China Health Industries (OTC BB:CHHE)

The GeoTeam® is taking a bold move and coding China Health Industries (Pinksheets:CHHE), which trades on the Pink Sheets, as a GeoSpecial.  After some initial due diligence and reviewing filed financials it is possible that some investors may view CHHE as an interesting risk/reward opportunity.

Positive points:

• Fiscal 2009 revenues increased 1337.93% to $10.98 million.
• First quarter fiscal 2010 revenues increased 3481.29% to $10.25 million.
• First quarter 2010 sales have essentially matched all of 2009's figure.
• Achieved 2009 EPS profitability of $0.05.
• First quarter 2010 EPS has already matched all of 2009's figure.
• Positive 2010 outlook:

"We anticipate our total revenues in 2010 versus 2009 to increase by 101% or approximately $11.04 million with growth in all categories of our product sales. Our gross profit margin in 2010 is expected to be approximately 55.45% due to raw material cost inflation. Operating expenses will increase due to higher percentage of R&D investment as well as expanding our own distribution channels. We estimate our overall 2009 net profit margins to be approximately 22.64%.However, there is no assurance that these predictions will be reached."

Source: See SEC Filing (For the quarterly period ended September 30, 2009)

We should note that we are somewhat perplexed on one issue: The 2010 guidance, which implies 2010 full year revenues of approx. $22 million, seems a little peculiar given that CHHE has already booked  $10.25 million in revenues for its 2010 first quarter.  The GeoTeam® will delve into this matter.

Other points to ponder:

• Shares outstanding of 62 million are above our preferred minimum.
• We found no verbiage on 2010 capital requirements
• Stock trades on the pinksheets, although the company is filing SEC documents, a practice uncommon with pinks.