99 Taibei Road
• Limin Economic\Tech. Zone
• Heilongjiang Province
•
• China
• www.biocactus.com
Investor Contact: Frank N. Hawkins, Jr. or Julie Marshall · Hawk Associates Inc. · (305) 451-1888 · www.hawkassociates.com
China Kangtai Cactus Bio-Tech Q3 Revenue Up 32% to Record $8.2M; Net Income Up 71% to $3.0M, EPS $0.15; Awarded $2.1 Million Contract for Patented Cactus-based Low and Zero Nicotine Cigarettes
China Kangtai Cactus Biotech Inc. (OTCBB: CKGT) is
a market-leading grower, developer, manufacturer, and
marketer of cactus-based products, including nutraceuticals,
nutritional food, health drink and liquor, extracts,
livestock feed & fish feed.
Culturally, Chinese believe in herbal-based medicine
and dietary supplements, which some view as alternative
medicine. This belief is the impetus for cactus products'
popularity in China and other parts of Asia. Cactus
products provide health benefits and are used as auxiliary
treatment to a variety of health issues, including
diabetes, obesity, constipation, cholesterol, high blood
pressure, low immunity and skin disorders.
Cactus contains over 18 amino acids, as well as carbohydrates,
proteins, chief meal fibrin, carotene, vitamins
C, E, vitamin K1, vitamins B1, B2, B6, and B12, nicotinic
acid, folacin, calcium, phosphorus, iron, potassium,
sodium, cobalt, molybdenum, magnesium, manganese,
copper, zinc, nickel, iodine, and selenium.
Kangtai Cactus capitalizes on 18 patents
and is currently seeking another 12. The
company controls over 387 acres of cactus
farms and maintains an active Research
and Development (R&D) effort.
Kangtai’s highly regarded products are
sold throughout China through a growing
distribution network. The company's
products are sold in supermarkets, nutrition
stores, department stores, hotels, restaurants
and social clubs, as well as through
direct corporate orders, seminars and
conferences orders.
The company went public in the U.S.
in August 2005 via a reverse merger.
The company employs a staff of 205.
Differentiators Competitive Strengths
60% market share of China's edible cactus
production –
The company’s 2008 production
capability of edible cacti was 14,425 tons.
The company predominantly grows three species
of cacti: Mexican Pyramid, Mexican Milpa-Alta
and Mexican Queen. The cactus fruits are processed
into juice, which is the basic ingredient for
cactus nutritional drinks. The harvested edible cacti
are processed into dry powder, which is the basic
ingredient for cactus nutraceuticals.
Strategic alliances with cooperative manufacturers –
In addition to its own cactus beverage and fruit
wine production facilities, Kangtai has cooperative
production agreements with five local pharmaceutical,
food and beverage manufacturers to process
and produce its products.
This strategy enables the company to fill orders
quickly with short production runs and to reduce
requirements for fixed asset investment. Kangtai
provides raw materials, quality control guidelines
and technical support while the processors provide
other materials, processing facilities and labor to
manufacture the cactus products for the company.
Active R&D –
The company's research and development
facility, the Heilongjiang Sino-Mexico
Cactus Development and Utilization Institute, is
certified by the prestigious Heilongjiang Science
& Technology Committee. The institute has independently
developed many patented cactus-based
nutraceuticals, nutritional food and drink product
formulas and production processes.
Through these efforts, Kangtai has a strong new
product pipeline that includes personal hygiene
and cosmetic products, baby foods, hydration and
energy drinks, animal nutrition and feed products.
Cactus cattle feed and cactus fish feed have been generating
rapidly growing revenues since July 2008.
The company plans to begin marketing cactus hog
feed in the fourth quarter in 2009.
Low cost regional distribution –
88% of Kangtai's
sales are generated by 14 regional distributors
that encompass over 200 distribution agents
covering 12 of China's 23 provinces and two of
China's four municipalities. The
efficient use of distributors through annual contract
has enabled the company to rapidly scale up sales
into new markets at minimal cost. In addition,
the company receives regular repeat orders from
group consumers such as schools, factories, community
organizations and government offices.
Recent News
China Kangtai Cactus Biotech Receives $5.94 Million for Transfer of Property and Equipment; Company Says No Impact on Operations
China Kangtai Cactus Biotech Awarded $2.1 Million Contract for Patented Cactus-based Low and Zero Nicotine Cigarettes
China Kangtai Cactus Biotech Says Q4 New Product Sales Exceeded Expectations
China Kangtai Cactus Biotech Adopts EITF 07-05, Expects to File Amended 10-Q, 10-K
China Kangtai Cactus Biotech Signs Cooperative Agreement To Produce Patented Cactus-based “Green” Animal Feed
Risk Factors
- Limited capital resources
- Indeterminate growth of Chinese
cactus market
- Investor understanding of the cactus
market
- Investor confidence in Chinese stocks
The Outlook
Kangtai's growth is driven by a diverse number of
factors including:
Traditional Chinese belief in herbal based
medicine and dietary supplements as an alter
native to healthcare
Surging demand for “green & natural" products
Growing Chinese consumer disposable income
and purchasing power for health & wellness
products
Increasing acceptance of Kangtai's prod
ucts by Chinese customers
Increasing awareness of cacti nutritional value
Unsaturated and fragmented cactus product
market with little competition
CKGT’s short-term strategy is to expand production
capacity and marketing efforts. CKGT is committed
to remaining at the forefront of providing quality
cactus-derived nutraceuticals, nutritional food,
health drinks, liquor, extracts, livestock feed and
fish feed.
CKGT's longer-term strategy is to expand its market
beyond China into South Korea, Singapore,
Taiwan and other southeastern Asian countries.
To accommodate this expansion CKGT entered into
an Asset Purchase Agreement in March 2009
with Qitaihe Kangwei Biotechnology Co., Ltd. to
acquire land use rights, housing ownership and
fixed assets consisting of machinery, equipment
and facilities.
Q3 2009 revenues increased by $2.0 M or 32% to $8.2 M from $6.2 M in Q3 2008. The increase in revenues was primarily driven by growing popularity of CKGT cactus-derived products. In addition, CKGT successfully launched two new products, cactus fish feed and cattle feed, in July 2008, which also con- tributed to the increase in sales.
Q3 '09 net income increased by $1.3M or 71% to $3.0 M from $1.8 M. This increase is due to the increase in net sales, specifically the sales of the newly launched cactus fish and cattle feed.
For 9M FY2009, revenue was $18 M, an increase of 29% from $14 M for the comparable period in 2008. Net income for 9M FY2009 was up 51% at $5.1 M, compared to $3.4 M for 9M FY2008.
The company had a cash position of $3.4M on Sept. 30, 2009, a YOY increase of 424% from $648K on Sept. 30, 2008.
Management
President, CEO and Chairman of the Board of Directors-
Jinjiang
Wang
General Manager and Director-
Chengzhi
Wang
CFO and Director-
Hong
Bu