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Why SinoCoking Coal and Coke Chemical Industries (SCOK) Stock Is Surging Today

NEW YORK (TheStreet) -- SinoCoking Coal and Coke Chemical Industries  (SCOK) surged Monday after the company announced it would shift its focus to large-scale production of clean energy, such as clean-burning synthetic gas.

The company is building a green facility to convert carbon dioxide into synthetic gas, or syngas, a fuel that produces clean energy and numerous types of fertilizers, solvents and other industrial products. The company said in a statement the facility should become operational in the fourth quarter and would produce as much as 25,000 cubic meters of syngas per hour, which would rank it among the highest outputs in China.

To reflect this change, SinoCoking plans to change its name to Clean Synthetic Technologies Corp. 

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"Clean Synthetic Technologies is more than just a new name. It is a new identity," said Chairman and CEO Jianhua Lv.

The stock was up 19.23% to $1.86 at 12:12 p.m. More than 1 million shares had changed hands, compared to the average volume of 106,005.

Separately, TheStreet Ratings team rates SINOCOKING COAL & COKE CHEM as a "hold" with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate SINOCOKING COAL & COKE CHEM (SCOK) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 46.8% when compared to the same quarter one year prior, rising from $0.50 million to $0.74 million.
  • The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, SCOK has a quick ratio of 1.68, which demonstrates the ability of the company to cover short-term liquidity needs.
  • SCOK, with its decline in revenue, underperformed when compared the industry average of 3.2%. Since the same quarter one year prior, revenues fell by 20.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Net operating cash flow has significantly decreased to $0.01 million or 99.33% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SINOCOKING COAL & COKE CHEM's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: SCOK Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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