"Any coal-producing company located in and selling to China is going to be printing money," says Asia region stock speciality Tony Sagami.
In his The Asia Stock Alert, he explains, "And in my opinion, the best to profit from that sooty need is Yanzhou Coal (NYSE: YZC), a fully integrated company that does it all; the company mines, prepares, processes, sells and transports coal." Here's his bullish review.
"The concept of investing in coal may not sound very exciting, but it is when you realize we're talking about the primary source of power for a country with 1.3 billion people.
"Yes, the environmental crowd hates it because it's dirty; produces greenhouse gases and acid rain; and no coal strip mine will ever win a beauty prize. Despite all this, coal does account for 25% of the world's energy needs. And, coal accounts for over 70% of China's electricity.
"Further, coal consumption in China is growing; and the country is building coal-powered power plants at a breakneck pace.
"Why? Because they're much cheaper to build and operate than any other power-producing option. Any coal-producing company located in and selling to these countries is going to be printing money.
"China is activating one new coal-fired plant every week of the year. To put that in perspective, every three years, China's adding the equivalent of another whole United States' worth of coal consumption - with no stopping point in sight.
"The reason for the high demand is simple: Per unit of energy delivered, coal costs about one-fifth as much as oil.
"Meanwhile, Yanzhou Coal is blessed in that its mines are close to its customers. A big chunk of the company's coal deposits are located in northeastern China, the epicenter of China's industrial hub.
"That proximity translates into lower transportation costs and, ultimately, a lower price for its customers. That also makes it very expensive for any competitors to weasel into Yanzhou's business.
"In addition to China, 15 new coal-fired power station projects are under construction in the North America, Central America, and the Caribbean. 12 new power station projects are in the works in Germany, Belgium, the Netherlands, and the U.K.
"Overall,you have a world that is hungry for coal. So I don't see any path for the price of coal other than upward.
"We also note that after electricity, the second thirstiest consumer of coal is the steel industry. Between coal-fired power plants and steel production, the demand for coal from Yanzhou Coal is going to be steady and reliable for decades to come.
"Finally, I love a bargain. And with Yanzhou Coal now trading at roughly one-half of its 52-week high set last summer, that's exactly what I see. The stock is definitely cheap, trading at only six times trailing earnings as well as paying a 24 cents per-share annual dividend."
Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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Reader Comments (Page 1 of 1)
6-01-2009 @ 3:12PM
hansbck said...
This is misleading information. YZC has paid a dividend of $0.59 for 10 shares (1 trading unit). I do not know where this "expert" gets his information but when you look on YZCs website you find all the information you need without misleading data.
6-01-2009 @ 9:13PM
Flaming City said...
Let's advocate the destruction of the environment and the Chinese destruction of the world. Human rights, care for society...nothing like making a buck.