Investor Presentation July 2008 Investor Presentation July 2008.

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Investor Presentation July 2008
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Transcript of Investor Presentation July 2008 Investor Presentation July 2008.

Page 1: Investor Presentation July 2008 Investor Presentation July 2008.

Investor PresentationJuly 2008Investor PresentationJuly 2008

Page 2: Investor Presentation July 2008 Investor Presentation July 2008.

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Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors include, but are not limited to, the company’s ability to market existing and new products, ability to access to capital for expansion, and changes from anticipated levels of sales, future national or regional economic and competitive conditions, changes in relationships with customers, dependence on our flagship product profits and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This presentation was developed by the Company, is intended solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy the Company’s stock. This presentation is based upon information available to the public, as well as other information from sources which management believes to be reliable, but is not guaranteed by CHBT as being accurate nor does it purport to be complete. Opinions expressed herein are those of management as of the date of publication and are subject to change without notice.

Safe Harbor StatementSafe Harbor Statement

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Equity SnapshotEquity Snapshot

Listed on the OTC Bulletin Board

Symbol: CHBT

Price (07/11/08):

$11.90

Market Cap:

$203.3 mil

Shares Outstanding: 17.1 mil

Revenue (ttm):

$42.3 mil

Net Income* (ttm): $14.2 mil

Diluted EPS (ttm): $0.80

P/E (ttm): 14.9

P/S (ttm): 4.8

P/B (ttm): 4.6

EV/EBITDA (ttm): 6.9

Insider / Institutional Ownership: 60.2% / 35.9%

Auditor: BDO McCabe Co. Ltd.Fiscal Year End: March 31

*Excluding a $3.4 million gain related to the change in fair value of convertible notes

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Strong revenue and profit growth with high margins

Proprietary technology creates sustainable, decisive competitive advantages

Strong brand with significant franchise value

Rising demand for China’s probiotics driven by increasing wealth and consumption of dairy products

Entry into bulk additives market further propels growth

Attractive valuation

Investment HighlightsInvestment Highlights

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Corporate OverviewCorporate Overview

One of the largest probiotics suppliers in China Shining is one of the most recognized brands in Shanghai

Proprietary technology offers significant cost and product quality advantages

307 employees (03/31/2008) 60 retail centers in China – 46 in Shanghai (03/31/2008) Operates in retail and bulk additive spaces

Net Income

8.410.9

FY2006 FY2007 FY 2008

21.9

30.6

Revenues

($ in Millions)

42.3

14.2*

Mission Statement: To become the dominant supplier of naturally occurring probiotic bacteria in China

*Excluding a $3.4 million gain related to the change in fair value of convertible notes

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What are Probiotics?What are Probiotics?

“Live microorganisms which, when administered in adequate amounts, confer a health benefit on the host”

– World Health Organization

Benefits of probiotics– Improves health of G.I. tract– Stimulates immune system– Helps break down nutrients properly– Reduces creation of toxins– Reduces symptoms of lactose intolerance– Decreases prevalence of allergy in susceptible individuals– Reduces some risks associated with certain cancers

3 basic methods of delivery– Dairy products – Dietary supplements (capsules, tablets, or powders)– Other food and beverages

* Sample: Bifido Bacteria, one kind of probiotic

Source: ww.usprobiotics.org

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Projected Rapid GrowthProjected Rapid Growth

0

1000

2000

3000

4000

5000

6000

7000

MilkProducts

Animal Feed Capsules Other

CY 2006

CY 2010

Year Milk Products

Animal Feed

Capsule Form

Other Totals (mt)

2006 2,000 1,000 100 300 3,400

2010 6,500 2,500 600 1,000 10,600

Chinese Probiotic Usage and Growth (Metric Tons)

Source: Domestic Probiotics Market Analysis and Forecast Report by Beijing Leadership Management Consulting Co. Limited

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Market SnapshotMarket Snapshot

Chinese affluence drives demand for health food– Demand for health food in China expected to reach $9.7B by 2010

(Source: Pacific Bridge Medical)

Demand for milk/yogurt increasing significantly– Sales of yogurt drinks rose by 25% per year in 2005 and 2006– Chinese Bureau of Statistics forecasts tenfold increase in domestic

dairy consumption, 2007-2015– U.S. banks investing in Chinese dairy industry

Restricted use of antibiotics stimulates probiotic demand– Over-prescription of antibiotics in China– Chinese government is encouraging probiotics supplements to combat

antibiotics abuse

China has limited probiotics production capacity– Current demand relies on imports from European manufacturers

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Current Key ProductsCurrent Key Products

* As of fiscal year ended March 31, 2008

Shining Essence (49% of sales)

Shining Signal (13% of sales)

Shining Golden Shield (13% of sales)

Shining Energy (11% of sales) Facilitates brain cell development and increases alertness

Calms digestive system, enhances G.I. health and protects / strengthens liver function

Reduces high blood pressure, high blood sugar levels and hyperlipidemia

Vitamin C, L. Arginine, and other amino acids

L. acidophilus & B. bifidium

Monascus rice and L. acidophilus

B. adolescentis & lentinusedodes

Enhances the body’s immune system

Product Key Components Uses

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New Product DevelopmentNew Product Development

Additives for Yogurt Essential to yogurt-based drinks

One of the fastest-growing food product segments

in China in 2005 and 2006

Additives for Milk Powder Commonly added to infant formula

Improve digestion in babies

Additives for Other Products Ice creams

Buns and bakery products

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Distribution – Current and PlannedDistribution – Current and Planned

Milk/Yogurt Products via Bulk Additives

New Manufacturing Facility

Retailers /Pharmacies

Company-Owned Retail Centers

Supermarkets

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Strategies for GrowthStrategies for Growth

2 Pronged Strategy Health food business: geographical expansion - 300

Shining retail centers

Launch food additive business

Leveraging on Highly recognized Shining brand

Our cost and quality advantage

Strong R&D capability: introduce new and complementary products

Growing demands for probiotics: establish 150 mt / year production facility to capitalize on the market opportunity

mt = metric tons

Shining Retail Center

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Retail Expansion StrategyRetail Expansion Strategy

300 retail centers by March 31, 2009

550 square feet / center

Initial investment about $40,000 per

center

Financed through operating cash flow

Payback period < 1 year

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Bulk Additive StrategyBulk Additive Strategy

Launch “Shining Probiotics” for bulk additives line

Produce bulk food additives for dairy and animal feed industries

Commenced construction of 150 mt / year production facility in December 2007, to be completed in 2008 CY

Products sold directly to major international and domestic dairy and food manufacturers

Revenue potential of new plant = $110 MM per year

CY = Calendar Year; mt = metric tons

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New Industry-Leading FacilityNew Industry-Leading Facility

The only probiotics plant currently in development in China that will be able to meet the domestic demand for bulk additives Initial revenue opportunity at Phase I capacity = $110MM / year

Phase 1 = 150 mt / year of production capacity

Phase 2 = scalable to 300 mt / year

Production yield allows company to sell for as little as one-sixth competitors’ price while maintaining 70%+ gross margin

Projected to be online in late 2008 CY

CY = Calendar Year; mt = metric tons

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Proprietary Production ProcessProprietary Production Process

Leading edge production technology

Fermentation: Very high production yield

= low production cost and high margins

Superior probiotic strands: Better

functionality and product quality

Micro-encapsulation: Very long shelf life

Bacteria-Based Activation

Bacteria-Based Cultivation

Multistage Fermentation

Bacteria Extraction

Granule Emulsification

Freeze-Drying

Micro-Encapsulation

Double-Aluminum Packaging

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Mr. Jinan Song, Founder, Chairman and CEOFounder and CEO since 1999; Masters degree in politics and economics from Harbin Industrial University

Mr. Raymond Li, CFO20 years of finance experience in financial reporting, due diligence, M&A activity, staff management and tax issues

Ms. Eva Yan, Executive Vice PresidentParticipation in formulating corporate development plans, implementing internal control procedures, and presentations in business negotiations.

Mr. Henry Tai, VP of Corporate Development

20 years of experience in direct investments, corporate finance and auditing in Australia, China, Hong Kong and the United Kingdom

Dr. Shuguang Fang, Chief Technology Officer10 years of experience in bio-engineering; team member of 863 strategic projects and national 9th -5 year and 10th- 5 year projects in China; Ph.D. in Chemical Bio-engineering from East China University of Science and Technology

Dr. Kai Ma, Director of Research and Development10 years of experience in microbiology; team member of the national 863 and 973 strategic projects; Ph.D. in Microbiology from Institute of Microbiology of Chinese Academy of Sciences

ManagementManagement

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Strong Financial PerformanceStrong Financial Performance

Gross Profit ($ in Million)

0.0

10.0

20.0

30.0

40.0

FY '05 FY '06 FY '07 FY'08

68.0%

70.0%

72.0%

Gross Profit Gross Margin

Net Sales ($ in Million)

14.4

21.9

30.6

42.3

FY 2005 FY 2006 FY 2007 FY 2008

CAGR = 43.2%

Net Income ($ in Million)

14.2

5.5

10.9

8.4

FY 2005 FY 2006 FY 2007 FY 2008*

CAGR = 37.5%

*Excluding a $3.4 million gain related to

the change in fair value of convertible notes

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Income Statement, 2006-2008Income Statement, 2006-2008

** The earnings per share figures reflect an increase in weighted-average shares related

to the issuance of convertible notes in December 2007.

***The earnings per share figures reflect an increase in weighted-average shares related

to the share exchange transaction in March 2006.

For Fiscal Years Ended March 31

($ in thousands) FY2008 07-08%

Change

FY2007 06-07%

Change

FY2006 05-06%

Change

Net sales 42,321 38.3% 30,610 40.0% 21,862 51.6%

Gross profit% 70.9% 70.9% 70.5%

Operating income 18,315 22.7% 14,931 22.5% 12,186 52.7%

Net income 14,176* 30.0% 10,905 30.5% 8,354 53.0%

Diluted EPS $ 0.80** $ 0.64 $4.90***

* Excluding a $3.4 million gain related to the change in fair value of convertible notes

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Balance SheetBalance Sheet

March 31 ($ in thousands)

2008 2007 2006

Cash and cash equivalents 64,310 26,992 19,841

Total assets 93,792 44,580 33,427

Total liabilities 49,396 20,670 21,090

Stockholder’s equity 44,395 23,910 12,337

Current assets 79,979 41,897 31,833

Current ratio 3.0 2.0 1.5

Current liabilities 26,896 20,670 21,090

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Attractive ValuationAttractive Valuation

Herbalife Ltd. HLF 2.5B 12.58 0.73 1.10 6.96

Shanghai Jiaoda Onlly Co., Ltd 600530.SS 261.8M 45.22 N/A N/A

China-Biotics, Inc. CHBT $ 203.3M 14.88 0.50 4.80 6.87

AVERAGE (Excluding CHBT) 1.6B 26.64 1.26 1.80 11.36

Nu Skin Enterprises Inc. NUS 982.3M 21.40 1.07 0.83 8.14

Perrigo Co. PRGO 3.3B 26.24 1.07 1.92 15.57

Martek Biosciences MATK 1.2B 27.76 2.16 3.55 14.78

Company Ticker Market Trailing PEG P/S EV / Cap P/E (ttm) (ttm)

EBITDA

Data as of July 11, 2008, Yahoo! Finance. and www.jrj.com.cn

1.60

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Strong revenue and profit growth with high margins

Proprietary technology creates sustainable, decisive competitive advantages

Strong brand with significant franchise value

Rising demand for China’s probiotics driven by increasing wealth and consumption of dairy products

Entry into bulk additives market further propels growth

Attractive valuation

Investment HighlightsInvestment Highlights

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Contact InformationContact Information

China-Biotics Inc.

Raymond Li, Chief Financial Officer

No. 999 Ningqiao Road,

Jinqiao Export Processing Zone,

Pudong, Shanghai 201206, China

Phone: (86) 21-58349748

Web Site: www.chn-biotics.com

 

CCG Investor Relations

Crocker Coulson, President

1325 Avenue of the Americas, Suite 2800

New York, NY 10019

Phone: (212) 245-1010

E-mail : [email protected]

Web Site: www.ccgir.com

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Appendix: Reconciliation of Non-GAAP Financial Data

Non-GAAP Net income Q4 2008 Q4 2007

Net Income (Loss) Net Income Net Income

Adjusted Amount 4,622,129 $2,845,734

Adjustments

Non-cash gains from change in fair value of convertible bonds $3,366,000 -

Amount per consolidated statement of operations $7,988,129 $2,845,734

Non-GAAP Net income FY 2008 FY 2007

Net Income (Loss) Net Income Net Income

Adjusted Amount $14,176,244 $10,904,986

Adjustments

Non-cash gains from change in fair value of convertible bonds $3,366,000 -

Amount per consolidated statement of operations $17,542,244 $10,904,986

Page 25: Investor Presentation July 2008 Investor Presentation July 2008.

Thank you. July 2008Thank you. July 2008