L&L Energy, Inc. (NasdaqGM: LLEN)

Mining

$13.00

RedChip Research

LLEN had another very strong quarter, with revenue of $38.0 million and diluted EPS of $0.34. During the quarter, the Company acquired the Ping Yi Coal Mine, the ZoneLin Coal Coking facility, and the HongXing Coal Washing facility. We are closely examining the acquisitions and their potential contributions which we will report on in our forthcoming research update. However, we have little doubt that LLEN will continue to make aggressive acquisitions in the coming quarters for which additional capital will be required. We remain bullish on Len’s short- and long-term prospects, and are currently revising our estimates model.
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Value Proposition

LLEN has reported five consecutive years of profitability and is forecasting continued revenue and earnings growth for FY10. The Company is trading at 8.8x earnings (ttm) in a sector that trades at a median P/E of 13.2x (ttm); the Company is forecasting EPS of $0.94 this year, giving a forward P/E of 6.2x. Fair market value for this stock is potentially $13, giving investors potential upside of over 100%.

Overview

Formed to serve the vast energy needs of the Chinese market, L & L Energy, Inc. (“LLEN” or the “Company”), is a U.S.-based company focused on coalrelated businesses in China. The Company currently operates three profitable coal mines, three coal washing facilities, a coking coal facility, and a coal consolidation and wholesale business in Yunnan province, China. LLEN is headquartered in Seattle, Washington.

Investment Highlights

• For the three month period ended October 31, 2009, revenues rose 139.0% to $24.48M and earnings were up 195.1% to $6.95M compared to the same period in 2008.
• The Company had net working capital of $31.3M as of October 31, 2009, with a current ratio of 2.77x.
• Net cash provided by operating activities for 6MFY10 was $11.94M compared to $1.16M in the same period of last year, representing a 931% growth.
• China is the world’s largest producer and consumer of coal. 70% of China’s energy production comes from coal.
• Coal demand in China increased 13% annually over the past three years with supply only increasing 7% annually.

Recent News

Recent News: L&L Energy Inc. 05/12/10 6:00 AM EDT L & L Energy Recruits Two Consultants - PR Newswire 05/07/10 6:02 AM EDT L & L Energy to Present at Oppenheimer's China Conference in New York - PR Newswire 05/04/10 6:02 AM EDT L & L Energy Announces Fiscal 2010 Results to Exceed Previously Announced Guidance - PR Newswire 04/23/10 6:00 AM EDT L&L Sells HSC Subsidiary for Strategic Alignment - PR Newswire 04/07/10 9:28 AM EDT Skymark Research Initiates Independent Research Coverage on L&L Energy, Inc. - Globe Newswire 03/17/10 9:39 AM EDT L & L Energy Announces Third Quarter Fiscal Year 2010 Financial Results - Globe Newswire