Eternal Technologies: Yet another China investing play

Ever heard of Eternal Technologies Group, Inc. (Public, OTC:ETLT)? Neither did I until a recent stock screen and my research methods led me to discover this little gem of a company hanging out at under $1 a share.

Eternal Tech. is in the agricultural genetics industry, evolving methods for improvement in the quality and the quantity of a wide array of nutritional meat products in China. The object of this company may not be that easy to understand, but you can't complain about the stock trading with low multiples at 68 cents per share. The current P/BV is as low as 0.5 ( 31 /63 ) and the P/E is close to 5 after you factor in the 2007 earnings which comes to around $6 million. Why should you care about a company that makes so little? Because it trades cheaper per share then a can of Coke, that's why.

The balance sheet is one of the healthiest in the markets in these days of subprime debacle and the cash flows are steadily positive with a ratio of current assets/current liabilities coming in at a stellar figure of 22. Back in June Eternal Technologies initiated a buyback program to repurchase up to 5% of its issued and outstanding shares between now and December 31, 2007. With 47,073,279 shares issued and outstanding, the repurchase could total 2,353,664 shares. They just got their English website up and running, take a look, it's making me hungry for turtle and mutton.

So what do these guys do again? Eternal has become one of China's leading institutions for biopharmaceutical and biotech research, pure breed cultivation and breed stock production. The company has secured a key market niche by commercializing gene engineering technologies and providing superior breeding stock, allowing China's citizens the ability to improve their living standards. With the world's largest population, a double-digit national growth rate and entry into the WTO, Eternal Technologies has a playing field set for tremendous opportunity. As a prominent player in the agricultural genetics industry, cash in the bank and an untapped market, Eternal has the potential to become a major player in China's national growth.

ETLT recently completed two acquisitions of stakes at profitable companies which produce mango and lychee extending its existent production at these fruits.
Both acquisitions will contribute their Q4 earnings at the Q4 and were funded by issuing new shares making ETLT's market cap increase to a total value of almost $4 million. At the current price per share increasing the multiples P/BV and P/E accordingly for about 15% compared with the ones mentioned previously, it still implies both multiples remain objectively low.

So investing in Mutton and Mango farms is the way to go? This is China we are talking about and they have plenty of mouths to feed despite the American obsession with McDonalds (MCD) cheeseburgers. Mmm, cheeseburgers.

Let me add that Eternal Technologies Group's portfolio includes medical equipment for the detection and prevention of breast cancer, which also contributes about 20% of the total annual revenue. The people of China will continue to eat Mutton and Mango just like Homer Simpson puts down Krusty Burgers on a daily basis. It doesn't matter if you don't like Mutton and Mango, they do. Besides shares of Eternal Technologies Group, Inc trade for under a buck and have nothing to do with subprime and everything to do with China's population. Mmm, Mutton.

Article written by: Steve Reeves
Article posted on: September 18th, 2007

Disclaimer: The Author does not own any positions in the securities listed in this publication.