China Energy IPO: Andatee China Marine Fuel

| About: Andatee China (AMCF)

Andatee China Marine Fuel (AMCF), a producer of blended marine fuel oil for cargo and fishing vessels in China, is expected to float its IPO this week.

Business Overview (from prospectus)

We, through our VIE entities (Variable Interest Entities, as the term is discussed in greater detail in Management’s Discussion and Analysis below), are engaged in the production, storage, distribution and wholesale purchases and sales of blended marine fuel oil for cargo and fishing vessels with operations mainly in Liaoning, Shandong and Zhejiang Provinces in the PRC. We compete by providing our customers value-added benefits, including single-supplier convenience, competitive pricing, logistical support and fuel quality control. Our sales of marine oil for fishing boats represented approximately 70 – 80% of our total revenue for the period 2005 – 2008 as compared with the sale of marine oil for cargo vessels which represented the remaining 20 – 30% of our total revenue for the same periods. Currently, we sell approximately 85% of our products through distributors and approximately 15% to retail customers. Our products are substitutes for diesel used throughout east China fishing industry by small to medium sized cargo vessels. Our core facilities include as storage tanks, berths (the space allotted to a vessel at the wharf), marine fuel pumps, blending facilities and tankers. Our sales network covers major depots along the towns of Dandong, Shidao and Shipu along the east coast of China.

Offering: 2.3 million shares at $6 - $8 per share. Net proceeds of approximately $15.1 million will be used for capital improvement, sales and marketing, research and development, funding possible future acquisitions as well as for general working capital purposes.

Lead Underwriters: Rodman & Renshaw (NYSEARCA:RODM), Newbridge Securities

Financial Highlights:

Our revenue increased by US$20.4 million, or 31.5%, from US$64.9 million for the nine months ended September 30, 2008 to US$85.3 for the nine months ended September 30, 2009, with volume sales increasing due to the expansion of our sales network and recovery of demand from downstream industry... Our cost of revenues increased US$15.5 million, or 26.1%, from US$59.6 million for the nine months ended September 30, 2008 to US$75.1 million for the same period of 2009... As a result of the factors above, our gross profit increased by US$4.9 million, or 91.3%, from US$5.3 million for the nine months ended September 30, 2008 to US$10.2 million in the same period of 2009...As a result of the foregoing, net income increased US$2.4 million, or 103.4%, from US$2.3 million for the nine months ended September 30, 2008 to US$4.7 million for the same period of 2009.


We believe we have no significant competition in the fuel market for small and medium vessels. Potential competitors could include major domestic oil producing and refining companies, including as Sinopec (NYSE:SHI), China Petrol (NYSE:SNP) and CNOOC (NYSE:CEO), none of which are currently active in this marketplace or legally permitted to blend oil. However, we believe it is unlikely they would enter into this segment of the market in the near future since the entry opportunities diminish as we develop our integrated distribution system through acquiring resources and sites and strengthening our market position, thus creating high barriers to entry, including regulatory and compliance hurdles capital and storage scarcity, shortage of skilled management.

Additional Resources: