Fired Up About Chinese Coal

by: Glen Bradford

Ready to go

I don’t see why I shouldn’t point out companies that are ‘Fired Up, Ready To Go’ as Obama would put it. I’ve got three Chinese companies that are heating up NBA Jam style.

There are three parts to this madness. The first is that I need to believe that the risk of losing money is negligible in the long run. That is to say that they are so cheap right now, it doesn’t make sense not to own them as far as I can tell. The second is I want uplisting potential. Lastly, I want to be able to light the product produced on fire. Fire it up.

Puda Coal (PUDZ.OB) is a company I’ve covered several times as one that I felt would uplist. They are doing it tomorrow (Tuesday). They are currently a supplier of metallurgical coking coal in the PRC. Since I’ve covered them their ticker has changed from PUDC to PUDZ and is now changing to PUDA tomorrow. Why do I think they are Fired up? They’ve talked about consolidating 6 mines in Yuncheng City, they’re priced to shrink, and they are uplisting this week. Don’t forget that there is a coal mine consolidation party in that neck of the woods. It’s my belief that you’ll be lucky if you see these prices ever again as they are currently floating above $5 making them a candidate for mutual funds who likely can’t wait to get their grubby little fingers all over this value play.

Songzai International (OTC:SGZH.OB) has a trailing P/E of 3.2 and is also engaged in coal production in the PRC. With 25% of their market capitalization in cash, some would argue it’s cheap. Combine that with their reported double in sales and net income year over year this last quarter. Note the results were unaudited. Currently Songzai trades at uplistable and mutual fund friendly prices. I think that’s where they are headed even though they’ve made no public statement. I would categorize this as a “no-brainer” because I think that it doesn’t take much of a brainiac to figure out that they’re giving this away.

L&L Holdings (OTC:LLFH) gives off the distinguished aroma that I call uplist. Yes, they too are in the business of coal mining in the PRC. Do note that this is 100% personal speculation, but my instinct tells me that I’m hot on the trail. My instinct tells me that uplisting is coming in the very near future. Who knows? What I do know is that they appear to be an acquisition machine in the perfect market to acquire. They are priced to stagnate and grew revenues 70% last year. They are cents away from being mutual fund friendly.

In my opinion, the trick to buying undervalued companies is buying them before everyone else “realizes what’s going on.” It’s kind of like bargain shopping for sports cars --- something you probably don’t do every day. Odds are that you don’t see a brand new Lamborghini or Ferrari for sale. But say that you do. Say that it’s priced at $10,000. Are you going to wait for the next person to walk by or are you going to fire it up?

Disclosure: Bradford was long Puda, Songzai and L&L at the time of publication.