Strong Energy Play in Chinese Coal

trickynick said: "StockFreak turned me on to XEC and it didn't take much homework for me to see that they are an undervalued company all over the world. To return the favor, I will suggest you check out YZC."

HappyHarry said: "I just have such a hard time actually putting my money in these foreign countries. How much accountabilty do they really have?"

AlfredSokol said: "Yeah, the numbers look great."

HappyHarry said: "They do indeed. Most impressive is how they added almost $200,000,000 to revenues yet the cost of goods sold barley went up. That type of pricing power is a very strong indicator."

alhamid said: "their balance sheet is so perfect i could cry"

StockFreak said: "Nice one TrickyNick. Are you worried about them posting a 5.29 eps this year as compared to 6.43 last year? Do you think this is too conservative as a trending eps so far this year?"

HappyHarry said: "Look at the [url=http://finance.yahoo.com/q/ks?s=XEC]Key Statistics[/url] I take it this company is supplying a lot of the energy to Chinese manufacturing companies? Is this an ADR?"

trickynick said: "[QUOTE=StockFreak]Are you worried about them posting a 5.29 eps this year as compared to 6.43 last year? Do you think this is too conservative as a trending eps so far this year?[/QUOTE] That's a tough one. It's really hard to tell if that trending will prove correct or not. Over the longer term I am pretty comfortable with the company for several reasons. ADR's such as this stock have generally performed better recently than the two most relevant stock indexes in China as well as China-focused mutual funds and hedge funds. One thing I am a little concerned about is what may happen if China's central banks decide to let the yuan further appreciate. The effect on Yanzhou from that would likely be more indirect than anything since they do most of their business with domestic Chinese customers who would presumably be harder hit by that. To answer Harry's question, Yanzhou sells thermal coal for the production of electricity as well as a softer, slower burning grade that is sold to manufacturers of steel and other metal products and building materials. They also provide a transportation service for railroad coal. The reasoning that most leads me to look favorably on this company (apart from the numbers) is that I see them as positioned to profit from both the current and future situations in China. At the moment, many of the capital equipment in China's economy is older, slightly worn out and is being used more heavily than is going to be sustainable in the long run. Because of this, energy production in China is not as efficient as it could be, meaning they consume more resources (ie. they burn more coal) which is a good thing for Yanzhou. In the long-run however, companies which have prospered from the large economic growth that will have occured will have the opportunity to upgrade their plant capacity (necessity will force it at some point anyhow). The transportation system will be improved so that rails and roads are in better shape. This will decrease Yanzhou's costs and allow them to deliver their product faster and more cheaply. On the whole, I think Chinese demand for coal and other basic materials will stay on pretty much an even clip for years and will not be as vulnerable as other sectors to economics slumps that may take place in China in the future. So, it appears to be a good outlook from either prospective. That's my reasoning however obfuscated it may be."

StockFreak said: "Not a bad take Nick, seems logical, however i dont know much about China's industrial economy as well as i would like. Might be a good way to diversify energy plays. However as China becomes more energy efficient, especially since the rate at which new tech comes in to the market increases, this may scare investors from coal. Along side with more studies of coal pollution (from fluoride) and lung cancer, along with the yuan issue. You cant argue with the numbers tho."

StockFreak said: "Looked at this a little bit more and initiated a 2% position. Great diversification play, and they have been rewarding their shareholders consistently. Great tip nick. On another note, what do you guys think of this bidu stock? Im thinking this is a peak at what the Chinese can do when they break in to their record level savings."

AlfredSokol said: ""China" and "Internet" are 2 real goods to string together right now. BIDU was up 400% in their debut."

trickynick said: "This is the biggest loser in my portfolio right now. Down 11.32% since I bought it. I guess things can be worse. I wonder if I should buy more. It seems as though something has to give."

StockFreak said: "There was a disheartening press release that talked about their earnings flat lining and possibly receding at the end of this year. They also mentioned some of YZC's major competitors and the comparison makes YZC look pretty unattractive at this point in their cycle. Cant seem to find the article at the moment but its there. The combination of the news and poor performing Asia ADR's in general would give the stock a hold (by a string, and its not silk) in my opinion."

AlfredSokol said: "You should think about bailing."