China Agritech (PINK:CAGC)

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)

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

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.