China Integrated Energy (CBEH) - ADR

Company Synopsis: 

China Integrated Energy, formerly known as China Bio Energy Holding Group Co., is an integrated energy company in China engaged. The company has three business segments: the wholesale distribution of finished oil and heavy oil products, the production and sale of biodiesel and the operation of retail gas stations. 

The Company’s primary business segment is the wholesale distribution of finished oil and heavy oil products. It sells primarily gasoline, diesel and heavy oil in 14 provinces and municipalities through seven sales offices located in various regions of China. During the year ended December 31, 2009, the Company distributed 279,000 tons of finished oil and heavy oil products. The Company operates a 100,000-ton biodiesel production plant located in Tongchuan City, Shaanxi Province. Its biodiesel feedstock includes non-edible seed oil, waste cooking oil and vegetable oil residue, most of which have limited alternative uses.

Fundamental Analysis 

1. Sales have increased from $54mn in 2006 to $290mn in 2009, an increase (CAGR) of 60% p.a. The sales are projected to reach $473mn in 2010, expected CAGR of 59.60%.
2. Net profit increased by 70% from $5mn in 2006 to $38mn in 2009. The same is expected to increase at the rate of 46% till 2012.
3. EPS has increased from $0.22 in 2006 to $1.34 in 2009, a CAGR of 80%.  EPS is expected to increase at a CAGR of 61% up to 2012.

Technical Analysis 

The stock appears to near the over sold boundary. Below are the technical details. 

Below charts show the absolute price movement from 1st Jan 2009 to 14th April 2010. The first chart shows the individual price movement; the second chart depicts the performance of CBEH against S&P 500 (normalized to 100) and the third chart is the Fundamental Chart. 

Chart 1 (Bloomberg)

Chart 2 (Bloomberg)

Chart 3 (Bloomberg)

My Conclusion

China has voracious hunger for energy, to cater to industries and the upcoming middle class. I am bullish to China's rapidly growing auto market, hence the bet on CBEH. Currently the company is present in 14 provinces, any expansion (which is very likely) will be an addition to the sales and net profit.  

Using the appropriate valuation model the company is currently appearing cheaply valued and could achieve multiple folds. 

Additionally, the stock is not yet on the radar of any analysts, hence that could be one reason most of you might not have read about the stock. I feel that one should grab the opportunity before it gets a Buy recommendation from Wall Street or comes to Light.   

Happy Investing!!! 

Disclosure: No position as yet, but could change going forward.