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Author: DCWD40 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 3433  
Subject: Re: Research in SH Date: 9/15/2011 11:54 PM
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SEED cratered yesterday on news of a drop in sales and its CEO resignation:

During the third quarter of fiscal 2011, the Company generated revenues of RMB244.7 million (US$37.4 million), compared with RMB462.2 million (US$68.1 million) generated in the three months ended June 30, 2010. The goods already sold and delivered to customers can be seen as Deferred Revenue line on the balance sheet and the Advances from Customers records the advance cash receipts from customers this selling season. The lower amount of revenues this quarter is in part due to a later application of the distributor discount this 2011 selling season resulting in a later recognition of revenue this year.

Gross profit for the three months ended June 30, 2011 was RMB85.8 million (US$13.1 million) compared to RMB190.9 million (US$28.1 million) in the same period of the prior year.

Based on its current outlook, and existing and anticipated business conditions, Origin lowers the revenue guidance for FY 2011 in the range of RMB 530 million to RMB 550 million.


http://finance.yahoo.com/news/Origin-Agritech-Limited-bw-236...

Mr. Liang Yuan, President, Chief Executive Officer (CEO), and Director has informed Origin of his intention to resign from his current position as President and Chief Executive Officer for personal reasons effective immediately. Dr. Gengchen Han, Chairman of Origin, will assume the role of acting CEO.

As Origin is moving from traditional hybrid seed business to high-entry-barrier biotech GMO, we will also take this opportunity to transition to a professional management team for future business operations.


http://finance.yahoo.com/news/Origin-Agritech-Announces-bw-3...

I am not sure what a "professional management team" means but I would take a successful founder any day to a bunch of educated professionals. But, SEED is now on this new path.

The company also reported this:

As a result, the Jilin Changrong subsidiary will withdraw its seed registration and fold current operations into Origin’s existing Northeast distribution and Jinong Hi-tech Company. Origin will continue to hold 23% of Jinong Hi-tech. Originally, Jilin Changrong was formed as a collaborative effort between Origin and Jinong Hi-tech. Prior to the withdrawal, Origin Agritech directly held 53.95% of Jilin Changrong.

Commenting on the restructuring, Dr. Gengchen Han, Chairman and Chief Executive Officer of Origin, said, “We are pleased to have realized operational efficiencies from our restructuring in the Northeast. This current restructure, coupled with our new production unit in Xinjiang, will allow Origin to allocate resources to areas where we can achieve stronger returns for the long term. Leveraging on our enhanced technological and distribution platform, we will continue to innovate to better address Chinese farmers’ demand for premium agricultural product solutions.”


http://finance.yahoo.com/news/Origin-Agritech-Limited-bw-270...

These press releases are a lot of fog to me. Why is the 2011 estimate now lower? Who is the new "team" (which sounds like more than one person)? If the earlier merger wasn't the best way to leverage the company's operations, you do it? It seems, based on what I read in the US about the lack of clarity in Chinese company financial records, that SEED found a skunk in the Jinong house. To save face, they restructured the deal and left the skunk with Jinong. Does anyone see this differently?

SEED looks like it is in trouble. But, it has a lot of cash and very little debt. When I see one red flag, like a CEO leaving, I usually stop watching a stock. But with all these negatives, it is really hard to continue watching. If the government wasn't providing a protected environemnt for GMO seeds, and SEED wasn't a recongized leader here, if would be easy to walk away. But, the potential is now enchanced by the stock hovering at $2 and change. If the company's long-term potential is still in good shape, this could be a big multi-bagger in the future. [This is being said by a guy who got stung in AMSC.]

Unsure what to think... Not buying in the near future...

W.D.
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