L&L Energy, Inc.
L&L Energy, Inc. (NasdaqGS: LLEN) MARCH 18, 2011 | TARGET PRICE: $17.00 | RATING: STRONG BUY
UPDATE
3QFY11 Results Match Estimates. LLEN reported $65.9 million in revenue and EPS of $0.41 which was in-line with our projections. 3QFY11 revenue increased 15% sequentially and 74% YOY led by a doubling QOQ of the Company’s coal wholesale segment. Coal Wholesale Revenue More Than Doubles in Q3. Coal wholesale revenue increased 102% from $5.5 million in 2QFY11 to $11.2 million in 3QFY11. The rise in coal wholesale revenue caught us off guard as wholesale revenue was just $13.2 million for all of FY10. Higher Coal Prices and Expanded Mining Production. Company management reports increases in the average selling price of thermal and washed coal during and subsequent to the quarter. Coal mining production also increased by approximately 10% from 160,000 tons in 2QFY11 to 180,000 tons in 3QFY11. Additional mine capacity increases are expected to be announced. Mine Acquisition Expected Before April 30th. On the earnings call, Company management stated that they currently have issued 3 MOUs for coal mines in China and that at least one acquisition should be complete by the end of FY11. While no specifics were given regarding the capacities of the acquisition targets, management alluded that the 3 mining acquisitions would push total mine capacity to close to 2 million tons annually from 750,000 tons currently. Coal Shipments From U.S. Mine to Commence Soon. Last month, LLEN signed an agreement that gives them the exclusive right to market coal from the Bowie Mine located in Colorado for export to China, Taiwan, Japan and Korea. The Company expects approximately 500,000 tons of coal to be available in 2011 with shipments to begin in May or June. We believe that importing coal has the potential become the Company’s third largest source of revenue in FY12 behind coal washing and coal mining. Reiterate Target Price of $17.00 and STRONG BUY Rating. While we have raised our FY12 estimates, lower peer multiples keep target price the same.
L&L Energy, Inc. (NasdaqGS: LLEN)
3rd Quarter Summary 3QFY11 3QFY11 Actual YOY RedChip Results Change estimates Revenue 65.9 73.6% 64.3 Gross Profit 21.4 33.3% 22.5 Gross Margin 32.5% -982bps 35.0% Operating Income 16.5 26.4% 17.0 Operating Margin 25.1% -936bps 26.5% Net Income 12.6 31.7% 13.2 Net Margin 19.1% -608bps 20.5% EPS 0.41 18.2% 0.41
Diff. vs RedChip estimates 2.5% -4.9% -254bps -3.1% -144bps -4.5% -141bps 0.0%
in US$ millions, except percentage, and EPS data
LLEN’s 3QFY11 results essentially matched our expectations. The Company reported revenue of $65.9 million in versus our estimate of $64.3 million. For the nine months ended January 31, 2011, the Company grew revenues 138% YOY to $178.6 million. The Company reported slightly lower than expected gross profit, operating income, and net income totals due to lower than anticipated margins. The primary reason behind the lower margins came from an increased contribution from the coal wholesale segment which carries much lower margins than coal mining (net margin of 5.6% vs 52% in 3QFY11). Diluted EPS of $0.41, exactly matched our estimate.
L&L Energy, Inc. (NasdaqGS: LLEN)
Annual Production Capacity (tons) DaPuAn Coal Mine SuTsong Coal Mine PingYi Coal Mine Total Coal Mining DaPuAn Coal Washing Hong Xing Coal Washing Ping Yi Coal Washing Total Coal Washing Zone Lin Coal Coking
Coal Coking Total
300,000 150,000 300,000 750,000 300,000 200,000 600,000 1,100,000 150,000 150,000
As of January 30, 2011
3QFY11 Production Rates
Coal Mining Coal Washing
Tonnage 180,000 220,000
% Increase YOY 12.50% 0.00%
Utilization Rate 96% 80%
Balance Sheet and Liquidity Summary 3QFY11 3QFY10 Cash 8.15 15.20 Accounts Receivable Turnover 9.0 5.7 Working Capital 43.77 27.24 Short-term debt 2.20 1.74 Long-term debt 0.08 4.15 Cash from operations (ttm) 49.09 22.55 Cash from financing (ttm) 1.53 20.45 Capex (ttm) 55.33 23.66 Free Cash Flow (ttm) -6.24 -1.11 in US$ millions
Due to the Company’s excellent earnings over the past twelve months, cash from operations has been robust, totaling $49.1 million on a ttm basis. This excellent operating cash flow has largely funded the Company’s expansion and improvements of mines and facilities.
L&L Energy, Inc. (NasdaqGS: LLEN)
The majority of warrants have been exercised. In 9MFY11, 2,422,155 warrants have been exercised at an average exercise price of $3.16. This represents the exercising of approximately 70% of the outstanding warrants. 1,043,174 warrants remain outstanding as of January 31, 2011, with an average exercise price of $3.16. The threat of shareholder dilution currently remains low.
Coal mining acquisitions appear to be imminent. On the earnings call, CEO Dickson Lee stated that LLEN has completed 3 non-binding MOUs to acquire coal mines in the southern part of China. The Company expects to acquire at least one of these coal mines by the end of FY11. While there was no discussion on the sizes of the mines that LLEN has been looking at, management did say that their goal was to expand their coal mine production capacity to 2 million tons annually from 750,000 tons currently. We have opted to be very conservative for our mining capacity projections for FY12. We estimate that the potential mining acquisitions have approximately 300,000 tons each of capacity on average as there aren’t currently any indications that the Company is looking to raise a large sum of money through either debt or equity which would be required to take on larger acquisitions. We are projecting the acquisition of one 300,000 coal mine to be completed by the end of FY11 and for the SuTsong mine to be expanded to 300,000 tons of capacity, giving the Company 1.2 million tons of mining capacity in FY12. We note that further potential upside exists to our projection in the way of additional acquisitions and further expansion of the mines at DaPuAn and SuTsong. Coal imports to China set to begin with a few months. On November 29, 2010, LLEN agreed to provide to Bowie Resources, owner and operator of the Bowie coal mine located in Colorado, initial funding of up to $3 million that would be used to fund Bowie’s coal mining operations. As we stated in our previous update, Bowie Resources was having difficulty in paying their expenses, so LLEN agreed to provide funding to Bowie at a 9% interest rate and also earned an option to obtain up to a 9% equity interest in Bowie. Since this time, LLEN has increased their investment in the Bowie Mine to approximately $7 million. Management stated on the earnings call that they do not believe that Bowie will require any additional funding from LLEN. On February 7, 2011 LLEN announced that it had secured the exclusive right to market super compliance coal from the Bowie mine for export to China, Taiwan, Japan and Korea. The agreement gives LLEN the right to market this coal for 18 months (starting from February 4, 2011) along with an option to extend the agreement if certain price targets are reached. LLEN estimates that approximately 500,000 tons of coal will be available for export in 2011, and at least 500,000 tons of coal will be available for export in 2012.
L&L Energy, Inc. (NasdaqGS: LLEN)
LLEN also announced on January 19, 2011, that they entered into a commitment document with Zhanjiang Port Co. Ltd., which is the largest public port inside the Zhanjiang Harbor to conduct a feasibility study that will work toward the establishment of a coal blending and distribution center in the harbor. LLEN intends to ship coal from the Bowie Mine into this port, along with other ports in Asia. Management reiterated on the earnings call that initial shipments from the Bowie Mine to China should commence in May/June. Management has projected that 500,000 tons of coal will be available for export in 2011; we have taken a conservative approach and have estimated that LLEN will import approximately 233,000 tons of coal to China in 2011. However, this number could be higher depending on how many relationships LLEN make with different ports in China or if LLEN begins exporting coal from the Bowie Mine to other Asian countries. We believe that coal importing will be a major source of growth for LLEN and we project that this segment will make a greater contribution to revenue growth than any other segment in FY12. We believe that imports of coal will be the Company’s third largest segment by revenue in FY12 (coal washing and coal mining would be the 1st and 2nd largest, respectively.) China Freezes Coal Contract Prices in 2011. On December 6, 2010, China’s National Development and Reform Commission (NDRC) issued a notice ordering the prices of China’s major coal supply contracts to remain unchanged from 2010 levels. This notice was issued due to higher inflation in China. While this should somewhat keep a lid on thermal coal prices in 2011, some believe that coal suppliers might be able to find ways around the price cap such as purposely delivering lower volumes forcing power producers to purchase coal on the spot market where prices are higher. In light of the coal price freeze, we have projected thermal coal ASPs for LLEN essentially flat for FY11.
Japan nuclear crisis could lead to greater coal demand. The devastating earthquake on March 11, 2011 and associated nuclear power plant crisis has wreaked havoc on Japan. This natural disaster has led to authorities taking stock of the dangers of nuclear power, and we believe Japan will be looking for other sources of energy
L&L Energy, Inc. (NasdaqGS: LLEN)
outside of nuclear power, to which coal stands to be a big beneficiary. We note that LLEN’s recent agreement with Bowie includes the exclusive right to market Bowie coal to Japan. Coking coal prices forecast to continue rising higher on supply shortages; however, lower steel production from Japan may ease supply pressures. Coking coal prices have continued to rise recently as supply remains compressed due to the Australian floods. The Tata Steel Group said they expect coking coal prices to be fixed above $300 per ton, as compared to $225 per ton for the current quarter. Anglo American has settled contracts for the April-June period at $330 per ton, which is up 47% from the first quarter. Kees Gerretse, Tata Steel Group’s group director for procurement and transport, said that coking coal prices are expected to return to normal by August. However, reduced demand from Japan may help speed up the process. Due to the Japanese earthquake, the country’s steel production is expected to drastically decline. Goldman Sachs estimates that about 23% of Japan’s steelmaking capacity has been affected by the earthquake, while Deutsche Bank estimates that up to 40% of the country’s steelmaking capacity has been affected. Much of coking coal’s demand is related to steel production, so any decreases in steel production should lower the price of coking coal. Taking into account the above factors, we expect coking coal prices to remain elevated through June and then fall fairly sharply afterwards due to a combination of lower demand from Japan and higher supply from Australia. Revenue and EPS estimates raised. Prior to the beginning of FY11, LLEN issued guidance of $218 million in revenue and $1.50 - $1.61 in EPS. We have slightly increased our 4QFY11 and FY11 revenue estimates due to higher than expected coal prices, particularly with regards to washed and coking coal prices which are expected to rise higher for the April – June period. Our current revenue projection is above Company guidance at $245.8 million and our EPS projection of $1.54 is in the middle of guidance. For FY12, our projections include the effect of an additional coal mine being acquired and the addition of revenue and income from the importing and marketing of Bowie coal. We are now estimating FY12 revenue at $365.3 million and EPS of $2.31. Management has not issued FY12 guidance at this time.
Forward Estimates Revenue EPS 4QFY11 $67.2M $0.42 FY11 $245.8M $1.54 FY12 $365.3M $2.31 Source: RedChip Research
L&L Energy, Inc. (NasdaqGS: LLEN)
Fiscal Year Ending ($000s)
04/30/10 04/30/11 04/30/12 04/30/13 04/30/14 04/30/15
Revenue
109,218
245,806
365,323
EBIT Less: Taxes Debt-Free Earnings Less: Capital Expenditures Less: Working Capital Requirements Add: Depreciation and Amortization Total Net Investment
43,885 6,583 37,302 (37,998) (10,057) 1,399 (46,656)
63,170 9,476 53,695 (56,825) (13,361) 7,828 (62,358)
95,150 121,579 151,974 176,290 14,273 18,237 22,796 26,444 80,878 103,342 129,178 149,847 (65,989) (61,740) (65,301) (61,977) (21,694) (16,440) (17,809) (14,248) 10,198 11,873 14,841 17,216 (77,484) (66,306) (68,270) (59,009)
(9,354)
(8,663) 0.24 0.96 (8,327)
Net Debt-Free Cash Flows: Discount Period Discount Factor @ 17.6% PV of Net Debt-Free Cash Flows:
Terminal Value Assumptions Terminal Year EBITDA 193,506 EBITDA Multiple 4.70 Terminal Value Discount Period Discount Factor @ 17.6% PV of Terminal Value
909,478 4.25 0.50 457,277
3,393 1.25 0.82 2,773
474,919
37,036 2.25 0.70 25,743
593,649
60,908 3.25 0.59 36,007
Aggregate of PV of FCFF Less: Net Debt EV
WACC Cost of Equity 17.80% Cost of Debt 6.0% Shares outstanding (000) % Equity 98.2% Target Price % Debt 1.8% Current Market Price WACC 17.6% Upside
688,633
90,838 4.25 0.50 45,672
559,144 (5,870) 565,014 33,170 $17 7.60 124%
Our DCF valuation derives a target price of $17.00. While we have increased our FY12 estimates, lower market multiples have caused the target price to remain the same. Beyond our FY12 projections, we have modeled for YOY revenue growth of 30%, 25%, and 15% in FY13, FY14, and FY15, respectively, along with an assumed EBIT margin of 25.6%, which is in line with the expected EBIT margins for FY11 and FY12. We have assumed a long-term tax rate of 15% and have projected that the Company will spend an increasingly lower percentage of profits on capital expenditures in later years, which will lead to increased free cash flows. We have assumed a cost of equity of 17.8% derived from the discount to market price that was present for Puda Coal’s (a close peer to LLEN) secondary offering on January 17, 2011. Our terminal value EBITDA multiple was taken from the median EV/EBITDA multiple of our selected peer group.
L&L Energy, Inc. (NasdaqGS: LLEN)
LLEN PEER COMPARISON Market P/E Fwd. P/S P/B Revs. Rev. Per EV/EBITDA BVPS Fwd. Fwd. Net Name Ticker Price Cap (M) (ttm) P/E (ttm) (mrq) (ttm) Share (ttm) (ttm) (mrq) Revs. Income Yanzhou Coal Mining 1171 HK 24.75 20,316.61 21.4x N/A 3.9x 3.4x 3870.1 0.79 14.8x 0.92 5971.6 1425.7 Sinocoking Coal and Coke SCOK US 10.24 215.28 N/A N/A 3.6x 2.9x 53.7 2.54 N/A 3.51 191.1 N/A Puda Coal PUDA US 11.25 337.76 10.4x 6.7x 0.7x 1.4x 324.8 16.08 7.6x 8.36 485.5 N/A China Energy CHGY US 0.77 34.65 2.3x N/A 0.4x 0.8x 88.0 1.96 1.6x 1.15 N/A N/A U.S. China Mining Group SGZH US 4.07 60.78 9.7x N/A 1.2x 0.7x 51.2 3.43 1.7x 5.92 N/A N/A Median L&L Energy Inc.
10.0x 6.7x 1.2x 1.4x LLEN US
7.60
244.17
4.7x
3.7x
1.1x
1.9x
4.7x 212.7
7.19
3.9x
3.98
329.4
68.0
As of March 17, 2011 Source: Bloomberg
Multiples on Chinese small-cap coal stocks have dropped significantly since our last update. The following table summarizes the changes in median P/E, P/S, P/B, and EV/EBITDA over the last 60 days.
1/10/2011 3/17/2011
P/E (ttm) P/S (ttm) P/B (mrq) EV/EBITDA (ttm) 12.8x 1.3x 1.8x 7.2x 10.0x 1.2x 1.4x 4.7x
As with many Chinese small- and micro-cap stocks, short interest has continued to increase. LLEN shares are now trading only slightly above their 52-week low.
L&L Energy, Inc. (NasdaqGS: LLEN)
Quarterly Income Statement All Figures in US$ 000's, except share data FY Ending April 30,
FY10
1QFY11
2QFY11
3QFY11
67,947 13,245 18,319 13,157 (3,451) 109,218
18,626 5,052 28,963 7,018 (4,328) 55,330
18,612 5,518 32,193 7,749 (6,655) 57,418
20,659 11,158 33,773 7,371 (7,067) 65,895
Cost of revenues Gross profit Gross Margin
57,037 53,740 49.20%
36,724 18,606 33.63%
38,146 19,272 33.56%
44,504 21,390 32.46%
Personnel costs Selling, general and administrative Operating income Operating Margin
2,560 7,295 43,885 40.18%
781 3,226 14,599 26.39%
1,956 2,901 14,415 25.10%
1,711 3,169 16,510 25.06%
Interest income (expense) Other income Earnings before taxes
(197) 498 44,187
(71) (13) 14,516
(101) 421 14,735
(285) 444 16,669
Revenue Coal Mining Coal Wholesale Coal Washing Coal Coking Less: Intersegment Revenues Total revenues
Income taxes Net income before minority interest Minority interest Net income Net Margin EPS - Diluted Weighted average shares outstanding - Diluted
4,531 2,183 2,006 2,148 39,655 12,333 12,728 14,522 (7,041) (1,394) (1,667) (1,937) 32,615 10,939 11,061 12,585 29.86% 19.77% 19.26% 19.10% 1.34 0.36 0.35 0.41 25,748,036 30,407,090 31,225,945 31,018,298
L&L Energy, Inc. (NasdaqGS: LLEN)
Quarterly Balance Sheet All Figures in US$ 000's FY Ending April 30, Current Assets Cash and Cash Equivalents Accounts Receivables Other Receivables Inventories Prepaid and Other Current Assets Total Current Assets
3QFY10
FY10
1QFY11
2QFY11
3QFY11
15,204 18,863 634 5,974 8,883 49,558
7,327 17,305 7,956 9,605 22,671 64,864
9,477 16,113 7,893 11,758 15,865 61,107
9,335 20,802 8,617 11,949 15,356 66,058
8,147 28,161 8,738 10,521 17,832 73,399
43,811 8,369 105 2,061 7,602 111,507
17,211 37,387 1,298 1,259 7,142 129,162
31,202 35,237 5,222 7,082 141,108
27,713 52,252 1,187 7,108 155,578
36,243 53,428 1,129 4,445 1,052 6,437 176,133
Current Liabilities Accounts Payable Accrued Expenses and Other Liabilities Bank Loan and Bank Line of Credit Taxes Payable Customer Deposits Other payables Total Current Liabilities
1,733 756 1,742 7,803 4,155 6,128 22,318
1,996 1,225 10,387 3,938 15,345 32,891
5,235 755 11,823 4,771 6,966 29,550
4,415 803 2,196 15,166 2,635 5,781 30,996
5,206 849 2,196 14,109 4,920 2,349 29,629
Non Current Liabilities Long-term Bank Loans Long-term Payables Asset Retirement Obligation Total Liabilities
4,147 3,392 8,406 38,264
4,147 800 507 38,345
3,407 800 1,225 34,982
588 800 1,249 33,634
80 800 1,278 31,787
Non Current Assets Construction in Progress Property, plant, equipment, and mine development, net Asset retirement costs, net Deferred Tax Assets Intangible Assets, net Long term investment Long term receivable Related party notes receivable Total Assets
Shareholders' Equity Common Stock - Par Value Additional Paid in Capital Shares to be issued Stock subscription Service Cost being Amortized Retained Earnings Accumulated Other Comprehensive Income Deferred Stock Compensation Treasury Stock - Common Total Shareholders Equity Non-controlling Interest Total Equity Total Liabilities & Shareholders Equity
27 29 30 30 32 36,055 32,781 34,718 37,940 45,461 0 (1,800) (5,613) 31,400 45,109 56,047 67,108 79,693 630 700 1,739 3,359 5,067 (37) (1,753) (1,302) (396) (396) (396) (397) 62,463 78,222 92,137 106,288 126,753 10,780 12,594 13,988 15,656 17,593 73,243 90,817 106,126 121,944 144,346 111,507 129,162 141,108 155,578 176,133
L&L Energy, Inc. (NasdaqGS: LLEN)
Quarterly Cash Flow Statement All Figures in US$ 000's FY Ending April 30,
9MFY10
FY10 1QFY11 6MFY11 9MFY11
Operating Activities Net Income Depreciation and Amortization Issuance of Common Stock for Services Issuance of Common Stock for Employee Bonus Minority Interest Income Amortization of Deferred Compensation
24,575 2,057 1,532 1,005
Gain on reduction of debt Decrease in Asset Retirement Costs Accounts Receivable Inventory Accounts Payable Taxes Payable Prepaid and Other Current Assets Other Receivable Customer Deposits Accrued Liabilities and Other Liabilities Other Payable Net Cash Provided By Operating Activities
(529) (837) 507 (719) (95) (3,235) (7,459) (6,897) 9,208 1,117 3,833 (4,517) (10,238) 2,330 (9,767) 2,166 4,185 (197) 276 16,319 29,619
Investing Activities Acquisition of Property and Equipment Acquisition of Business, net Acquisition of Construction-in-progress Change in Minority Interest Due to Acquisition and Disposal (Increase)/Decrease in Investments Acquisition of Intangible Assets Net Cash Provided By Investing Activities
31,056 1,399 139 7,041 64
10,939 3,112 431 1,394 -
21,999 4,632 1,277 1,753 3,062 -
34,584 6,223 1,912 1,753 4,999 396
1,192 (2,153) 3,239 1,435 6,945 63 833 (470) (8,379) 18,581
(3,497) (10,856) (2,344) (916) 2,419 3,210 4,779 3,722 7,205 3,937 (661) (782) (1,303) 982 (422) (376) (9,563) (12,996) 29,336 35,792
(18,234) (18,310) (3,582) (8,240) (10,882) (4,555) (4,562) - (15,126) (13,990) (20,720) (29,249) (428) 574 (4,445) (429) (22,215) (39,584) (18,082) (28,960) (44,577)
Financing Activities Loan to Associates Additional purchase of noncontrolling interest Payments of Debt Payment to Shareholder Proceeds from Long-term Payable Proceeds from Warrant Extension Net Borrowing on Bank Line of Credit Payment on Bank Loans Proceeds from Issuance of Common Stock Warrants Converted to Common Stock Net Cash Provided By Financing Activities
5,984 (427) (439) (911) 9,160 2,598 15,964
100 (911) (142) 9,177 3,916 12,141
50 (740) 1,457 767
50 (1,363) 2,070 757
(1,871) 2,500 4,670 5,349
Foreign Exchange Rate Effect on Cash and Cash Equivalents Increase in Cash & Cash Equivalents
(37) 10,106
53 2,229
884 2,150
874 2,007
4,255 819
50
L&L Energy, Inc. (NasdaqGS: LLEN)
Projected Income Statement All Figures in US$ 000's, except share data FY Ending April 30,
1QFY11
2QFY11
3QFY11
4QFY11E
FY11E
Revenue Coal Mining Coal Wholesale Coal Washing Coal Coking Less: Intersegment Revenues Total revenues
18,626 5,052 28,963 7,018 (4,328) 55,330
18,612 5,518 32,193 7,749 (6,655) 57,418
20,659 11,158 33,773 7,371 (7,067) 65,895
22,800 8,369 34,953 8,550 (7,508) 67,164
80,697 30,097 129,881 30,688 (25,558) 245,806
Cost of revenues Gross profit Gross Margin
36,724 18,606 33.63%
38,146 19,272 33.56%
44,504 21,390 32.46%
44,682 22,482 33.47%
164,056 81,750 33.26%
Personnel costs Selling, general and administrative Operating income Operating Margin
781 3,226 14,599 26.39%
1,956 2,901 14,415 25.10%
1,711 3,169 16,510 25.06%
1,679 3,157 17,646 26.27%
6,127 12,452 63,170 25.70%
Interest income (expense) Other income Earnings before taxes
(71) (13) 14,516
(101) 421 14,735
(285) 444 16,669
(54) 470 18,062
(511) 1,323 63,982
Income taxes Net income before minority interest Minority interest Net income Net Margin EPS - Diluted Weighted average shares outstanding - Diluted
2,183 2,006 2,148 2,348 8,685 12,333 12,728 14,522 15,714 55,297 (1,394) (1,667) (1,937) (2,043) (7,042) 10,939 11,061 12,585 13,671 48,255 19.77% 19.26% 19.10% 20.35% 19.63% 0.36 0.35 0.41 0.42 1.54 30,407,090 31,225,945 31,018,298 32,738,363 31,347,424
L&L Energy, Inc. (NasdaqGS: LLEN)
Projected Income Statement All Figures in US$ 000's, except share data FY Ending April 30,
1QFY12E
2QFY12E
3QFY12E
4QFY12E
FY12E
Revenue Coal Mining Coal Wholesale Coal Washing Coal Coking Coal Importing Less: Intersegment Revenues Total revenues
26,393 8,453 39,130 9,833 6,426 (8,518) 81,715
30,276 8,537 35,631 7,374 12,466 (8,568) 85,717
32,377 8,622 40,254 7,227 15,739 (9,442) 94,778
34,859 8,709 43,367 7,082 19,264 (10,169) 103,113
123,905 34,321 158,383 31,516 53,896 (36,697) 365,323
Cost of revenues Gross profit Gross Margin
55,305 26,411 32.32%
56,716 29,001 33.83%
63,393 31,384 33.11%
69,242 33,870 32.85%
244,656 120,666 33.03%
Personnel costs Selling, general and administrative Operating income Operating Margin
2,043 3,841 20,527 25.12%
2,143 3,986 22,872 26.68%
2,180 4,312 24,892 26.26%
2,372 4,640 26,859 26.05%
8,737 16,779 95,150 26.05%
Interest income (expense) Other income Earnings before taxes
(54) 572 21,045
(54) 600 23,418
(54) 663 25,501
(54) 722 27,526
(217) 2,557 97,490
Income taxes Net income before minority interest Minority interest Net income Net Margin EPS - Diluted Weighted average shares outstanding - Diluted
2,736 3,044 3,315 3,578 12,674 18,309 20,373 22,186 23,948 84,816 (1,977) (2,200) (2,396) (2,586) (9,160) 16,332 18,173 19,790 21,361 75,656 19.99% 21.20% 20.88% 20.72% 20.71% 0.50 0.56 0.60 0.65 2.31 32,738,363 32,738,363 32,738,363 32,738,363 32,738,363
L&L Energy, Inc. (NasdaqGS: LLEN)
Projected Balance Sheet All Figures in US$ 000's FY Ending April 30, Current Assets Cash and Cash Equivalents Accounts Receivables Other Receivables Inventories Prepaid and Other Current Assets Total Current Assets
FY10
FY11E
FY12E
7,327 17,305 7,956 9,605 22,671 64,864
6,732 29,497 8,603 12,304 16,406 73,541
13,864 40,185 12,786 15,903 24,466 107,204
17,211 37,387 1,298 1,259 7,142 129,162
36,243 68,516 1,129 7,000 1,052 6,437 193,918
36,243 124,307 1,129 7,000 1,052 6,437 283,372
Current Liabilities Accounts Payable Accrued Expenses and Other Liabilities Bank Loan and Bank Line of Credit Taxes Payable Customer Deposits Other payables Total Current Liabilities
1,996 1,225 10,387 3,938 15,345 32,891
4,922 836 2,196 14,109 4,916 4,922 31,901
7,340 893 2,196 14,109 7,306 4,893 36,737
Non Current Liabilities Long-term Bank Loans Long-term Payables Asset Retirement Obligation Total Liabilities
4,147 800 507 38,345
80 600 1,278 33,859
80 400 1,278 38,495
29 32,781 45,109 700 (396) 78,222 12,594 90,817 129,162
32 45,461 0 (1,800) 93,364 5,067 (1,302) (397) 140,424 19,636 160,060 193,918
32 45,461 0 (1,800) 169,020 5,067 (1,302) (397) 216,080 28,796 244,876 283,372
Non Current Assets Construction in Progress Property, plant, equipment, and mine development, net Asset retirement costs, net Deferred Tax Assets Intangible Assets, net Long term investment Long term receivable Related party notes receivable Total Assets
Shareholders' Equity Common Stock - Par Value Additional Paid in Capital Shares to be issued Stock subscription Service Cost being Amortized Retained Earnings Accumulated Other Comprehensive Income Deferred Stock Compensation Treasury Stock - Common Total Shareholders Equity Non-controlling Interest Total Equity Total Liabilities & Shareholders Equity
L&L Energy, Inc. (NasdaqGS: LLEN)
Projected Cash Flow Statement All Figures in US$ 000's FY Ending April 30,
FY11E
FY12E
31,056 1,399 139 7,041 64
48,255 7,828 1,912 1,753 7,042 396
75,656 10,198 9,160 -
Gain on reduction of debt Decrease in Asset Retirement Costs Accounts Receivable Inventory Accounts Payable Taxes Payable Prepaid and Other Current Assets Other Receivable Customer Deposits Accrued Liabilities and Other Liabilities Other Payable Net Cash Provided By Operating Activities
507 (95) (7,459) 9,208 3,833 (10,238) (9,767) 4,185 276 29,619
(12,192) (2,699) 2,926 3,722 5,364 (647) 978 (389) (10,423) 53,825
(10,689) (3,598) 2,418 (8,060) (4,183) 2,390 57 (29) 73,321
Investing Activities Acquisition of Property and Equipment Acquisition of Business, net Acquisition of Construction-in-progress Change in Minority Interest Due to Acquisition and Disposal (Increase)/Decrease in Investments Acquisition of Intangible Assets Net Cash Provided By Investing Activities
(18,310) (4,562) (15,126) (428) (39,584)
(13,456) (3,000) (40,369) (7,000) (63,825)
(14,664) (51,324) (65,989)
100 (911) (142) 9,177 3,916 12,141
(200) 50 (1,871) 2,500 4,670 5,149
(200) (200)
53 2,229
4,255 (596)
Operating Activities Net Income Depreciation and Amortization Issuance of Common Stock for Services Issuance of Common Stock for Employee Bonus Minority Interest Income Amortization of Deferred Compensation
Financing Activities Loan to Associates Additional purchase of noncontrolling interest Payments of Debt Payment to Shareholder Proceeds from Long-term Payable Proceeds from Warrant Extension Net Borrowing on Bank Line of Credit Payment on Bank Loans Proceeds from Issuance of Common Stock Warrants Converted to Common Stock Net Cash Provided By Financing Activities Foreign Exchange Rate Effect on Cash and Cash Equivalents Increase in Cash & Cash Equivalents
FY10
7,132
L&L Energy, Inc. (NasdaqGS: LLEN)
RedChip Research Coverage Universe Number of Covered Percentage of Rating Companies Universe Strong Buy 3 10.7% Buy 16 57.1% Speculative Buy 8 28.6% Hold 1 3.6% Sell 0 0.0%
L&L Energy, Inc. (NasdaqGS: LLEN)
UPDATE
3QFY11 Results Match Estimates. LLEN reported $65.9 million in revenue and EPS of $0.41 which was in-line with our projections. 3QFY11 revenue increased 15% sequentially and 74% YOY led by a doubling QOQ of the Company’s coal wholesale segment. Coal Wholesale Revenue More Than Doubles in Q3. Coal wholesale revenue increased 102% from $5.5 million in 2QFY11 to $11.2 million in 3QFY11. The rise in coal wholesale revenue caught us off guard as wholesale revenue was just $13.2 million for all of FY10. Higher Coal Prices and Expanded Mining Production. Company management reports increases in the average selling price of thermal and washed coal during and subsequent to the quarter. Coal mining production also increased by approximately 10% from 160,000 tons in 2QFY11 to 180,000 tons in 3QFY11. Additional mine capacity increases are expected to be announced. Mine Acquisition Expected Before April 30th. On the earnings call, Company management stated that they currently have issued 3 MOUs for coal mines in China and that at least one acquisition should be complete by the end of FY11. While no specifics were given regarding the capacities of the acquisition targets, management alluded that the 3 mining acquisitions would push total mine capacity to close to 2 million tons annually from 750,000 tons currently. Coal Shipments From U.S. Mine to Commence Soon. Last month, LLEN signed an agreement that gives them the exclusive right to market coal from the Bowie Mine located in Colorado for export to China, Taiwan, Japan and Korea. The Company expects approximately 500,000 tons of coal to be available in 2011 with shipments to begin in May or June. We believe that importing coal has the potential become the Company’s third largest source of revenue in FY12 behind coal washing and coal mining. Reiterate Target Price of $17.00 and STRONG BUY Rating. While we have raised our FY12 estimates, lower peer multiples keep target price the same.
L&L Energy, Inc. (NasdaqGS: LLEN)
3rd Quarter Summary 3QFY11 3QFY11 Actual YOY RedChip Results Change estimates Revenue 65.9 73.6% 64.3 Gross Profit 21.4 33.3% 22.5 Gross Margin 32.5% -982bps 35.0% Operating Income 16.5 26.4% 17.0 Operating Margin 25.1% -936bps 26.5% Net Income 12.6 31.7% 13.2 Net Margin 19.1% -608bps 20.5% EPS 0.41 18.2% 0.41
Diff. vs RedChip estimates 2.5% -4.9% -254bps -3.1% -144bps -4.5% -141bps 0.0%
in US$ millions, except percentage, and EPS data
LLEN’s 3QFY11 results essentially matched our expectations. The Company reported revenue of $65.9 million in versus our estimate of $64.3 million. For the nine months ended January 31, 2011, the Company grew revenues 138% YOY to $178.6 million. The Company reported slightly lower than expected gross profit, operating income, and net income totals due to lower than anticipated margins. The primary reason behind the lower margins came from an increased contribution from the coal wholesale segment which carries much lower margins than coal mining (net margin of 5.6% vs 52% in 3QFY11). Diluted EPS of $0.41, exactly matched our estimate.
L&L Energy, Inc. (NasdaqGS: LLEN)
Annual Production Capacity (tons) DaPuAn Coal Mine SuTsong Coal Mine PingYi Coal Mine Total Coal Mining DaPuAn Coal Washing Hong Xing Coal Washing Ping Yi Coal Washing Total Coal Washing Zone Lin Coal Coking
Coal Coking Total
300,000 150,000 300,000 750,000 300,000 200,000 600,000 1,100,000 150,000 150,000
As of January 30, 2011
3QFY11 Production Rates
Coal Mining Coal Washing
Tonnage 180,000 220,000
% Increase YOY 12.50% 0.00%
Utilization Rate 96% 80%
Balance Sheet and Liquidity Summary 3QFY11 3QFY10 Cash 8.15 15.20 Accounts Receivable Turnover 9.0 5.7 Working Capital 43.77 27.24 Short-term debt 2.20 1.74 Long-term debt 0.08 4.15 Cash from operations (ttm) 49.09 22.55 Cash from financing (ttm) 1.53 20.45 Capex (ttm) 55.33 23.66 Free Cash Flow (ttm) -6.24 -1.11 in US$ millions
Due to the Company’s excellent earnings over the past twelve months, cash from operations has been robust, totaling $49.1 million on a ttm basis. This excellent operating cash flow has largely funded the Company’s expansion and improvements of mines and facilities.
L&L Energy, Inc. (NasdaqGS: LLEN)
The majority of warrants have been exercised. In 9MFY11, 2,422,155 warrants have been exercised at an average exercise price of $3.16. This represents the exercising of approximately 70% of the outstanding warrants. 1,043,174 warrants remain outstanding as of January 31, 2011, with an average exercise price of $3.16. The threat of shareholder dilution currently remains low.
Coal mining acquisitions appear to be imminent. On the earnings call, CEO Dickson Lee stated that LLEN has completed 3 non-binding MOUs to acquire coal mines in the southern part of China. The Company expects to acquire at least one of these coal mines by the end of FY11. While there was no discussion on the sizes of the mines that LLEN has been looking at, management did say that their goal was to expand their coal mine production capacity to 2 million tons annually from 750,000 tons currently. We have opted to be very conservative for our mining capacity projections for FY12. We estimate that the potential mining acquisitions have approximately 300,000 tons each of capacity on average as there aren’t currently any indications that the Company is looking to raise a large sum of money through either debt or equity which would be required to take on larger acquisitions. We are projecting the acquisition of one 300,000 coal mine to be completed by the end of FY11 and for the SuTsong mine to be expanded to 300,000 tons of capacity, giving the Company 1.2 million tons of mining capacity in FY12. We note that further potential upside exists to our projection in the way of additional acquisitions and further expansion of the mines at DaPuAn and SuTsong. Coal imports to China set to begin with a few months. On November 29, 2010, LLEN agreed to provide to Bowie Resources, owner and operator of the Bowie coal mine located in Colorado, initial funding of up to $3 million that would be used to fund Bowie’s coal mining operations. As we stated in our previous update, Bowie Resources was having difficulty in paying their expenses, so LLEN agreed to provide funding to Bowie at a 9% interest rate and also earned an option to obtain up to a 9% equity interest in Bowie. Since this time, LLEN has increased their investment in the Bowie Mine to approximately $7 million. Management stated on the earnings call that they do not believe that Bowie will require any additional funding from LLEN. On February 7, 2011 LLEN announced that it had secured the exclusive right to market super compliance coal from the Bowie mine for export to China, Taiwan, Japan and Korea. The agreement gives LLEN the right to market this coal for 18 months (starting from February 4, 2011) along with an option to extend the agreement if certain price targets are reached. LLEN estimates that approximately 500,000 tons of coal will be available for export in 2011, and at least 500,000 tons of coal will be available for export in 2012.
L&L Energy, Inc. (NasdaqGS: LLEN)
LLEN also announced on January 19, 2011, that they entered into a commitment document with Zhanjiang Port Co. Ltd., which is the largest public port inside the Zhanjiang Harbor to conduct a feasibility study that will work toward the establishment of a coal blending and distribution center in the harbor. LLEN intends to ship coal from the Bowie Mine into this port, along with other ports in Asia. Management reiterated on the earnings call that initial shipments from the Bowie Mine to China should commence in May/June. Management has projected that 500,000 tons of coal will be available for export in 2011; we have taken a conservative approach and have estimated that LLEN will import approximately 233,000 tons of coal to China in 2011. However, this number could be higher depending on how many relationships LLEN make with different ports in China or if LLEN begins exporting coal from the Bowie Mine to other Asian countries. We believe that coal importing will be a major source of growth for LLEN and we project that this segment will make a greater contribution to revenue growth than any other segment in FY12. We believe that imports of coal will be the Company’s third largest segment by revenue in FY12 (coal washing and coal mining would be the 1st and 2nd largest, respectively.) China Freezes Coal Contract Prices in 2011. On December 6, 2010, China’s National Development and Reform Commission (NDRC) issued a notice ordering the prices of China’s major coal supply contracts to remain unchanged from 2010 levels. This notice was issued due to higher inflation in China. While this should somewhat keep a lid on thermal coal prices in 2011, some believe that coal suppliers might be able to find ways around the price cap such as purposely delivering lower volumes forcing power producers to purchase coal on the spot market where prices are higher. In light of the coal price freeze, we have projected thermal coal ASPs for LLEN essentially flat for FY11.
Japan nuclear crisis could lead to greater coal demand. The devastating earthquake on March 11, 2011 and associated nuclear power plant crisis has wreaked havoc on Japan. This natural disaster has led to authorities taking stock of the dangers of nuclear power, and we believe Japan will be looking for other sources of energy
L&L Energy, Inc. (NasdaqGS: LLEN)
outside of nuclear power, to which coal stands to be a big beneficiary. We note that LLEN’s recent agreement with Bowie includes the exclusive right to market Bowie coal to Japan. Coking coal prices forecast to continue rising higher on supply shortages; however, lower steel production from Japan may ease supply pressures. Coking coal prices have continued to rise recently as supply remains compressed due to the Australian floods. The Tata Steel Group said they expect coking coal prices to be fixed above $300 per ton, as compared to $225 per ton for the current quarter. Anglo American has settled contracts for the April-June period at $330 per ton, which is up 47% from the first quarter. Kees Gerretse, Tata Steel Group’s group director for procurement and transport, said that coking coal prices are expected to return to normal by August. However, reduced demand from Japan may help speed up the process. Due to the Japanese earthquake, the country’s steel production is expected to drastically decline. Goldman Sachs estimates that about 23% of Japan’s steelmaking capacity has been affected by the earthquake, while Deutsche Bank estimates that up to 40% of the country’s steelmaking capacity has been affected. Much of coking coal’s demand is related to steel production, so any decreases in steel production should lower the price of coking coal. Taking into account the above factors, we expect coking coal prices to remain elevated through June and then fall fairly sharply afterwards due to a combination of lower demand from Japan and higher supply from Australia. Revenue and EPS estimates raised. Prior to the beginning of FY11, LLEN issued guidance of $218 million in revenue and $1.50 - $1.61 in EPS. We have slightly increased our 4QFY11 and FY11 revenue estimates due to higher than expected coal prices, particularly with regards to washed and coking coal prices which are expected to rise higher for the April – June period. Our current revenue projection is above Company guidance at $245.8 million and our EPS projection of $1.54 is in the middle of guidance. For FY12, our projections include the effect of an additional coal mine being acquired and the addition of revenue and income from the importing and marketing of Bowie coal. We are now estimating FY12 revenue at $365.3 million and EPS of $2.31. Management has not issued FY12 guidance at this time.
Forward Estimates Revenue EPS 4QFY11 $67.2M $0.42 FY11 $245.8M $1.54 FY12 $365.3M $2.31 Source: RedChip Research
L&L Energy, Inc. (NasdaqGS: LLEN)
Fiscal Year Ending ($000s)
04/30/10 04/30/11 04/30/12 04/30/13 04/30/14 04/30/15
Revenue
109,218
245,806
365,323
EBIT Less: Taxes Debt-Free Earnings Less: Capital Expenditures Less: Working Capital Requirements Add: Depreciation and Amortization Total Net Investment
43,885 6,583 37,302 (37,998) (10,057) 1,399 (46,656)
63,170 9,476 53,695 (56,825) (13,361) 7,828 (62,358)
95,150 121,579 151,974 176,290 14,273 18,237 22,796 26,444 80,878 103,342 129,178 149,847 (65,989) (61,740) (65,301) (61,977) (21,694) (16,440) (17,809) (14,248) 10,198 11,873 14,841 17,216 (77,484) (66,306) (68,270) (59,009)
(9,354)
(8,663) 0.24 0.96 (8,327)
Net Debt-Free Cash Flows: Discount Period Discount Factor @ 17.6% PV of Net Debt-Free Cash Flows:
Terminal Value Assumptions Terminal Year EBITDA 193,506 EBITDA Multiple 4.70 Terminal Value Discount Period Discount Factor @ 17.6% PV of Terminal Value
909,478 4.25 0.50 457,277
3,393 1.25 0.82 2,773
474,919
37,036 2.25 0.70 25,743
593,649
60,908 3.25 0.59 36,007
Aggregate of PV of FCFF Less: Net Debt EV
WACC Cost of Equity 17.80% Cost of Debt 6.0% Shares outstanding (000) % Equity 98.2% Target Price % Debt 1.8% Current Market Price WACC 17.6% Upside
688,633
90,838 4.25 0.50 45,672
559,144 (5,870) 565,014 33,170 $17 7.60 124%
Our DCF valuation derives a target price of $17.00. While we have increased our FY12 estimates, lower market multiples have caused the target price to remain the same. Beyond our FY12 projections, we have modeled for YOY revenue growth of 30%, 25%, and 15% in FY13, FY14, and FY15, respectively, along with an assumed EBIT margin of 25.6%, which is in line with the expected EBIT margins for FY11 and FY12. We have assumed a long-term tax rate of 15% and have projected that the Company will spend an increasingly lower percentage of profits on capital expenditures in later years, which will lead to increased free cash flows. We have assumed a cost of equity of 17.8% derived from the discount to market price that was present for Puda Coal’s (a close peer to LLEN) secondary offering on January 17, 2011. Our terminal value EBITDA multiple was taken from the median EV/EBITDA multiple of our selected peer group.
L&L Energy, Inc. (NasdaqGS: LLEN)
LLEN PEER COMPARISON Market P/E Fwd. P/S P/B Revs. Rev. Per EV/EBITDA BVPS Fwd. Fwd. Net Name Ticker Price Cap (M) (ttm) P/E (ttm) (mrq) (ttm) Share (ttm) (ttm) (mrq) Revs. Income Yanzhou Coal Mining 1171 HK 24.75 20,316.61 21.4x N/A 3.9x 3.4x 3870.1 0.79 14.8x 0.92 5971.6 1425.7 Sinocoking Coal and Coke SCOK US 10.24 215.28 N/A N/A 3.6x 2.9x 53.7 2.54 N/A 3.51 191.1 N/A Puda Coal PUDA US 11.25 337.76 10.4x 6.7x 0.7x 1.4x 324.8 16.08 7.6x 8.36 485.5 N/A China Energy CHGY US 0.77 34.65 2.3x N/A 0.4x 0.8x 88.0 1.96 1.6x 1.15 N/A N/A U.S. China Mining Group SGZH US 4.07 60.78 9.7x N/A 1.2x 0.7x 51.2 3.43 1.7x 5.92 N/A N/A Median L&L Energy Inc.
10.0x 6.7x 1.2x 1.4x LLEN US
7.60
244.17
4.7x
3.7x
1.1x
1.9x
4.7x 212.7
7.19
3.9x
3.98
329.4
68.0
As of March 17, 2011 Source: Bloomberg
Multiples on Chinese small-cap coal stocks have dropped significantly since our last update. The following table summarizes the changes in median P/E, P/S, P/B, and EV/EBITDA over the last 60 days.
1/10/2011 3/17/2011
P/E (ttm) P/S (ttm) P/B (mrq) EV/EBITDA (ttm) 12.8x 1.3x 1.8x 7.2x 10.0x 1.2x 1.4x 4.7x
As with many Chinese small- and micro-cap stocks, short interest has continued to increase. LLEN shares are now trading only slightly above their 52-week low.
L&L Energy, Inc. (NasdaqGS: LLEN)
Quarterly Income Statement All Figures in US$ 000's, except share data FY Ending April 30,
FY10
1QFY11
2QFY11
3QFY11
67,947 13,245 18,319 13,157 (3,451) 109,218
18,626 5,052 28,963 7,018 (4,328) 55,330
18,612 5,518 32,193 7,749 (6,655) 57,418
20,659 11,158 33,773 7,371 (7,067) 65,895
Cost of revenues Gross profit Gross Margin
57,037 53,740 49.20%
36,724 18,606 33.63%
38,146 19,272 33.56%
44,504 21,390 32.46%
Personnel costs Selling, general and administrative Operating income Operating Margin
2,560 7,295 43,885 40.18%
781 3,226 14,599 26.39%
1,956 2,901 14,415 25.10%
1,711 3,169 16,510 25.06%
Interest income (expense) Other income Earnings before taxes
(197) 498 44,187
(71) (13) 14,516
(101) 421 14,735
(285) 444 16,669
Revenue Coal Mining Coal Wholesale Coal Washing Coal Coking Less: Intersegment Revenues Total revenues
Income taxes Net income before minority interest Minority interest Net income Net Margin EPS - Diluted Weighted average shares outstanding - Diluted
4,531 2,183 2,006 2,148 39,655 12,333 12,728 14,522 (7,041) (1,394) (1,667) (1,937) 32,615 10,939 11,061 12,585 29.86% 19.77% 19.26% 19.10% 1.34 0.36 0.35 0.41 25,748,036 30,407,090 31,225,945 31,018,298
L&L Energy, Inc. (NasdaqGS: LLEN)
Quarterly Balance Sheet All Figures in US$ 000's FY Ending April 30, Current Assets Cash and Cash Equivalents Accounts Receivables Other Receivables Inventories Prepaid and Other Current Assets Total Current Assets
3QFY10
FY10
1QFY11
2QFY11
3QFY11
15,204 18,863 634 5,974 8,883 49,558
7,327 17,305 7,956 9,605 22,671 64,864
9,477 16,113 7,893 11,758 15,865 61,107
9,335 20,802 8,617 11,949 15,356 66,058
8,147 28,161 8,738 10,521 17,832 73,399
43,811 8,369 105 2,061 7,602 111,507
17,211 37,387 1,298 1,259 7,142 129,162
31,202 35,237 5,222 7,082 141,108
27,713 52,252 1,187 7,108 155,578
36,243 53,428 1,129 4,445 1,052 6,437 176,133
Current Liabilities Accounts Payable Accrued Expenses and Other Liabilities Bank Loan and Bank Line of Credit Taxes Payable Customer Deposits Other payables Total Current Liabilities
1,733 756 1,742 7,803 4,155 6,128 22,318
1,996 1,225 10,387 3,938 15,345 32,891
5,235 755 11,823 4,771 6,966 29,550
4,415 803 2,196 15,166 2,635 5,781 30,996
5,206 849 2,196 14,109 4,920 2,349 29,629
Non Current Liabilities Long-term Bank Loans Long-term Payables Asset Retirement Obligation Total Liabilities
4,147 3,392 8,406 38,264
4,147 800 507 38,345
3,407 800 1,225 34,982
588 800 1,249 33,634
80 800 1,278 31,787
Non Current Assets Construction in Progress Property, plant, equipment, and mine development, net Asset retirement costs, net Deferred Tax Assets Intangible Assets, net Long term investment Long term receivable Related party notes receivable Total Assets
Shareholders' Equity Common Stock - Par Value Additional Paid in Capital Shares to be issued Stock subscription Service Cost being Amortized Retained Earnings Accumulated Other Comprehensive Income Deferred Stock Compensation Treasury Stock - Common Total Shareholders Equity Non-controlling Interest Total Equity Total Liabilities & Shareholders Equity
27 29 30 30 32 36,055 32,781 34,718 37,940 45,461 0 (1,800) (5,613) 31,400 45,109 56,047 67,108 79,693 630 700 1,739 3,359 5,067 (37) (1,753) (1,302) (396) (396) (396) (397) 62,463 78,222 92,137 106,288 126,753 10,780 12,594 13,988 15,656 17,593 73,243 90,817 106,126 121,944 144,346 111,507 129,162 141,108 155,578 176,133
L&L Energy, Inc. (NasdaqGS: LLEN)
Quarterly Cash Flow Statement All Figures in US$ 000's FY Ending April 30,
9MFY10
FY10 1QFY11 6MFY11 9MFY11
Operating Activities Net Income Depreciation and Amortization Issuance of Common Stock for Services Issuance of Common Stock for Employee Bonus Minority Interest Income Amortization of Deferred Compensation
24,575 2,057 1,532 1,005
Gain on reduction of debt Decrease in Asset Retirement Costs Accounts Receivable Inventory Accounts Payable Taxes Payable Prepaid and Other Current Assets Other Receivable Customer Deposits Accrued Liabilities and Other Liabilities Other Payable Net Cash Provided By Operating Activities
(529) (837) 507 (719) (95) (3,235) (7,459) (6,897) 9,208 1,117 3,833 (4,517) (10,238) 2,330 (9,767) 2,166 4,185 (197) 276 16,319 29,619
Investing Activities Acquisition of Property and Equipment Acquisition of Business, net Acquisition of Construction-in-progress Change in Minority Interest Due to Acquisition and Disposal (Increase)/Decrease in Investments Acquisition of Intangible Assets Net Cash Provided By Investing Activities
31,056 1,399 139 7,041 64
10,939 3,112 431 1,394 -
21,999 4,632 1,277 1,753 3,062 -
34,584 6,223 1,912 1,753 4,999 396
1,192 (2,153) 3,239 1,435 6,945 63 833 (470) (8,379) 18,581
(3,497) (10,856) (2,344) (916) 2,419 3,210 4,779 3,722 7,205 3,937 (661) (782) (1,303) 982 (422) (376) (9,563) (12,996) 29,336 35,792
(18,234) (18,310) (3,582) (8,240) (10,882) (4,555) (4,562) - (15,126) (13,990) (20,720) (29,249) (428) 574 (4,445) (429) (22,215) (39,584) (18,082) (28,960) (44,577)
Financing Activities Loan to Associates Additional purchase of noncontrolling interest Payments of Debt Payment to Shareholder Proceeds from Long-term Payable Proceeds from Warrant Extension Net Borrowing on Bank Line of Credit Payment on Bank Loans Proceeds from Issuance of Common Stock Warrants Converted to Common Stock Net Cash Provided By Financing Activities
5,984 (427) (439) (911) 9,160 2,598 15,964
100 (911) (142) 9,177 3,916 12,141
50 (740) 1,457 767
50 (1,363) 2,070 757
(1,871) 2,500 4,670 5,349
Foreign Exchange Rate Effect on Cash and Cash Equivalents Increase in Cash & Cash Equivalents
(37) 10,106
53 2,229
884 2,150
874 2,007
4,255 819
50
L&L Energy, Inc. (NasdaqGS: LLEN)
Projected Income Statement All Figures in US$ 000's, except share data FY Ending April 30,
1QFY11
2QFY11
3QFY11
4QFY11E
FY11E
Revenue Coal Mining Coal Wholesale Coal Washing Coal Coking Less: Intersegment Revenues Total revenues
18,626 5,052 28,963 7,018 (4,328) 55,330
18,612 5,518 32,193 7,749 (6,655) 57,418
20,659 11,158 33,773 7,371 (7,067) 65,895
22,800 8,369 34,953 8,550 (7,508) 67,164
80,697 30,097 129,881 30,688 (25,558) 245,806
Cost of revenues Gross profit Gross Margin
36,724 18,606 33.63%
38,146 19,272 33.56%
44,504 21,390 32.46%
44,682 22,482 33.47%
164,056 81,750 33.26%
Personnel costs Selling, general and administrative Operating income Operating Margin
781 3,226 14,599 26.39%
1,956 2,901 14,415 25.10%
1,711 3,169 16,510 25.06%
1,679 3,157 17,646 26.27%
6,127 12,452 63,170 25.70%
Interest income (expense) Other income Earnings before taxes
(71) (13) 14,516
(101) 421 14,735
(285) 444 16,669
(54) 470 18,062
(511) 1,323 63,982
Income taxes Net income before minority interest Minority interest Net income Net Margin EPS - Diluted Weighted average shares outstanding - Diluted
2,183 2,006 2,148 2,348 8,685 12,333 12,728 14,522 15,714 55,297 (1,394) (1,667) (1,937) (2,043) (7,042) 10,939 11,061 12,585 13,671 48,255 19.77% 19.26% 19.10% 20.35% 19.63% 0.36 0.35 0.41 0.42 1.54 30,407,090 31,225,945 31,018,298 32,738,363 31,347,424
L&L Energy, Inc. (NasdaqGS: LLEN)
Projected Income Statement All Figures in US$ 000's, except share data FY Ending April 30,
1QFY12E
2QFY12E
3QFY12E
4QFY12E
FY12E
Revenue Coal Mining Coal Wholesale Coal Washing Coal Coking Coal Importing Less: Intersegment Revenues Total revenues
26,393 8,453 39,130 9,833 6,426 (8,518) 81,715
30,276 8,537 35,631 7,374 12,466 (8,568) 85,717
32,377 8,622 40,254 7,227 15,739 (9,442) 94,778
34,859 8,709 43,367 7,082 19,264 (10,169) 103,113
123,905 34,321 158,383 31,516 53,896 (36,697) 365,323
Cost of revenues Gross profit Gross Margin
55,305 26,411 32.32%
56,716 29,001 33.83%
63,393 31,384 33.11%
69,242 33,870 32.85%
244,656 120,666 33.03%
Personnel costs Selling, general and administrative Operating income Operating Margin
2,043 3,841 20,527 25.12%
2,143 3,986 22,872 26.68%
2,180 4,312 24,892 26.26%
2,372 4,640 26,859 26.05%
8,737 16,779 95,150 26.05%
Interest income (expense) Other income Earnings before taxes
(54) 572 21,045
(54) 600 23,418
(54) 663 25,501
(54) 722 27,526
(217) 2,557 97,490
Income taxes Net income before minority interest Minority interest Net income Net Margin EPS - Diluted Weighted average shares outstanding - Diluted
2,736 3,044 3,315 3,578 12,674 18,309 20,373 22,186 23,948 84,816 (1,977) (2,200) (2,396) (2,586) (9,160) 16,332 18,173 19,790 21,361 75,656 19.99% 21.20% 20.88% 20.72% 20.71% 0.50 0.56 0.60 0.65 2.31 32,738,363 32,738,363 32,738,363 32,738,363 32,738,363
L&L Energy, Inc. (NasdaqGS: LLEN)
Projected Balance Sheet All Figures in US$ 000's FY Ending April 30, Current Assets Cash and Cash Equivalents Accounts Receivables Other Receivables Inventories Prepaid and Other Current Assets Total Current Assets
FY10
FY11E
FY12E
7,327 17,305 7,956 9,605 22,671 64,864
6,732 29,497 8,603 12,304 16,406 73,541
13,864 40,185 12,786 15,903 24,466 107,204
17,211 37,387 1,298 1,259 7,142 129,162
36,243 68,516 1,129 7,000 1,052 6,437 193,918
36,243 124,307 1,129 7,000 1,052 6,437 283,372
Current Liabilities Accounts Payable Accrued Expenses and Other Liabilities Bank Loan and Bank Line of Credit Taxes Payable Customer Deposits Other payables Total Current Liabilities
1,996 1,225 10,387 3,938 15,345 32,891
4,922 836 2,196 14,109 4,916 4,922 31,901
7,340 893 2,196 14,109 7,306 4,893 36,737
Non Current Liabilities Long-term Bank Loans Long-term Payables Asset Retirement Obligation Total Liabilities
4,147 800 507 38,345
80 600 1,278 33,859
80 400 1,278 38,495
29 32,781 45,109 700 (396) 78,222 12,594 90,817 129,162
32 45,461 0 (1,800) 93,364 5,067 (1,302) (397) 140,424 19,636 160,060 193,918
32 45,461 0 (1,800) 169,020 5,067 (1,302) (397) 216,080 28,796 244,876 283,372
Non Current Assets Construction in Progress Property, plant, equipment, and mine development, net Asset retirement costs, net Deferred Tax Assets Intangible Assets, net Long term investment Long term receivable Related party notes receivable Total Assets
Shareholders' Equity Common Stock - Par Value Additional Paid in Capital Shares to be issued Stock subscription Service Cost being Amortized Retained Earnings Accumulated Other Comprehensive Income Deferred Stock Compensation Treasury Stock - Common Total Shareholders Equity Non-controlling Interest Total Equity Total Liabilities & Shareholders Equity
L&L Energy, Inc. (NasdaqGS: LLEN)
Projected Cash Flow Statement All Figures in US$ 000's FY Ending April 30,
FY11E
FY12E
31,056 1,399 139 7,041 64
48,255 7,828 1,912 1,753 7,042 396
75,656 10,198 9,160 -
Gain on reduction of debt Decrease in Asset Retirement Costs Accounts Receivable Inventory Accounts Payable Taxes Payable Prepaid and Other Current Assets Other Receivable Customer Deposits Accrued Liabilities and Other Liabilities Other Payable Net Cash Provided By Operating Activities
507 (95) (7,459) 9,208 3,833 (10,238) (9,767) 4,185 276 29,619
(12,192) (2,699) 2,926 3,722 5,364 (647) 978 (389) (10,423) 53,825
(10,689) (3,598) 2,418 (8,060) (4,183) 2,390 57 (29) 73,321
Investing Activities Acquisition of Property and Equipment Acquisition of Business, net Acquisition of Construction-in-progress Change in Minority Interest Due to Acquisition and Disposal (Increase)/Decrease in Investments Acquisition of Intangible Assets Net Cash Provided By Investing Activities
(18,310) (4,562) (15,126) (428) (39,584)
(13,456) (3,000) (40,369) (7,000) (63,825)
(14,664) (51,324) (65,989)
100 (911) (142) 9,177 3,916 12,141
(200) 50 (1,871) 2,500 4,670 5,149
(200) (200)
53 2,229
4,255 (596)
Operating Activities Net Income Depreciation and Amortization Issuance of Common Stock for Services Issuance of Common Stock for Employee Bonus Minority Interest Income Amortization of Deferred Compensation
Financing Activities Loan to Associates Additional purchase of noncontrolling interest Payments of Debt Payment to Shareholder Proceeds from Long-term Payable Proceeds from Warrant Extension Net Borrowing on Bank Line of Credit Payment on Bank Loans Proceeds from Issuance of Common Stock Warrants Converted to Common Stock Net Cash Provided By Financing Activities Foreign Exchange Rate Effect on Cash and Cash Equivalents Increase in Cash & Cash Equivalents
FY10
7,132
L&L Energy, Inc. (NasdaqGS: LLEN)
RedChip Research Coverage Universe Number of Covered Percentage of Rating Companies Universe Strong Buy 3 10.7% Buy 16 57.1% Speculative Buy 8 28.6% Hold 1 3.6% Sell 0 0.0%
L&L Energy, Inc. (NasdaqGS: LLEN)
