L & L Sees Continued Growth, Remains Strong
L & L International Holdings, Inc. [[LLFH.OB]], a coal and compressed air company operating in China, may not be the most well-known energy name, but its exposure to China’s robust demand for coal, and very reasonable price-earnings multiple considering its growth rates, could make it a great opportunity for long-term investors.
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China continues to be the world’s largest producer and consumer of coal, with approximately 71% of the country’s energy coming from the commodity. While demand has softened due to the global economic crisis, many experts believe that the contraction is only temporary, and demand is expected to continue to rebound amid a broad Chinese recovery.
Last quarter, L & L International reported net income that rose 4% to $2.96 million, or $0.126 per share, on revenues that jumped 19% to $12.75 million, for the three months ended July 31, 2009. However, it is important to note that less than one month of sales from its 65% controlling interest in Hon Shen coal-washing facilities was included in this quarter’s results.
L & L International expects the acquisition of Hon Shen to add $39 million to its annual revenues, while also increasing its gross margins thanks to vertical integration with its existing operations. As a result, many investors are looking towards next quarter’s earnings and revenue figures to experience a jump due to the inclusion of the new subsidiary.
In the end, L & L International may be up substantially since we first profiled it on TheOTCInvestor back in July of 2009, but it still represents a strong value going forward trading at a price-earnings multiple of just over 10x. Long-term investors looking for exposure to China’s coal market may want to take a look at this stock going forward.
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