China Clean Energy Inc. (OTC:CCGY) is one of the very few listed Chinese entities in the biodiesel business. Apart from its traditional business of specialty chemicals, CCGY buys waste palm oil stock from Malaysia and Indonesia and converts that into biodiesel for domestic consumption and export. With the rise in gasoline and diesel prices, biodiesel has not only become a sought after commodity, its prices (regulated in China) has also been on the increase. This has contributed to its record growth for 3Q 2007. Some highlights of the financial results released yesterday were:
- Revenue reached a record $5.5 million, up 48% from the third quarter of2006
- Gross Profits reached a record $ 1.4 million, up 37% from the third quarter of 2006
- Operating Income totaled $861,257, up 9% from the third quarter of 2006
- Net Income was $834,586, or $0.04 per share, up 67% from the third quarter of 2006
While this is still a small company in many ways, it is profitable and inhabits a good niche. In fact, CCGY is currently running at full capacity (10,000 tons/year) and has recently (as of 11/5) obtained the necessary approvals from local government agencies for the construction of a 100,000 ton plant near its existing one. This is very good news and will push the company to the next level of its development.
What the company needs is $15m for the construction and working capital necessary to start this operation. However, at yesterday's conference call for the announcement of the results, the company wasn't forthcoming on how or when it is going to raise this money. Given the company's record performance, it would have been an ideal time to announce a stock offering. The fact that it didn't suggests to me one of the following scenarios: (i) management is worried that a stock offering will dilute earnings too much (possibly
