China micro cap making a cleaner, healthier cigarette

A new product is emerging out of China that, while it may not entirely remove the health problems associated with smoking, could China Kangtai Cactus Biotech, Inc.significantly reduce the risk to the smokers themselves and those around them. It is a cigarette made with cactus, by Harbin-based China Kangtai Cactus Biotech, Inc. and has just undergone trial marketing with an eye to release the smokes in the fourth quarter of this year.

The cigarettes, patented last year by the Beijing government, come in two blends: one is a low-nicotine type, made with a few tobacco leaves, but mostly of cactus, honeysuckle and ginkgo biloba leaves, purporting to lower the content of harmful nicotine by 70%. The other eschews nicotine completely, blending all the above ingredients except for tobacco leaves.

The result, say CKGT officials, is a cigarette with all the taste and enjoyment of regular smokes, but with none of the potentially lethal effects to the body, primarily the lungs. They also say the potential harm from the second-hand smoke is greatly reduced.

The company is high on the growth potential for this product, pointing to the hundreds of millions of smokers in China alone – accounting for 30% of the world’s smokers - as well as the accompanying goodwill to China Kangtai, a company also into food products, health and energy drinks, beer, wine and liquor.

CKGT is a leading grower, developer, producer, and marketer of cactus-derived products, including the ones mentioned above, besides extracts and powders, and animal feed. China Kangtai controls over 387 acres of plants and maintains an active research and development group that holds 18 product patents and is seeking another 12. China Kangtai’s high-quality “green” products are among the leading national brands in their field.

Investors of all stripes should hearken to the company’s second-quarter numbers, announced in mid-August, which showed revenues skyrocketing 30% to US$6.5 million from the $5 million in the similar quarter of 2008. Net income increased 37% to $1.4 million from $1 million in Q2 2008. Six-month revenue was $9.8 million, an increase of 27% from $7.8 million for the comparable period last year. Net income for the first six months of 2009 was up 29% at US$2.1 million, compared to $1.6 million for the first six months of 2008.

Not surprisingly, the 52-week peak enjoyed by its stock price has just recently been achieved, at $1.20, after dipping to a low of 12 cents in the bad-old days of March. The stock remains in the upper end of this range, putting a special urgency on investors to investigate this company that excels by making things out of cactus.

© Copyright: Stockhouse

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