Weikang Bio-Tech: Business Continues to Thrive

Weikang Bio-Tech Group (WKBT.OB) reported strong 2009 second quarter results after the markets closed yesterday. Once again, the company was able to post solid growth in sales and earnings per share.

• Revenues increased 544% to $13.20 million.
• Earning per share increased 225% to $0.13.

Comments about future prospects were encouraging:

Our business will continue to accelerate as we enter the second half of 2009. We are seeing strong demand for our OTC pharmaceuticals and TCM products especially in the midst of China's new healthcare reform initiatives, which will secure our future growth.

Unfortunately, as we highlighted on May 8, 2009, the company still has issues regarding its liquidity position. Thus, an investment decision here is a tough call. On the flip side, the stock has a tax adjusted P/E of 7.3 and a PEG ratio of 1.4. Given the compelling valuation proposition, the GeoTeam® will establish a position in WKBT.OB realizing that there may be substantial dilution risk as management grapples with ways to cure the Company's negative working capital position. If not for the this issue, Weikang Bio-Tech would be a classic GeoBargain selection.

We have requested an interview with management. The stock remains on the GeoBargain on the Radar list and is also an ideal candidate for consideration as a GeoSpecial.

Disclosure: Long WKBT.OB

Comments

[Tom Santamaria:]

I find the growth of this company very exciting. But how will they finance this growth as it is obvious that dilution is necessary.

Sep 04 11:44 AM

[WhiteTiger:]

Tom,
I share your sentiment. I have tried to contact the company, but have received no response. I own a little just in case the company solves its capital needs. The key will be if the capital raised will be able to unleash a new level of growth to overcome dilution.

Sep 16 12:18 PM