Weikang Bio-Tech Group Co (OTC BB:WKBT)

We have mentioned Weikang Bio-Tech twice over the past year and a half, indicating that it may qualify as a GeoSpecial if it could rectify some outstanding liquidity issues.

At eh outset of tracking Weikang, the Company had negative working capital of $8 million due to a rather large financial obligation of approximately $7.6 million that it was supposed to satisfy by October of 2009. A financing arrangement to remedy this situation has yet to occur.

The good news is that the date to meet its financial obligation has been extended to June 30, 2010. Also, the negative working capital situation is much improved, having been reduced to $46,218 from $4.27 million in its 2009 second quarter. This coupled with Weikang's low valuation has prompted us to code WKBT as a low tier GeoSpecial. We must realize that the risk of a dilutive capital raising event still exists. We also need information on whether or not the Company is operating at full capacity, a factor that could impact near term growth as EPS comparisons will be more challenging.

Valuation Parameters:
Price as of November 20, 2009: $2.75
Trailing EPS: $0.59
Trailing P/E: 4.7
Nine months EPS growth rate: 238.5%
PEG Ratio (P/E divided by EPS growth rate): 0.02