Commercial and financial markets bullish on traditional Chinese medicine |
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| By Rob Goldman | |
| Tuesday, 10 August 2010 03:17 | |
 Goldman Small Cap Research initiated coverage of Nutrastar International Inc. (OTC:BB:NUIN), a pure play on the fast-growing nutraceutical market and the Chinese domestic market, with a 19% market share. In doing so, the analyst team may have stumbled onto an undiscovered gem.
Nutrastar is the leader in the production and distribution of “Chinese Golden Grass”, derived from Cordyceps Militaris. Chinese Golden Grass is one of the most highly regarded herbal nutrients in Traditional Chinese Medicine, as its enzymes appear to have a very favorable impact on boosting one’s immune system, lowering blood pressure, and combating gastrointestinal disorders. In a recent interview with Nutraceuticals World, the CEO of PepsiCo was gushing about the use of Traditional Chinese Medicine products in all kinds of nutraceuticals, especially beverages in the near future. Goldman believes that the Company’s strong management, enviable profit margins, and a large cash position translate into continued success. Following a recent equity offering, Nutrastar has roughly $1.00 in net cash per share and is generating 50% net margins. With the world’s first energy drink made from Cordycepin introduced in 2Q10, the annual sales growth could approach 45% in 2010. It is easy to see why Goldman Small Cap Research believes that Nutrastar is an incredibly undervalued stock. It is a pure play on the fast-growing nutraceutical market and also the all-important Chinese domestic market. In addition, with huge sales growth, high net margins and a large cash position, the risk profile is dramatically reduced at current levels. After all, the stock is trading around 3x net cash---not earnings-net cash, due to the fact that the Street has not gotten a hold of the story yet. Following a very profitable 2009 in which Nutrastar earned $7.7M on $15.3M in revenue, Goldman projects $21.5 in sales and $0.62 EPS for 2010 and $28.5M in sales with $0.75 in EPS next year. By initially assigning a conservative 12x multiple on FY10E EPS, the stock could clearly reach the $7.00 price target in short order. The stock closed at $3.16 on Monday, which means that Goldman’s target is more than a double from here, and that is conservative. Goldman Small Cap rates Nutrastar a Speculative Buy. BiomedReports is not paid or compensated to report news and developments about publicly traded companies. Full disclosure can be read in the About Us Section Add this page to your favorite Social Bookmarking websites            |
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