Stock to Watch: China-based food producer American Lorain

American Lorain Corporation (NYSE Amex: ALN), an international processed foods company based in Shandong Province, People’s Republic of China (”PRC”), got a boost in September when it began trading its common stock on a senior exchange, NYSE Amex, under the ticker symbol “ALN.”

Chairman and CEO Si Chen commented in theirnews release:

Moving from the OTC BB to NYSE Amex is a major milestone for American Lorain, as we strive to improve liquidity and transparency for our shareholders. Trading on NYSE Amex is also an important endorsement of the Company as a major player in the food processing industry in China and helps us build credibility with our customers worldwide.”

American Lorain Corporation, a leading processed foods company that sells chestnuts, convenience foods, and canned, frozen and bulk food products both domestically and internationally through its subsidiaries, is also gaining momentum with its marketing strategies and innovation based on marketing tests, particulary for its convenience food products: Ready-to-Cook (RTC), Ready-to-Eat (RTE), and Meals Ready-to-Eat (MRE). This MRE product recently saw a boost to sales and product placement through ALN’s strategic alliance with leading convenience store chain, Beijing K.P.I. Hi-24 Convenience Stores Co., Ltd.

ALN, who produces approximately 50 varieties of chestnut products including aerated open-bottom chestnuts and sweetheart chestnuts, is also attending the world’s largest food and trade show, Anuga, being held in Cologne, Germany, October 10th through 14th. Beijing Lorain, a Lorain Group Company, will be exhibiting at the trade show event, which attracts over 160,000 industry visitors and is considered by many to be the most important food and beverage trading hub.

Chestnuts: A $2.1 billion market

It is estimated that chestnuts have been cultivated in China for at least 2,000 years. A versatile nut, the chestnut is the only nut to contain Vitamin C, as well as significant protein and more fiber than an apple. The chestnut can be used to make flour for bread, or can be candied, boiled, steamed, grilled, roasted or fried (as fritters), or used as a stuffing for vegetables or poultry. As chestnuts are a seasonal product, ALN leases or owns a total of 23,700 metric tons of storage, and plans to expand capacity in 2009 by adding an additional 6,000 tons of storage. The market for chestnuts is currently estimated to be about $2.1 billion, worldwide. China accounts for approximately 60% of the world’s chestnut output.

With well-established domestic sales distribution channels that cover 26 provinces and administrative regions in China (including large supermarket chains and wholesalers) as well as international sales channels that reach 42 countries, ALN is poised for growth, particulaly as it moves to capitalize on higher-margin convenience foods.

The Company has $29.1 million in working capital (as of June 30, 2009) and is trading at 5x P/E (ttm) while its competitors trade at 10-12x P/E (ttm). ALN is also under strong leadership as Mr. Si Chen, the company’s founder, Chairman and CEO, is an expert in the food sector with over 20 years industry experience.

American Lorain is definitely a stock to watch.