Saturday, April 7, 2012

Time to sell China Animal Healthcare?

I have four lots of China Animal Healthcare bought in January 2010 and am now contemplating selling it even though it remains slightly out of the money. For those unfamiliar with the stock, China Animal Healthcare is company that manufactures vaccines for livestock and its operations are based predominantly in China. This was what I said back then when I bought the stock:

"Thought I managed to get a bargain buying in at 26.5 cents. Turns out the bottom is even lower, closer to 22.5 cents that is despite an earlier runup to 30 cents. I don't think this is a bad stock. will have to see how the proposed qualifications to its manufacturing facilities will pan out. hope this S-Chip wont burn me."

China Animal Healthcare has had plenty of exciting developments. It has had strong revenue and earnings growth since listing on the Singapore Stock Exchange via an RTO at the end of 2008. For FY2011, the company recorded a 30% increase in revenue and a 86% increase in PATMI.
China Animal Healthcare has also had private equity firms like BlackRock take a stake in the company through the issuance of convertible bonds. China Animal Healthcare is also listed on the Hong Kong Stock Exchange.

From the chart above, after the strong run up in 2009 that saw it almost touch 40 cents, China Animal Healthcare's share price has since struggled the past 3 and 12 months. Year-to-date it is lagging the STI and year-on-year, it is down 27%.

Why do I want to sell China Animal Healthcare? The most important reason is that despite the stock's strong fundamental growth, it has not been realised in terms of share price. It is currently trading at 8 times earnings and I think that the market has priced in all its growth as well as possibilities of accounting fraud (guilt by association). Furthermore, its insiders an unknown group of investors have decided to sell off big chunks of shares during 1-2 months ago.

I should be selling it once I see the "correct" price. This selling may or may not happen the next 10 trading days, but I definitely will not be picking China Animal Healthcare's shares in the mean time.


  1. "its' insiders have decided to sell off big chunks of shares during 1-2 months ago."

    you are talking about the selling off in HK market by Fidelity? why you called them insider?

  2. I have decided to label them as "a group of unknown investors". It may not be insiders, but at least on the Singapore Stock Exchange, there is no mention on the identity of those selling the big blocs of shares.


    Yeah, it was announced in HK exchange.

  4. Hello,

    To clarify, the link that you have pasted refers to transactions executed in September 2011.

    These are not the transactions that I am referring about. The transactions that I am referring to are the ones that were done in January-February 2012, large sell queues between 0.245–0.270 of 6-10 million shares daily.

    If you have the identity of the parties forming the large sell queues, do let us know.

  5. ok, thanks for the clarification! I do not have anything to add.