Your Thursday PLIN Update
Updated Goldman Small Cap Research Report
Before today's opening bell, I want you to check out this week's profile: PLIN.
Yesterday, PLIN went on a roller-coaster run up to $2.09 before settling at $1.71.
Currently, this stock is appearing oversold and has maintained a level of $1.67 for nearly a month and a half.
Knowing it is trading around these lows, PLIN could be displaying a ton of upside potential in the short-term. It will be worth keeping on your radar the rest of the week.
Make sure to read my initial report on PLIN below.
Today I want you to turn your immediate focus to past champ stock profile China Xiangtai Food Co., Ltd. (PLIN).
Previously, I brought PLIN to your attention at around $1.93 on the morning of March 26th before it turned up the heat to run approximately 105% intraday to a high of $3.96.
Currently, PLIN looks undervalued as the company has several potential catalysts going for its stock that you need to be aware of. Here they are:
#1 PLIN Potential Catalyst - Yesterday's Breaking News
PLIN Provides Update on Current Business Operations
NEW YORK, May 27, 2020 /PRNewswire/ -- China Xiangtai Food Co., Ltd. (NASDAQ: PLIN) ("Xiangtai" or the "Company"), an emerging growth company engaged in the food processing business, today provided a business update and reported on recent corporate developments.
The Company noted that the U.S. Senate passed the Holding Foreign Companies Accountable Act, which would require the Securities Exchange Commission to prohibit the trading of companies whose auditor has not been under the inspection of the Public Company Accounting Oversight Board (PCAOB). The Company assures that its consolidated financial statements were audited by a PCAOB-inspected public accounting firm and therefore would not be subject to proposed prohibition.
Although not affected by the Senate Bill so far, the Company remains committed to providing transparent disclosure to its shareholders. To protect the interests of invstrs, the Company will keep enhancing transparency and disclosure.
As the restaurants gradually reopen, overall pork demand in China is expected to recover. The Company has fully resumed manufacturing activities this month. All employees are required to adhere to applicable safety protocols including but not limited to appropriate social distancing measures, strict sanitization practices, the use of personal protection equipment, and daily employee health checks.
To maintain business continuity and stability, Xiangtai strategically develops towards the upstream of the food supply chain. Recently, the Company rented a 2,500 square meter hog farm in Guangxi Province, further expanded into hog breeding business and vertically integrated the food supply chain.
"Businesses are as usual for us and our operations are back to normal to meet the demand of our customers. As a company serving people's essential needs, we are doing our best to provide healthy and safe products to our customers and to support our valued channel partners," said Ms. Zeshu Dai, Chairman and Chief Executive Officer of China Xiangtai Food Co., Ltd. "While expanding into hog breeding business, we are producing our products in a more environmentally friendly way and ensuring higher quality. We expect to continue expanding the market share in the southwest area."
"During 2020 we have continued to make significant progress on our strategic priorities, despite the unprecedented challenges posed by the global CV-19 pandemic," Said Mr. Xiaohui Wu, President and Director of China Xiangtai Food Co., Ltd. "We are confident that vertical integration strategy can benefit our shareholders as the retail trends are progressing more healthily."
#2 PLIN Potential Catalyst - $6.70 Analyst Price Target
In early May, Rob Goldman from Goldman Small Cap Research, released an updated research report on the company while reiterating a $6.70 target.
From Wednesday's close of $1.70, this gives PLIN upwards of approximately 291% potential upside.
Here are some of the most important report highlights:
- Conclusion: PLIN has announced major initiatives which should substantially increase the Company’s financial performance and drive the stock toward our $6.70 price target, which reflects 13x our upwardly revised FY21 operating income forecast in our basic (non-roll up) P&L model.
- PLIN closes accretive, complementary acquisition. In a matter of weeks, PLIN not only executed a highly profitable and accretive complementary business acquisition but closed on a major joint venture which provides the Company with unrivalled positioning through vertical integration. The acquisition in particular enables PLIN to expand the southwest market in China but also add roughly $70Mn, or a 70% rise in annualized sales.
- New, 10-year JV bolsters integration. Meanwhile, the recently announced a 10-year joint venture with Chongqing Fengjie County Rural Ecological Agriculture Development Co., Ltd. ("FEA") increases PLIN’s vertical integration by immediately adding hog breeding capabilities. Pork is a major food staple in China and PLIN is a leading provider throughout the food chain.
- New forecasts, price target under review, more deals in the offing. Given the recent events, we have raised key forecasts and our price target is under review for a potential upgrade as well. Plus, it appears additional business development opportunities are in the offing later this year, enabling PLIN to establish a stronghold in this sector. Publicly traded pork companies such as Hormel are near year highs as this category serves as a popular defensive group during these difficult economic and market conditions. As a US-traded pure play on this sector in China, PLIN could follow a similar path.
#3 PLIN Potential Catalyst - The Stock's Low Float
Like many of my recent major champs, this stock is also of the low float variety.
According to Yahoo Finance, PLIN has a float of approximately 8.74Mn shares.
This means that when the slightest bit of good news comes out regarding a company like PLIN, there are so few shares available for trading that a stock can see extreme volatility/price spiking in the short-term.
Remember, it was only last week that we watched another low float stock make an approximate triple-digit intraday run of over 300%.
#4 PLIN Potential Catalyst - Major Corporate Actions!
China Xiangtai Food Co., Ltd. Enters into Definitive Agreement to Acquire Controlling Interest in Chongqing Ji Mao Cang Feed Co., Ltd.
Anticipated Annualized Revenue of $170Mn USD by Expanding into China's Southwest Market
CHONGQING, China, April 3, 2020 /PRNewswire/ -- China Xiangtai Food Co. Ltd. (NASDAQ: PLIN) ("Company" or "PLIN"), an emerging growth company primarily engaged in pork processing in China, today announced that the Company, through its subsidiary Chongqing Jinghuangtai Enterprise Management Consulting Co., Ltd., entered into a definitive agreement (the "Agreement") to acquire a 51% controlling interest in Chongqing Ji Mao Cang Feed Co., Ltd. ("JMC"). JMC is a private enterprise specializing in feed raw material sales and providing feed formula solutions, and the acquisition is expected to help the Company expand its market in Southwest China.
As previously announced, the Company entered into a non-binding Memorandum of Understanding (the "MOU") to acquire 51% controlling interest in JMC, one of the leading feed suppliers in southwest China. JMC has more than 200 customers in the farm industry and nearly 100 customers in the feed production industry. In 2019, JMC sold more than 200,000 tons of soybean meal, exceeding $70Mn USD (RMB 500 million) in sales. With the Company's revenue of $102.5Mn in its last fiscal year, PLIN expects this acquisition to increase its gross revenue by 70% on an annual basis.
Pursuant to the Agreement, subject to certain milestones to be achieved by JMC, the Company agreed to issue to JMC a total of 2Mn shares of the Company's ordinary share for consideration equal to $7.42Mn over the next two years.
Ms. Zeshu Dai, Chairwoman and CEO of China Xiangtai Food, commented, "We are thrilled to enter into a definitive agreement with JMC. Combining JMC's capability in feed raw material and formula solutions with PLIN's commercial strength as a leading provider of pork products will make a dramatic impact on our penetration and expansion into China's southwest market. Looking ahead, we will continue to implement the Company's growth strategy to create value for our shareholders."
Mr. Xiaohui Wu, the President and Director of China Xiangtai Food, added, "The acquisition of JMC will further enable the Company to respond to the growing demand for pork in China. We believe that our business and profitability will benefit from this expanded vertical integration of the industry supply chain and network. Further, this transaction will accelerate our already impressive growth in this vital market."
Read The Full Article Here.
More About The Company (PLIN)
From the company website:
Incorporated in Cayman Island on January 23, 2018, China Xiangtai Food Co., Ltd. is primarily a pork processing company that has operations across key sections of the industry value chain, including slaughtering, packing, distribution, and wholesale of a variety of fresh pork meat and parts.
We offer two main series of our products, namely the processed series and the fresh series.
We purchase live hogs through distributors who purchase hogs from well-known big hog farms located in different cities in southern China. We use an automated standard modern production line to slaughter the hogs and pack the fresh pork and byproducts. We deliver the fresh pork to local distributors who then resell the fresh pork to smaller wholesalers and retail vendors. Main products from the processed series include shredded meat, sliced meat, meat stuffing, pickled meat, lamb and offal, sausage, bacon, steamed meat, breaded chicken and spicy meat.
We also purchase fresh pork, beef, lamb, chicken, duck, and rabbit meat from local farmers. We process fresh pork, beef, lamb, chicken, duck, and rabbit meat into processed products. We sell fresh pork and processed meat products to both wholesale and retail markets. Main products from the fresh series include fresh pork and byproducts, beef, lamb, chicken, duck and rabbit meat.
Maintaining the highest industry standards for food safety, product quality and sustainability is one of our core values. We have food circulation permit and national industrial production certificate. Our operations comply with international standards and we have obtained a series of certifications, such as ISO9001, ISO22000 and HACCP. We have strict quality control systems in each segment of our value chain, from production through sales and distribution.
We have more than 200 employees. In our slaughterhouse and processing facility, we have a standardized and automatic production line for hog slaughtering and meat packing. We also have meat processing rooms and standardized freezers to process and store processed meat product. Our slaughtering plant in Linshui Industrial Park, Sichuan Province covers an area of 27,000 square meters. Our processing factory in Fuling, Chongqing, covering an area of 8,000 square meters. We have 6 registered trademarks in PRC.
We are committed to provide consumers with high-quality, nutritious and tasty products through our portfolio of trusted and well-known brands and to driving consumption trends, while setting a high industry standard in product quality and food safety.