traditional OTC drugs, according to newspaper reports from early spring - during that time, at least 20% higher sales levels have been recorded. all in all, an exciting situatiion.. Price/Sales is still under 2, around 1.80. If sales are up as I expect, PSR will decrease further.. I really like this company, sort of a JNJ of China. For long term holders this one could be good for HK$5 and even more.. rgrds CROSSY