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GHN Agrispan (GHNA): A True Hand To Mouth Company

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To OTC Journal Members: 

Let's say you wanted to be in the food business. That's a pretty broad industry. You have the producers- the farmers who grow the crops and/or raise the animals. You have the processors- who turn the farmer's products into consumables. You have the distributors- the middle men who get the finished products into markets, convenience stores, restaurants, etc. Then you have the retail providers- this is the last stop before the consumer actually eats the food.

Imagine owning shares in a company with a 40% growth rate, making money hand over fist, and filling the role at every level in the supply chain. From planting the seeds and feeding the livestock to a mouthful of lunch going into one of the employees at the China manufacturing facility of Dell Computer.

It's a marvelous opportunity. Read on........
 

GHN Agrispan (OTC BB: GHNA): From Hand To Mouth

You plant a seed in the ground. You water, fertilize, prune, cultivate, grow, and eventually harvest. It's food that will help feed 1.3 billion. Once harvested, the product goes to a processor/packager. Then a distributor takes it from the processor, and delivers it to the store, restaurant, cafeteria- wherever it takes its final step before ending up on the consumer's plate. Then, you plant another seed, and start all over.

Along the way the grower, processor, distributor, and final seller have businesses that make a profit. That's a bunch of companies sharing the prosperity. Here's why I'm very taken with today's new idea: This company wears all the hats- from Hand to Mouth- from planting the seed to the end consumer- they do it all, so they make money at every step in the process.

GHN Agrispan is capitalizing on China's burgeoning food industry- and they are doing it smack dab in the middle of one of China's Special Economic Zones- Xiamen City. The SEZ's have been granted a special economic system highly conducive to doing business for major multi national corporations.

Xiamen City- their home base, is located on the coast in the south, and hence has a gigantic port ideal for manufacturers. GHN Agrispan (GHNA) has 4 major business segments: Modern Agriculture, Frozen Pre Cooked Meats, Group Catering, and Retail Distribution.

As stated above- a company that provides from hand to mouth. From planting the seed to the consumer's mouth. Is it any wonder they are growing double digits?
 

Phase 1- Food Production

GHNA grows pollution free fruits and vegetables, raises pollution free livestock, poultry, and seafood, and boasts eco-friendly organic gardens. They have 4,100 acres of contracted coop, 260 acres of pollution free vegetables in Fujian Province, 80 acres of apple orchards in Gansu Province, and a 494 acre eco friendly organic production facility in the Longyan Agricultural Bureau.

GHNA also raises 200,000 chickens, ducks, and geese on 3.3 acres- has a 58 acre abalone farm, and 25 acres in Ningbo on which they can raise about 2 million pigs annually. Where does all this production lead? 

Right up the whole supply chain. Right from the farm to the mouth. As I said- this is a Hand To Mouth company.

And, lest you think it's just produce- think again- they have lots more stuff:

GHNA offers a complete line of ready to eat foods- they are packaged and distributed to grocery stores all over China. 


The Last Step: To the Mouth

How does the food find its way to the end consumer with this company? Several ways. As mentioned above, they have a Retail Logistics division that distributes their products all over China to Chain stores, small grocery stores, restaurants, etc.

In addition, the company has a thriving catering business. When I say catering, I'm not talking about the caterer who gives you a price to serve a choice of meat or fish at your daughter's wedding- I'm talking about long term contracts with the major companies in the Xiamen CEZ to provide cafeteria style catering to their thousands of employees on a daily basis.

How about this for a customer base:

  • Kodak
  • Phillips
  • Dell
  • Lenovo
  • WalMart
  • Bank of China
And- a whole bunch of China names none of us would recognize.

From the farm to the lunch table at Dell Computer's Xiamen manufacturing facility. It's hand to mouth. And, lest you think the Dell Computer manufacturing and assembly facility in Xiamen is some sort of seedy, toxic factory employing 12 year olds, think again. 

Here's what their lunch facilities look like. Hardly the picture some choose to paint of the China manufacturing facilities. Hi tech, state of the art, very comfortable long term labor force. Consistent catering business for many years to come.
 

What's It All Add Up To?

This company is going to deliver something close to $40 million in revenues this year, and probably about $8 million in net profits.

The three offices you see pictured here manage their nationwide platform of Agriculture, Frozen pre packaged foods, Group Catering, and Retail Logistics.

From the nearly $40 million in revenues, the company is likely to deliver about $7.5 to $8 million in net profits- that's about 20% net margins- that's unheard of in the food business- 5% net is more like the norm in this highly competitive industry.

This company is extremely profitable because they control everything from hand to mouth- they make money at every stage in the process, where most food companies don't.

This all equates to about $.17 to $.18 in EPS- somewhere in the 4x to 5x this year's EPS with the stock trading (or actually not trading much yet) this year's earnings- another stock screaming own me at this level. Also- this is another company with a great balance sheet. Cash, lots of current and non-current assets- absolutely no long term debt. 

And- the icing on the cake- today's post close news. 

GHNA delivered big news that could put this one square on investors' radar screens. GHNA announced a major new multi year contract. In the company's press release, they state they have signed an agreement with a Fortune 100 retail giant in China- it's a one year supplier agreement with an automatic renewal feature.

The company states it will be receiving purchase orders from the giant retailer to deliver certain of its products to locations throughout China.

The retailer is not named in the press release. However, if you read the 8K filing with the SEC related to this news- the retailer is revealed to be WalMart. Major order flow from WalMart- whether in the US or in China, can make a company's entire business.

This kind of vertically complete company in any rational market is worth at least 10x EPS, if not more. Therefore, it seems to me the upside from here is $1.50 to $2 on a $.75 stock as the company exists today- higher with more contracts. 

Seems fine to pick up right up to $.90. Like BOPH- the stock is highly illiquid and under followed. However, note since I was the first one out on Bohai, the stock has traded over 600,000 shares in a very short period of time. You get the first look.

Here's the post close news release for your review:

GHN Agrispan Signs Agreement with Internationally Recognized Fortune 100 Retail Giant in China

Initial One-Year Supplier Agreement Automatically Renewable for Consecutive Annual Terms

Press Release Source: GHN Agrispan Holding Company On Thursday September 23, 2010, 4:22 pm

XIAMEN, China--(BUSINESS WIRE)--GHN Agrispan Holding Company (OTCBB:GHNA - News), an emerging company engaged in China's high-growth agriculture, prepared foods and catering industries, today announced that it has signed a supplier agreement with an internationally recognized Fortune 100 retail giant in China.

The supplier agreement, signed July 29, 2010 allows GHN Agrispan, upon receipt of a purchase order, to sell certain of its products to the retail giant for resale at the retailer's locations throughout the PRC. The agreement has an initial term of one year and, so long as neither party provides written termination, the agreement automatically renews for consecutive one year periods.

"We are very excited to announce an agreement with a Fortune 100 enterprise," commented Ms. Xu Yizhen, CEO of GHN Agrispan. "As one of the most highly-respected international corporations in mainland china, we are pleased to provide this retailer with our fresh agricultural products and prepared foods. We hope this partnership will flourish over the next several years, and we expect to generate substantial growth as we roll out new products and services that expand and deepen our relationships with this client's customer base in China."

Ms. Yizhen continued, "After years of deploying best-of-industry practices, we have positioned GHN Agrispan to capitalize on China's growing middle class and their increasing desire for quality food products that are free of toxins and pollutants and provide a healthy alternative to heavily processed foods. We look forward to providing our investors regular news about our growing operations in China, in addition to any updates on our relationship with this Fortune 100 enterprise."

For more information on specific terms of this agreement, please refer to GHN Agrispan's recently filed 8-K by searching for the filing on the SEC website at www.sec.gov, or by navigating directly to the 8-K using the following link: http://www.sec.gov/Archives/edgar/data/1472688/000101968710003445/ghn_8k.htm

About GHN Agrispan Holding Company

Based in Xiamen City, China, GHN Agrispan Holding Company (OTCBB:GHNA - News) is an emerging Chinese operating company engaged in the high-growth agriculture, prepared foods and catering industries in China. GHN Agrispan has positioned itself to capitalize on China's burgeoning middle class through an increasing desire for healthy food products that are free of toxins and pollutants, as well as the China's booming catering industry, which is currently experiencing growth in the double digits. GHN Agrispan's catering group is recognized as one of the most reputable catering services in Xiamen. The company places a strong emphasis on food safety, selling its premium products and services to target clients including: US Fortune 500 companies, European multi-national firms, as well as established Chinese private enterprises and government institutions such as banks and schools. In addition, the output from the GHN Agrispan's fresh fruit, vegetables and other planting bases is purchased by major national supermarkets and first-tier wholesalers in developed cities throughout China.

For more information please visit the website for GHN Agrispan's wholly-owned subsidiary, Yidong Group: www.ghnagrispan.com/en

Forward-Looking Statements

This release contains "forward-looking statements" for purposes of the Securities and Exchange Commission's "safe harbor" provisions under the Private Securities Litigation Reform Act of 1995 and Rule 3b-6 under the Securities Exchange Act of 1934. These forward-looking statements are subject to various risks and uncertainties that can affect GHN Agrispan's operating results, liquidity and financial condition or otherwise cause GHN Agrispan's actual results to differ materially from those forecasted. Such factors include risks associated with economic, weather, public health and other factors affecting consumer spending, including negative changes to consumer confidence and other recessionary pressures, higher energy and labor costs, the successful implementation of GHN Agrispan's growth strategy, including the ability of GHN Agrispan to finance its expansion plans and the mix and pricing of goods sold. The identified risk factors and other factors and risks that may affect GHN Agrispan's business or future financial results are detailed in its filings with the Securities and Exchange Commission. These cautionary statements qualify all of the forward-looking statements GHN Agrispan makes herein. GHN Agrispan cannot assure you that the results or developments anticipated by it will be realized or, even if substantially realized, that those results or developments will result in the expected consequences for it or affect it, its business or its operations in the way it expects. GHN Agrispan cautions you not to place undue reliance on these forward-looking statements, which speak only as of their respective dates. GHN Agrispan does not undertake an obligation to update or revise any forward-looking statements to reflect actual results or changes in the GHN Agrispan's assumptions, estimates or projections.

Contact:

Company Contact:
GHN Agrispan Holding Company
Kenneth Ma, Executive Director
+86-136-660-1113
or
Financial Communications Contact:
Trilogy Capital Partners
Darren Minton, President
Toll-free: 800-592-6067
info@trilogy-capital.com


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