China Agritech (PINK:CAGC)

Roman and Renshaw on CAGC                                         06/16/2011

CAGC: Terminating Coverage

Termination of Coverage

Effective immediately, we are terminating coverage of China Agritech Inc. (“China Agritech”) to allocate resources more efficiently within our coverage universe. Upon termination of coverage, any of our prior financial projections on China Agritech should not be considered reliable.

Rating

China Agritech was last rated Under Review.

Delisting from Nasdaq

On May 20, 2011, the company announced that the Nasdaq Hearings Panel denied the request of the company for continued listing, and the shares were delisted and trading was suspended on the Nasdaq Stock Market effective at the open of business on that day.

Dismissal of Ernst & Young

On March 14, 2011, China Agritech announced that it dismissed Ernst & Young Hua Ming as its independent auditor effective the same day. (Please note that the company announced on November 15 of last year that it appointed Ernst & Young Hua Ming as its auditor.) Subsequently, on March 29, 2011 the company announced that a Special Committee of its Board engaged the law firm of TroyGould PC to advise it in connection with the Committee’s independent investigation of certain allegations on the company made by third parties. On the same day, TroyGould retained BDO China Li Xin Da Hua Certified Public Accountants Co., Ltd. to assist in the investigation of various accounting issues. On April 12, China Agritech announced the appointment of Simon & Edward, LLP as its new independent auditor starting from April 6, 2011.

Valuation

On February 7, 2011 we put our rating on China Agritech under review due to uncertainties surrounding the company with regard to various negative allegations raised against the company.

Notice Regarding Privacy and Confidentiality:


This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

BEIJING, May 20, 2011 /PRNewswire-Asia-FirstCall/ -- China Agritech, Inc. (NASDAQ: CAGC) ("China Agritech", or the "Company"), a leading organic compound fertilizer manufacturer and distributor in China, today announced that the Nasdaq Hearings Panel has denied the request of the Company for continued listing and has determined to delist and suspend trading of the shares on The Nasdaq Stock Market effective at the open of business on Friday, May 20, 2011. The Company's shares are expected to subsequently trade on the OTC Market.

The Company remains committed to dispelling the allegations made against our Company. The independent investigation is proceeding under the supervision of the Special Committee. The Company expects the investigation will be completed within the next couple of months. The Company is dedicated to providing accurate and complete information to our shareholders and is focused on completing the investigation and audit process so that concerns about the Company can be properly addressed. The Company expects to be able to file the 2010 10-K within a reasonable time period after the completion of the investigation and audit process.

BEIJING, April 12, 2011 /PRNewswire-Asia-FirstCall/ -- China Agritech, Inc. today announced that the Board of Directors, based on the recommendation of the Company's Audit Committee, has appointed Simon & Edward, LLP as the Company's independent auditors starting from April 6, 2011.

BEIJING, March 29, 2011 /PRNewswire-Asia-FirstCall/ -- China Agritech, Inc. announced today that the Special Committee of the Board of Directors of the Company has engaged the law firm of TroyGould PC to advise it in connection with the Committee's independent investigation of certain allegations made by third parties with respect to the Company and certain related issues. On the same day, TroyGould retained BDO China Li Xin Da Hua Certified Public Accountants Co., Ltd. to assist in the investigation with respect to various accounting issues, including specific financial transactions and customer relationships.

On November 13, 2010, China Agritech, Inc. (the “Company”) appointed Ernst & Young Hua Ming (“E&Y”) as its independent registered public accounting firm. On March 14, 2011, the Company terminated the services of E&Y. During the period from November 13, 2010 to March 14, 2011, E&Y never conducted a review or completed an audit of any of the Company’s financial statements. The decision to terminate E&Y was recommended and approved by the Audit Committee of the Board of Directors of the Company.

The following events occurred within the period from E&Y’s engagement to the date of E&Y’s dismissal. On December 15, 2010, E&Y provided a letter to the Audit Committee of the Board of Directors of the Company (the “Audit Committee”) describing certain matters that, if not appropriately addressed in a timely manner, may result in audit adjustments, significant deficiencies or material weaknesses and/or delays in meeting the 10-K filing deadline. The Company believes it responded to the matters outlined in E&Y’s December 15, 2010 letter. E&Y does not agree that those matters had been fully addressed and believes those matters could have materially impacted the Company’s internal control over financial reporting as of December 31, 2010. On March 8, 2011, E&Y informed the Audit Committee that it had encountered additional issues and concerns that, in E&Y’s view, required additional information and procedures, including the initiation of an independent investigation, in order to verify certain transactions and balances recorded on the Company’s financial statements and records for the year ended December 31, 2010. E&Y also orally advised the Audit Committee that it may not be able to rely on management’s representations based on the issues identified. The Company believes that it was taking appropriate steps to respond to E&Y’s recommendations for further investigation prior to the time of E&Y’s dismissal. E&Y does not agree with the Company’s assertion in this regard.

On March 13, 2011, the Company announced that it formed a special committee of its board in order to investigate certain allegations made by third parties with respect to the Company and certain related issues and that the Company would not be able to meet the its Form 10-K filing deadline. E&Y informed the Company that, in its view, there was a material omission of fact from the Company’s press release relating to the formation of the special committee, as the press release did not specifically disclose that the independent investigation was related to issues which were identified during the performance of the Company’s year end audit. E&Y further advised the Company’s representatives that E&Y may resign as the Company’s auditors if a revised press release was not issued. The Company, however, believed that the specific disclosure in the press release about the investigation combined with the disclosure of the indefinite delay in the 10-K filing, was a clear indication to the market that issues had arisen in connection with the annual audit which would have to be addressed.

E&Y informed the Company that the issues identified in performing their audit may, if further investigated, have adverse implications for the financial statements covering the three quarterly reports filed by the Company on Form 10-Q during 2010, and advised the Audit Committee to inform the predecessor auditors of the issues identified, so that they can assess the impact on prior financial reports.

BEIJING, Feb. 22, 2011 /PRNewswire-Asia/ -- China Agritech, Inc. announced that it has expanded its sales partnership with China National Agrochemical Corporation for the Company's Green Vitality organic granular compound fertilizer products.

Pursuant to the agreement, China Agritech will supply Green Vitality organic granular compound fertilizers worth an estimated value of RMB 44 million (approximately US$6.8 million) through December 2011.

By the end of 2010, the Company had become an official supplier of organic liquid compound fertilizers to the China National Agrochemical Corporation ("CNAC"), China's largest developer, manufacturer and seller of pesticides and one of the major players in the domestic fertilizer market. China Agritech's sales contract with CNAC in 2010 was valued at approximately US$2.0 million, focused upon the Company's Green Vitality organic liquid compound fertilizers.

Please see the latest letter to shareholders regarding allegations made by LM Research:

Rodman & Renshaw on CAGC

3Q10 Result Summary 

China Agritech Inc. (“China Agritech”, Ticker: CAGC, Market Outperform) announced 3Q10 results with both the top and bottom lines significantly missing our expectations as well as the Street consensus. Total revenue decreased 11.7% YoY to $23.9 million, considerably below our estimate of $37.2 million and the Street consensus of $36.0 million. Revenue from liquid fertilizers was down 5.8% YoY to $14.2 million. Sales of granular compound fertilizers plunged 18.2% YoY to $9.7 million. Gross profit was $9.0 million, compared to our estimate of $12.9 million. Gross margin, however, expanded to 37.6%, representing a 210bps improvement from 3Q09 and a 290bps sequential increase, and exceeded our expectation of 34.7%. Non-GAAP net income (excluding stock compensation expenses and provision for doubtful debt) came in at $4.6 million, or $0.22 per diluted share, below our respective estimates of $6.8 million and $0.34 as well as the Street consensus of $6.4 million and $0.30. 

3Q10 Highlights and Discussions 

The dismal top line result was attributable to a combination of a few factors leading to dwindled sales volume. Management cited the severe flood across central and southern China in the summer as having a significant impact on the sales of the company’s fertilizer products. Secondly, the company started to tighten its credit terms on granular products, requesting customers to pay cash on delivery going forward rather than continuing to grant them the 90-day credit term that was initiated during the product launch period. With the adverse summer weather impact gradually fading, we believe sales volume should rebound in Q4, especially for granular compound fertilizer products, which are primarily sold during the period from October to March. That being said, we believe the stringent cash payment policy could dampen the demand for the company’s granular compound fertilizer products, especially when considering the abundance of similar products in the market. 

The improvement in the overall gross margin was attributable to margin expansions in both the granular and liquid fertilizer segments, which recorded gross margins of 22.3% and 48.1%, respectively. Thanks to the increase in ASP from $349/MT to $367/MT, the gross margin of the granular segment improved more than 200bps YoY. The improved liquid fertilizer margin was partially a result of enhanced production efficiency. We also believe the summer flood played a role increasing the ASP and expanding margins. Income tax expenses during the quarter were $2.1 million, implying 53.4% effective income tax rate. The hike in effective tax rate was due to a large increase in non-deductible expenses ($1.1 million vs. $0.2 million in 3Q09) and no benefit from tax holiday. The soaring income tax expenses also contributed to the lackluster bottom line. Non-GAAP net margin for the quarter was 22.8%, above our estimate of 18.7%.

Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Third Quarter 2010 Results

• Net revenue for the third quarter of 2010 was $23.9 million compared with $27.0 millionin the same quarter last year.

 The decline in the sales of organic granular fertilizers was mainly due to normalizing the credit sale policy. As the organic granular fertilizers move beyond its introductory stage, an increasingly larger proportion of the granular products sales are now cash based and it is expected to remain so going forward. Decreased sales of organic granular fertilizer were also due to seasonality as such products are usually applied by farmers prior to the seeding season. Unusually high temperature and precipitation hampered the production, storage, transportation of organic fertilizers, decreasing order sizes from some commercial users. In addition, severe weather in the central and southern parts of the country, such as Hubei ,Anhui  and Guangxi provinces, also negatively impacted overall fertilizer sales, and in particular that of the organic granular fertilizers.  

• GAAP net income for the third quarter of 2010 was $1.8 million compared with $5.7 million in the same period of 2009. Diluted earnings per share of $0.09 on a substantially greater number of shares outstanding, compared with diluted earnings per share of $0.41 in the previous year's same quarter.

• Excluding the provision for doubtful debt and share-based compensation, adjusted net income attributable to common stockholders for the third quarter of 2010 was $4.6 million, compared with $6.2 millionin the third quarter of 2009.

• Non-GAAP diluted earnings per share were$0.22 versus $0.44 for the same period in 2009, but on a substantially greater number of shares outstanding in the 2010 period.

• Third quarter analyst eps estimates were $0.33. 

Business Outlook

Mr. Yu Chang, Chairman and Chief Executive Officer of China Agritech, concluded, "Entering the fourth quarter, weather conditions have become stable throughout China. Our granular sales are now accelerating. Seasonally, fourth quarter is the strongest quarter for granular products with solid payment receipt, as we have changed the payment terms for granular products from 90 days in the beginning of the year to current term of cash on delivery. The price of agricultural products, especially the cost-efficient and reliable organic fertilizers, has been rebounding as seeding resumes. We are capitalizing on this favorable trend to try our best to achieve our annual target."

Global Hunter on CAGC

China Agritech (Buy)
CAGC: Reducing Q3 estimate estimate following recent site visit.
 
We are reducing our Q3 expectations after having met with management during a recent site visit. It appears that the unseasonal weather patterns that occurred in Q3 may have impacted demand on a more macro basis, which in turn has more directly impacted CAGC as it relates to pricing. We have chosen to revise our revenue and earnings assumptions for Q3 as a result of this.
 
To our knowledge this situation has normalized, as has pricing, in Q4, but we will await further detail on the upcoming conference call. Shares have appreciated 36% over recent lows and are up 25% since our June initiation. We continue to view Agritech as the best positioned of the US listed Chinese fertilizer plays and we believe that its focus on granular fertilizer, although a lower margin play, is a stronger strategic position as it relates to share capture versus chemical fertilizers. As such we view the company as well positioned from a long term perspective and we maintain our Buy rating and $20 price target, which is predicated on FY 2011 estimates, but we are somewhat concerned that Q3 results could create near term volatility given the recent appreciation in share price.
 
Key Points:
 
Adjusting our Q3 estimates. Following our recent site visit and discussion with China Agritech’s management, we are lowering our Q3 revenue and earnings assumptions. We now expect the company to report $32.4MM in revenues and $7MM in non-GAAP net income in Q3, below our previous estimates of $37.5MM and $8.5MM, respectively. On a per share basis, this translates to an EPS of $0.33, below our previous estimate of $0.40. For the full year, we now expect the company to report revenues and non-GAAP net income of $110.2MM and $22.6MM, compared to our prior estimates of $115.3MM and $24.1MM. This is somewhat below the company’s full year guidance of $114MM in revenues and $23.5MM in non-GAAP net income.
 
We reiterate our Buy rating and $20 price target and continue to believe that CAGC remains the best way for US investors to play the compound fertilizer space. At Friday’s closing price of $14.71, CAGC is trading at 12.9x FY2010 and 11.3x FY2011 on a P/E basis and at 8.6x FY2010 and 6.3x FY2011 on an EV/EBITDA basis.Our target price of $20 per share is predicated on a 15.3x FY2011 on a P/E basis and 9.1x FY2011 on an EV/EBITDA basis, somewhat below the peer group averages of 17.5x and 11.6x, respectively. In our opinion, a $20 price target is easily justified by CAGC’s significant growth potential in the domestic organic fertilizer market, through the entrance of the much larger granular fertilizer market, recent production capacity expansion and rapidly growing market reach. In addition, the entrance into the branded large-scale distribution centers (currently not included in our estimates) could help the company to capture additional market share and ramp revenues in 2011 and beyond. CAGC also has a solid balance sheet with over $50MM in cash (following the recent equity raise and warrant exercise) and no debt, which translates into net cash of $2.62 per share.

Chardan Capital Markets took organic fertilizer firm China Agritech (CAGC) to Sell from Neutral and gave the stock a $9 price target on Wednesday morning. The analyst cited ongoing earnings quality and auditor concerns for the downgrade and noted that shares are overvalued compared to peers. The price target represents a -43% discount to Tuesday’s closing value.

As of Tuesday’s close, China Agritech is the only Chinese Agriculture Stocks Index component to post gains on a one-month basis. Elsewhere in the sector, Yongye International (YONG), AgFeed Industries (FEED), and China Green Agriculture (CGA) have all slipped by -18% or more for the period, and the Index is lagging the S&P 500 by -10%.

This morning’s Chardan downgrade comes just a week after Rodman & Renshaw started China Agritech at Market Outperform with a $20 price target. It will be interesting to see which of the analysts is on target, and where traders send the stock from here. So far in 2010, shares have traded for more than $30 and less than $10, and given the mixed consensus, investors can expect some more volatility.

• Net revenue grew 63% year-over-year to a quarterly record of $34.3 million from $21.0 millionin the second quarter last year. Liquid fertilizer sales increased year-over-year by 46% to approximately $20.0 million, while granular fertilizer sales posted a year-over-year 95% increase to reach approximately$14.3 million. Organic granular fertilizer continued to gain traction among farmers during the quarter, while the sales of organic liquid fertilizer is expected to further accelerate during the growing season starting from May. The increase of organic liquid fertilizer sales also reflected the expansion of the Company's customer base to newly established markets in the central and southern regions of China.
  
• Excluding the non-cash gain in the fair value of warrants, gain on extinguishment of warrants, and share-based compensation, non-GAAP net income attributable to common stockholders for the second quarter of 2010 was $7.3 million, up 30.4% from $5.6 million in the same period last year. Non-GAAP diluted earnings per share were $0.37 versus $0.44 for the same quarter in 2009, but on substantially greater number of shares outstanding in the 2010 period. Diluted weighted average number of shares outstanding for the second quarter of 2010 was 19.7 million compared with 12.7 million shares in the second quarter of 2009.

Business Outlook

The Company reiterates its guidance for the year ending December 31, 2010 with

• Revenues expected to reach approximately $114 million.
  
• Non-GAAP net income, which excludes the change in the fair value of warrants issued, gain on extinguishment of warrant liability, and stock-based compensation, of approximately $23.5 million, representing a year-over-year growth of 50% and 45% on revenues and non-GAAP net income, respectively.
  
  "While we are encouraged by our solid performance in the first half of the year, we expect that the second half will be stronger as the peak farming season is unfolding and our products are gaining traction. Our balance sheet is now strengthened and we expect that our cash flow will continue to improve. With our product portfolio, growing R&D capability, nationwide distribution footprint and strong financial standing, we believe that we are well positioned to capture the wave of the organic food market growth in China," Mr. Yu Chang, Chairman and Chief Executive Officer of China Agritech, concluded.

China Agritech, Inc. Receives $10 Million From Warrant Exercise by The Carlyle Group:

Mr. Yu Chang, Chairman and Chief Executive Officer of China Agritech, commented, "We are pleased that The Carlyle Group has increased its investment in and commitment to China Agritech. This investment will immediately provide better visibility to our financial statements, as there will no longer be non-cash charges related to these warrants that will affect our earnings. With the new proceeds to further strengthen our balance sheet, we have ample capital to support our ongoing operations and execute our current expansion plans, especially to begin the ramp up of our distribution network in China. We look forward to extending our growth track record and maximizing value to our long-term shareholders."

June 29, 2010 (PR Newswire)

• Our Growth Strategy
   
  We believe that our increased capacity to produce organic granular compound fertilizer products, which have a lower price point and greater market appeal than our premier organic liquid compound fertilizer products, makes us well positioned to expand sales and increase revenues. We have focused on the expansion of our granular production because the market for organic granular fertilizer is almost ten times larger than the current market for organic liquid fertilizer due to the familiarity and tradition of farmers’ using granular fertilizers. In addition, the per unit amount of granular fertilizer used for sowing coverage is much higher than the amount used for liquid fertilizer. 
  
• Our goal is to further expand our products’ market share throughout the PRC by building and operating branded, large-scale distribution centers, and engage franchisees to own and operate retail chain stores which will sell our own branded products (e.g., organic fertilizers) and international and local sourced products (e.g., seeds, pesticides and other agricultural products). Our growth strategy includes the following strategies:
  
  • Continue Organic Growth Initiatives. We believe that the current fertilizer market is fragmented and represents an excellent opportunity for us to gain additional market share from our competitors, mainly chemical fertilizer manufacturers. We intend to establish branded chain stores by converting our current offices into a flagship store and distribution center and inviting our current distributors to join in our line as franchisees to operate chain stores under our brand. We also intend to leverage our strong brand, quality customer services and quality of our products to gain incremental business in the fertilizer market. Finally, we strongly believe that as we continue to grow, economies of scale and enforced brand awareness will allow us to continue to be profitable.
    
  • Expand the lines of our products. Beside our current organic fertilizers, we will seek to source, either internally or locally, other agricultural products, like seeds, pesticides, agricultural equipments and tools to expand the lines of our products to meet all the necessities of farmers in the PRC. All these products will be sold through our branded chain stores directly to farmers, who are the end customers.
    
  • Capitalize upon Strong Industry Dynamics in the PRC. Continued economic growth in the PRC, coupled with evolving government policy on preservation of farmlands by promoting use of organic fertilizers on one hand and improvement of farmers’ income on another hand, present us with significant future growth opportunities. We believe that with continued strong government commitment, we will continue to benefit from it.
    
  • Execute Strategic Acquisitions. We intend to acquire certain domestic targets that are accretive and synergistic to our growth strategy.

Ex-GeoBArgain China Agritech analyst estimates are now available.

2010 EPS estimate: $1.16
2011 EPS estimate: $1.25

In 2009 CAGC reported adjusted EPS of $1.14. Recall that we removed CAGC from the GeoBargain list on March 8, 2010.  We were considering CAGC as an investment option once again, but the current forecasted growth rate does not meet our standards.  CAGC is yet another  casualty of the dilution train that has slammed the ChinaHybrid sector.  We will revisit if the growth outlook improves.  

CAGC Remains on GeoBargain List

• Added to GeoBargain list on 8/24/2009 at $2.95 ($5.90 post 1 for 4 reverse split and a 2 for 1 forward split).
• Current price: $21.60

CAGC had a huge run from in its initial inclusion on the GeoBargain list on.  The company should report 2009 EPS of close to $1.30, giving it a trailing P/E of around 16.  Because of the stock’s low P/E, we will keep it on the GeoBargain List.  We generally remove a stock from this list if it attains a trailing P/E of 25 or a forward P/E of 15.  The company has issued strong 2010 revenue guidance. However, given the stock’s huge run, uncertainty surrounding 2010 EPS and CAGC's recently shelf offering (giving them the ability to issue stock) may make it prudent to take some profits off the table.

We do think that management has an under-promise over-deliver type of philosophy, so we will monitor developments closely for:

• News that would increase guidance such as an acquisition
• Clarity on 2010 EPS Guidance
• Trading opportunities if the stock pulls back

The GeoTeam® is speculating that China Agritech will split its stock soon.

This Notice and the accompanying Information Statement are being furnished to the stockholders of China Agritech, Inc.,  in connection with action taken by the holders of a majority of the issued and outstanding voting securities of the Company, to effect a forward split of the Company’s Common stock on the basis of two shares for every one outstanding share.

The actions to be taken pursuant to the written consent shall be taken at such future date as determined by the Board of Directors, as evidenced by the filing of the Amendment with the Secretary of State of the State of Delaware, but in no event earlier than the 20th day after this Information Statement is mailed or furnished to the stockholders of record as of December 22, 2009.

Source: SEC Form DEF 14C (January 8, 2010)

Mr. Yu Chang, Chief Executive Officer of China Agritech, commented, "We are encouraged by the initial results from our strategic actions to expand into the much larger market for organic granular fertilizers and extend our geographic reach into new Chinese provinces. As many Chinese farmers are more familiar with granular than liquid fertilizers, we believe that the bundle of our granular with our liquid fertilizers will continue to drive sales volume. We also anticipate our major distribution relationships in the domestic and foreign markets will add to our growth. The additional capital from Carlyle's investment strengthened our cash position and we are financially well equipped for further expansion. Carlyle will help us integrate our marketing by building marketing and distribution channels so we may more quickly penetrate targeted markets.

^a The above forecasts reflect the Company's current and preliminary views and are therefore subject to change. Please refer to the Company's Safe Harbor Statement (usually in press releases) for the factors that could cause actual results to differ materially from those contained in any forward-looking statement.

^b Adjusted for a 1 for 4 reverse stock split

Source: PR Newswire (November 12, 2009)

China Agritech Inc (NASDAQ:CAGC), GeoBargain

China Agritech reported fantastic 2009 third quarter results, surpassing our expectations.

The Company also increased its full year 2009 guidance. We were a little concerned that the CAGC recently announced a private equity capital raise near its book value, but even with dilution CAGC should finish 2009 on a very positive note.

^a The above forecasts reflect the Company's current and preliminary views and are therefore subject to change. Please refer to the Company's Safe Harbor Statement (usually in press releases) for the factors that could cause actual results to differ materially from those contained in any forward-looking statement.

^b Adjusted for a 1 for 4 reverse stock split.

See CAGC news release

^d Non-GAAP EPS Figures exclude certain non-operating gains and losses as well as certain non-cash items. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information .  The GeoTeam® non-GAAP figures may, from time to time,  differ from company supplied figures.

After speaking with the CGAC the GeoTeam® has made the following minor adjustments to our 2009 second quarter fully-tax adjusted EPS number and our fully tax-adjusted trailing EPS number.

• New fully-tax adjusted EPS number:  $0.18
• Old   fully-tax adjusted EPS number:  $0.19

• New adjusted trailing EPS: $0.41
• Old   adjusted trailing EPS: $0.46

These changes have been reflected in our August 24th research note.

On August 17, 2009 the GeoTeam® coded China Agritech (CAGC.OB) as a GeoSpecial. The Company reported stellar 2009 second quarter earnings, exceeding analyst EPS estimates by about $0.10.  We have recoded CAGC as a GeoBargain.

2009 Second Quarter Financial results

^a 2009 EPS includes approximately $0.02 due to a reclassification of marketing rebate of approximately $716,478 from selling expenses to net revenues.

^b CAGC plans on affecting a 4 for 1 reverse split which should help the Company qualify for an upgrade to a senior exchange.

Select Valuation Items

• Price: $3.15 (8/24/09)
• Fully Tax-Adjusted Trailing EPS: $0.41
• Tax-Adjusted P/E: 7.68
• Book Value Per Share: $2.91

The GeoTeam® owned China Agritech in the past, but sold the stock when it appeared that above average EPS growth was not materializing. Leading up to this quarter, we were largely unimpressed with the Company's recent EPS growth trend.  However, we re-established a small position in China Agritech stock based on low valuation statistics. Furthermore, the Company has an overall strong balance sheet, despite an ongoing issue with accounts receivable.  After listening to a replay of the CAGC second quarter call, the GeoTeam® believes:

• There is a good chance that the second quarter earnings per share levels may be maintained going forward, due to the accelerating contribution from its non-liquid granular fertilizer product line.
• The accounts receivable issue will soon be rectified.

Mr. Yu Chang, Chief Executive Officer of China Agritech, commented, 'We are reaping the benefits of our strategic actions to expand into the much larger market for organic granular fertilizers and extend our geographic reach into new Chinese provinces. We are excited with the growth this quarter, especially with the contribution from two of our three planned new production facilities for organic granular fertilizers. We expect the third facility will be completed by the end of 2009. We also anticipate additional sales from our major distribution relationships in the domestic and foreign markets in the second half of 2009.'

The Company has full confidence that the projected net revenue of approximately $60 million and net income attributable to the common stockholders of $9.5 million for the fiscal 2009 year will definitely be exceeded. The company is projecting the production of 20,000 tons of granular organic fertilizers in the third quarter of 2009. See Previous Guidance.

Source: PR Newswire (August 17, 2009)

Beginning on July 20, 2009, the management of China Agritech, Inc.  held one on on presentations with investors.

Presentation Materials

The Chinese government has reported that raw materials prices are gradually declining, which resulted in steadily improving market conditions for compound fertilizers in China. The Company anticipates that lower material costs will generate higher profits on its anticipated revenues.

Mr. Yu Chang, Chairman and Chief Executive Officer of China Agritech, commented, 'We have taken a number of steps to position China Agritech for further growth. We expanded our marketing and distribution network within China, validated our relationship with China's largest fertilizer distribution company, Sinochem, created a diversified manufacturing base for our new organic granular fertilizer to penetrate key agricultural areas in China, and are introducing new high-margin fertilizers based on our proprietary technologies. Further, we intend to be more aggressive in enhancing growth and profits through exports and acquisitions. We look forward to the second half of 2009 as we further execute our plans to build shareholder value.'

Source: See Release

^a Company forecasts reflects the Company's current and preliminary view, which is subject to change.

^b The company did not provide EPS guidance. The GeoTeam® used the first quarter fully diluted shares outstanding of 24,699,615 to derive an implied EPS number.

Guidance Report: 

Full Year Fiscal 2008 Guidance Ending December

* The company did not provide EPS Guidance.  EPS of $0.35 was derived by using the company's shares outstanding as of the third quarter (24,699,615).

"The preliminary revenue is now lower than the previous guidance of $54 million and the preliminary net income remains unchanged from guidance. The reason for the lower revenue was mainly due to price decline and high sourcing costs for granular fertilizers in the fourth quarter."