June Idea of the Month: Chinese Maple Tree

By Travis Johnson, Stock Gumshoe, June 27, 2008


This is a little unusual, because typically I let investments percolate for a while before deciding whether or not they make sense. But today, I think the best idea for investing is one I wrote about just this week at StockGumshoe.com — Hanfeng Evergreen.

In case you’re wondering about that title, Han is the ethnicity that most of us would probably call “Chinese”, Feng means “maple tree” (according to the company … I certainly don’t speak or read Chinese).

If you happened to read the note I put up about Hanfeng when it was teased by Ian Wyatt for his Growth Report, I noted that I was intrigued but didn’t know much about them yet.

Well, I’ve been busy since then reading analyst reports, company filings and presentations, and doing some general research on the industry.

And I think Hanfeng Evergreen has a very good chance, government permitting, to be a big winner over the long term in the Chinese fertilizer market.

That “government permitting” bit is the big caveat, since in China almost anything can happen — especially for a necessary and regulated product like fertilizer. At the moment, everything seems to be falling in place for Hanfeng’s products to grow in popularity, with official endorsements and approvals that are either real or implied (there often seems little difference in China). But, as is also true in Western countries to a lesser extent, new regulations or other government decisions on things like price controls could make a significant difference to Hanfeng’s future.

But I said I like the company as an investment right now, (though I haven’t bought shares yet, largely because of my trading rules). So why do I like them?

First, a little explanation: Who is Hanfeng Evergreen?
Hanfeng Evergreen is a Canadian company, headquartered in Toronto, but all of their operational subsidiaries are in China. So essentially their operations are subject to Chinese law, but they provide reporting and disclosures to Canadian standards.

They are in the fertilizer business, but more specifically the “advanced” fertilizer business — manufactured slow-release and controlled-release fertilizers (as opposed to raw fertilizer such as that procuded by potash miners, etc.). They became the first company to manufacture these specialty fertilizers in China when they built their first plant in 2004, a business they started after building an urban greening, landscaping, and nursery business (thus the “Maple” name) that ...

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