99 Taibei Road
• Limin Economic\Tech. Zone
• Heilongjiang Province
• Harbin
• 150025
• 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 Biotech Q2 Revenue Up 34% to $8.7M; Net Income up 989% to $3M; First Half Year Revenue Up 45% to 14.3M; Net Income up 765% to $5.4M
China Kangtai Cactus Biotech Inc. (OTCBB: CKGT) is China's leading cactus grower and producer of cactus related products including nutraceuticals, health drinks, beer, wine, liquor, extracts and powders, nutritional food, livestock feed, fish feed and cigarettes. The com- pany has 31 product lines.
Culturally, Chinese believe in herbal-based medicine and dietary supplements, which some view as alter- native 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, includ- ing 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 grow- ing distribution network 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.
Differentiators Competitive Strengths
60% market share of China's edible cactus
production –
The company’s 2009 production capabil- ity of edible cacti increased 33% to 19,184 tons grown in over 387 acres of farm land in Guangdong and Heilongjiang provinces. The company predominantly grows three species of cacti: Mexican Pyramid, Mexican Milpa-Alta and Mexican Queen. 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 and other products.
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 devel- opment facility, the Heilongjiang Sino-Mexico Cactus Development and Utilization Institute, is certified by the prestigious Heilongjiang Science & Technology Committee. The institute has inde- pendently 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 began marketing cactus hog feed and low nicotine and zero nicotine cigarettes in Q4' 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 Q2 Revenue Up 34% to $8.7M; Net Income up 989% to $3M; First Half Year Revenue Up 45% to 14.3M; Net Income up 765% to $5.4M
China Kangtai Cactus Announces $1M Equity Infusion from Kodiak Capital Group
China Kangtai Cactus Biotech Announces Acquisition of Tobacco Manufacturer
China Kangtai Cactus Biotech Q1 Revenue Up 66% to $5.5M; Adjusted Net Income up 20.5%; Reports Strong Cash Generation From Operations
China Kangtai Cactus Biotech Terminates Funding Agreement
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 August 2009 with the Local Government of Baisha Town, Taishan City, Guangdong Province to acquire land use rights of 181,854 square meters, with a useful life of 50 years.
Management expressed satisfaction with its 2009 results noting that positive sales momentum helped generate nearly $8M in cash from operations. Nutraceuticals, which accounted for 40% of total sales were up 6%. Beverage sales reached 35% of total sales with a 73% increase. Cactus feed revenue was up 168% and packaged food salses rose 222%.
The company said it was very pleased with the initial sales of its cigarette products, which are showing excellent initial acceptance by Chinese consumers.
The company's guidance for 2010 calls for revenue growth of over 30% to nearly $35M. This guidance is forward looking and actual results may differ materially. These are the company's targets and not predictions of actual performance.
Management
President, CEO and Chairman of the Board of Directors-
Jinjiang
Wang
General Manager and Director-
Chengzhi
Wang
CFO and Director-
Hong
Bu