L & L International Holdings, Inc. (NASDAQOTH:LLEN)

CAPS Rating: 2 out of 5

Recs

5
Player Avatar jed71 (31.47) Submitted: 3/31/2010 9:11:00 PM : Outperform Start Price: $5.85 LLEN Score: -163.55

Here’s a very interesting coal mining play out of China. It doesn't take very long looking through the financials to figure out this issue is pretty heavily undervalued.

Absolutely huge revenue growth over the past five years (from $7MM to $41MM in 2009). And demand for energy in China is going nowhere but up. Just take a look at population estimates in China for the next twenty years and you'll know what I mean. The green movement has also not yet affected China's appetite for carbon-producing energy (nor do I think the government will take any action against this industry in the near future). Profit over the past few quarters has trended sharply higher, capped with a quarter over quarter increase to net income of 115% in 2Q2010 ($0.13 in 1Q2010 versus $0.28 in 2Q2010).

The balance sheet is equally impressive. They have grown PPE assets w/o substantially increasing debt load (to fuel future growth), and they have done a good job controlling both inventory and trade accounts receivable. If one takes into consideration the tremendous revenue growth, these feats become all the more impressive. Round this all off with an ROE of nearly 43%, and you have quite a growth story here. Now book value at greater than 6 is substantially higher than I normally like, but I think estimated revenue / earnings growth outweighs any book value considerations. My opinion is that this company's stock has nowhere to go but up. I put a price target of $24 a share on the company ($1.20 a share in earnings over the next four quarters times 20 multiple for growth story) --- and I honestly think this is probably too conservative.

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