This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

China Coal Stocks to Play: SinoCoking, Yanzhou

NEW YORK (TheStreet) --SinoCoking Coal and Coke Chemical Industries (SCOK) and Yanzhou Coal Mining (YZC) are expecting a near-term boost in performance. The pop should come from positive growth prospects, acquisitions and strong earnings outlooks of the companies; rising coal prices on increasing demand from emerging markets; and supply constraints.

However, the onslaught of government measures to ban operations at smaller mines and the directive to keep prices stable in annual supply contracts could cap the rally. China is seeking to consolidate smaller coal mines into 13 large-scale bases nationwide by 2015, and the ban is unlikely to be lifted until the next two to three quarters. The government issued pricing policies and has ordered companies to maintain stable prices and follow the agreed upon prices in annual supply contracts.

In its preliminary results for the fourth quarter and year-ended June 30, SinoCoking said that its new coking facility is on track for completion by first-quarter 2011. Operations at the unit will begin during second-quarter 2011, expanding the capacity to 1.1 million metric tonnes from the current 250,000 metric tonnes.

In order to rein in the effect of the ban on smaller coal mines, SinoCoking is entering a supply agreement with a large coal producer to meet customer needs until the government lifts the ban on operations of smaller mines.

Based on full production, this new coking facility will generate approximate revenue of $100 million-$110 million and $20 million-$25 million of net income at the current market pricing. After spending $10 million on the construction of the new coking facility, the company expects to spend an additional $70 million in capital expenditure.

For the quarter ended June 30, SinoCoking posted a preliminary net income of $2 million as compared to $6.3 million in the same quarter a year ago, while net revenues stood at $10 million as against $15.52 million in the same quarter a year ago. The performance was affected by lower market demand for both washed coal and coking products coupled with lower coking byproducts volume. In addition, the government's ban on the operation of small mines affected the company performance in the recent quarter. However, the company's efforts to find alternatives in case of a ban, strong coal demand in the second half of 2010 and various acquisitions are positives that support its performance in the upcoming quarters.

Out of the ten acquisitions planned, SinoCoking recently initiated two deals to acquire majority interest in two mines based in Henan. Through its wholly controlled affiliate Pingdingshan Hongli Coal & Coke (Hongli), SinoCoking acquired a 60% equity interest in Baofeng Shuangrui Coal and a 60% equity stake in Baofeng Xingsheng Coal, which operates Xingsheng Coal Mine, for approximately $12.4 million in total.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,976.94 -5.65 -0.03%
S&P 500 1,976.05 -2.86 -0.14%
NASDAQ 4,448.7050 +3.7960 0.09%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs