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PUDC: Leading China's Steel
Market
by Glenn Wilkins - AllPennyStocks.com News Reporter
December 7, 2005 (AllPennyStocks.com Media, Inc.) -At a time
of year when the most prized commodities are gold,
frankincense and myrrh, it goes a bit against the grain to be
touting the exploits of a company whose main product is coal.
But, if investors can halt psyching themselves for the
holidays for just a moment, they may wish to have a gander at
yet another China-based company, one that thrives on producing
just that.
For it is not just lumps of coal we’re talking about here.
Puda Coal Inc. (PUDC:OTCBB),
through its affiliates in Taiyuan City, is a leading supplier
of China‚s highest-grade metallurgical coking coal, used
mostly in steel manufacturing. Puda is the third-largest coal
cleaning company in its home Shanxi Province and is aiming at
having the largest cleaning capacity by the end of this
calendar year. Shanxi accounts for up to 25% of China’s coal
output and 50% of its coke production.
In a country just beginning to embrace capitalism on a
large scale, Puda is showing it’s a company that can dream
big, welcome new investment, and churn out a high-quality
product in droves for a market that needs it. Management is
more than quadrupling annual processing capacity from this
year’s 500,000 to projecting 2.7 million metric tons next
year.
How avid is the market for Puda’s product? The Wall Street
Journal points to a near 30% jump in Chinese construction
activity from July 2004 to the same month in‘05. The New York
Times reports that “this year alone, Shanghai will complete
towers with more office space for living and working than
there is in all the office buildings in New York City”, and
that, in order to keep pace, the Chinese steel industry has
continued to grow at 28% a year.
China, it is said, currently produces 26% of the world‚s
supply of steel, while consuming 27%, placing Puda in a unique
position to capitalize on the world’s incredible demand.
Puda Coal boasts of being a burgeoning success story that
just came upon public consciousness during the mid-1990s.
Co-founder Zhao Ming has been chairman and CEO since 1995,
with his brother Zhao Yao functioning as chief operating
officer. Zhao Yao comes with 20 years experience in the coal
industry, and also currently owns a 75% stake in Jucai Coal.
Jin Xia, whose background consists mostly of accounting and
economics, has been chief financial officer since 2003, and is
among a new generation of women conquering the upper echelons
of Chinese business.
Management is also anticipating being able to ramp up
revenue from 2004’s $19.7 million (all values in U.S. dollars
unless specified otherwise) to $109 million in 2006, boosting
net income from $3.7 million in 2004 to $11.3 million next
year, while maintaining gross profit margins in the 21-23%
range.
The figures that rolled in during mid-November appeared to
give management a strong leg to stand on: Puda’s revenue
clicked in at $18 million for the quarter which ended
September 30, a 267% increase over Q3 2004, and very nearly
matching the revenue numbers for all of calendar 2004, based
on sales of 234,000 metric tons of cleaned coal, a boost of
244% over the same quarter of 2004. Net income for the quarter
leaped 57% to $1.5 million, or two cents per diluted share,
doubling the penny-per-share earnings for the same period a
year ago.
And Puda and its affiliates are continuing to roll. At the
start of November, the Company signed its largest supply
contract to date with Changzhi Iron & Steel, the largest steel
maker in Shanxi province, by which Puda is to supply Changzhi
with 40,000 metric tons of cleaned coal a month, therefore,
480,000 MT a year. It’s a delivery schedule that promises to
be 10 times larger than that of Puda's largest client in 2004
- something that should make would-be investors sit up and
take notice.
Outstanding shares in Puda (which trades on the OTC market
under the symbol PUDC) total more than 75 million, which
suggests the party for potential investors is just getting
started. The stock sits in the lower region of a 52-week range
from 1.00 (in mid-July) to as high as 9.00 in late April.
Early December found the price around the 2.25 mark, which,
given the momentum the Company appears to be generating, may
be just where investors wish to find it, enabling them to
cross names off their Christmas list while still adding luster
to their portfolios.
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