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AgFeed Industries Inc. (NASDAQ: FEED)

AgFeed Industries Inc. (FEED) is engaged in the research and development, manufacturing, marketing, distribution and sale of pre-mix fodder blended feed and feed additives primarily for use in China’s domestic pork husbandry market. FEED operates through wholly owned subsidiaries, Nanchang Best Shanghai Best, Guangxi Huijie, Shandong Feed and HopeJia. On June 24, 2008, the Company acquired premix feed company. On January 3, 2008, the Company acquired a 70% interest each in Wannian Xiandai Animal Husbandry Limited Liability Co., and Jiangxi Huyun Livestock Co. Ltd. On January 4, 2008, FEED acquired a 60% interest in Ganzhou Green Animal Husbandry Develop. Co. Ltd. On January 7, 2008, it acquired Gang Feng Animal Husbandry Co. Ltd. On January 9, 2008, the Company acquired a 55% interest in Yichun Tianpeng Domestic Livestock Farm Ltd.

The Company was founded in 1995 and is headquartered in Nanchang City, the People’s Republic of China.

Source: Reuters.com, SEC Filings.

Financial Summary

• Revenue of $45.12 million and $117.07 million, compared to $49.43 million and $97.21 million for the quarter and nine month periods of 2008, respectively;
• Income from continuing operations of $3.71 million and $9.16 million, compared to $9.31 million and $19.81 million for the quarter and nine month periods of 2008, respectively;
• Net income of $2.9 million and $7.1 million for the quarter and first nine months of 2009, compared to $8.2 million and $13.1 million for the comparable 2008 periods;
• Earnings per share on income from continuing operations of $0.09 and $0.23 for the quarter and nine months of 2009 periods, compared to $0.28 and $0.64 for the comparable 2008 periods. Earnings per share of $0.07 and $0.18 for the quarter and nine months of 2009 periods, compared to $0.25 and $0.42 for the comparable 2008 periods;
• Gross profit of $7.6 million and $18.6 million for the third quarter and first nine months of 2009, as compared to $12.3 million and $26.8 million for the third quarter and first nine months of 2008, respectively;
• Balance sheet was strong; cash and cash equivalents on hand at September 30, 2009, was $36.5 million, an increase of $5.6 million in the third quarter of 2009; the current ratio was 5.47:1 at September 30, 2009; total assets were $157.9 million and book value was $142.8 million at September 30, 2009.

• Gross margins for the third quarter and first nine months of 2009 were 16.8% and 15.1%, respectively, compared to 24.9% and 27.5% for the corresponding 2008 periods.

Source: Reuters.com, SEC Filings.

Analyst Consensus

This is the consensus forecast amongst 1 polled investment analysts. Against the AgFeed Industries Inc. company.

The one analyst offering a 12 month price target expects FEED share price to rise to 7.00 in the next year from the last price of 4.88.

Source: www.ft.com

Source: http://www.reuters.com/finance/stocks/estimates?symbol=FEED.W

Investment Highlights

FEED announced in mid September that it has entered into a two-year Equity Credit Agreement with an institutional investor pursuant to which it may, from time to time, sell shares of its common stock to the investor for aggregate gross proceeds of up to $50,000,000. The shares would be sold to the investor at a slight discount to then-current market price of FEED common stock. The Company has no obligation to sell, nor does the investor have any right to force the Company to sell, to the investor any shares of its common stock at any time during the term of the agreement.

Additionally, the Company is not prohibited from accessing other sources of financing at any time during the term of the agreement. Any decision to sell shares under this agreement will be made solely by the Company and its Board of Directors at the time of a proposed sale. The Company also agreed to issue to the investor warrants to purchase 400,000 shares of its common stock at an exercise price of $5.75 per share. The warrants will be exercisable immediately after issuance, and have a term of five years. The warrants and any shares issued to the investor under the agreement or the warrant will be issued pursuant to the Company’s existing shelf registration statement.

In mid-July, FEED announced the formation of a joint venture with M2P2, a leading U.S. hog production and industry management consulting company. The new company, AgFeed International Protein Technology Corp. will focus on enhancing hog production systems for Chinese and other Pan Asian clients based on modern western standards to increase productivity and ensure the highest bio-security health standards in the Pan Asian hog industry.

The joint venture was formed to take advantage of the coming commercialization and consolidation of the hog industry being fostered by the Chinese central and local governments. The joint venture commenced operations on July 13, 2009, and FEED is the joint venture’s first client. Glenn McClelland, CEO of M2P2, has been appointed to serve as the president of AgFeed International Protein Technology. The new company will be owned 80.1% by FEED and certain affiliates and 19.9% by M2P2.

Source: http://www.agfeedinc.com/

Technical Analysis

Source: http://stockcharts.com

FEED is trading above its upper Bollinger Band. Relative to recent price action, the stock is currently overextended and due for either a pause or retracement.

FEED’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below 0, which suggests that the underlying moving averages are bearish.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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