Red Chip Companies have issued a buy rating on China Kagtai Cactus Bio-Tech, Inc, with a price target of $2.31 a share.China Kangtai Cactus Bio-tech, Inc., (CKGT.OB) is the dominant player in cactus-based consumer products with approximately 60% market share of China’s edible cactus production industry. China’s consumption of vitamins and mineral supplements has been growing at an astounding rate of approximately 18% per year over the last decade due to increased income per capita and the emergence of a new consumer culture.
CKGT is strategically positioned to capitalize on this growing demand with an established position as a pioneer in the cactus-based nutraceuticals sector. The Company’s own R&D arm is composed of a 12 member team that has successfully produced 31 product patents: 16 approved and 15 pending.
CKGT is a compelling value play with strong growth prospects. The Company has demonstrated its ability to consistently grow revenue and earnings. CKGT delivered an impressive 9% gross margin expansion from 23% in FY 2005 to 32% in FY 2006. In comparison to industry peer China Yingxia International, Inc (CYXI.OB), CKGT reported higher revenues in FY 2006, but is only trading at 37% of CYXI’s value. We believe that CKGT is significantly undervalued, and will experience substantial appreciation over the next 12 months and beyond.
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