Andatee China Marine Fuel Services Corporation (NasdaqGM: AMCF) is the largest privately owned company engaging in marine fuel production and distribution in Northern China. Auspiciously, 10 of the top 20 ports in the world are in China, and AMCF currently operates in two of them focusing on clients in the cargo and fishing industries. In January 2010, AMCF’s highly successful IPO raised $19.75 million at a share price of $6.30.
AMCF had a recent stock price of $6.69 (March 29, 2010). Upon going public AMCF joined the NASDAQ Global Market and holds the distinction of being the only U.S-listed Chinese company participating in the marine fuel industry in China.
China’s marine fuel market is expected to grow by 100% to 12 million tonnes (214,000 barrels per day) by 2013. If AMCF has found its niche market, it is certainly not a small one.
Highly fragmented, the fuel market for vessels smaller than 3,000 tons is currently facing limited competition resulting product shortages, poor quality and volatile pricing. Unstable supplies of raw materials have often caused chronic shortages of oil resulting in black markets and counterfeit products. As vessel operators dock at berths for refueling, they are often at the mercy of oil merchants selling them assortments of fuel oil from various suppliers. In such market conditions, boat and vessel operators are at risk of receiving poor quality oil or counterfeit products that have insufficient energy efficiency or damage engines.
Such market tribulations provide a great segue for AMCF’s emergence and growth in the marine fuels market as they provide a much needed boost of quality energy to the marine marketplace. AMCF’s experience has consistently shown that vessel operators are willing a pay a premium for consistent quality in fuels and services.
The company wields a considerable competitive advantage as they enjoy a well-recognized industry brand (Xing Yuan) that is associated with superior fuel quality and energy efficiency. AMCF backs up their reputation with stringent quality control which will certainly garner increased customer retention and a loyal customer base.
As aforementioned, AMCF currently operates in two of the largest ports in the world. Zhousan, in Zheijiang Province, is the second largest port on the globe as of 2008 and represents AMCF’s largest market opportunity. AMCF estimates the Zhousan market size at 1.2 million tons. In Liaoning Province, AMCF operates at the port of Dalian, ranked as the 18th largest port in the world with an approximate market size of 500,000 tons. Additionally, the company markets fuel and oil-based products in two markets in the Shandong province with a total estimated market size of 600,000 tons.
The corporation’s growth strategy includes proposals to expand into markets in the Jiangsu, Fujian, Guangdong, and Guangxi provinces. With a total market size estimated at 2.7 million tons, these potential expansions would increase their market opportunity over 150%. AMCF has also anticipated a large expansion in the number of outlets they operate in their current provinces.
AMCF’s goal is to become a “one-stop-shop” for marine port services by providing petroleum products, maintenance, payment services, and marine supplies for boat operators. The corporation believes that their “Andatee Marine Service Depot” for vessels will increase their customer base as they enter the value-added port services industry.
With the successful Initial Public Offering and a focused, disciplined management team, Redchip believes that AMCF is well- positioned to execute its expansion and growth business plan for this year and beyond.
But enough of expectations and storylines, the financials are the real bar for success–and successful they have been.
AMCF had net income of $6.4 million on $124.3 million of revenue in 2009 for a 5.2% profit margin. Compare this with the previous year’s numbers of $1.5 million and $79.2 million, respectively, with a margin of 1.9%. The corporation’s strong response as the world continues to pull itself out of the recent economic downturn bodes well for the company as the recovery continues.
AMCF also added to their inventory and property, plant, and equipment assets as sales grew markedly in 2009. AMCF’s core facilities include storage tanks, berths (the space allotted to a vessel at the wharf), marine fuel pumps, blending facilities and tankers.
The strength and signature of AMCF is their R&D department and their experimentation with mixed marine fuels. Designing their own blend of Marine Diesel Oil, AMCF produces a substitute for the diesel used throughout east China’s fishing and cargo industry. AMCF mixes separate fuels for cargo ships and for fishing boats/vessels.
The marine fuel for cargo vessels is classified as CST180 and CST120. AMCF’s fishing boat fuel is subdivided between their #3 fuel (for engines with 1,600 rpm capacity) and the #4 mix (for engines with 1,400 rpm capacity). AMCF also concocts blended marine fuel according to their customers’ specifications using their proprietary blending technology. The #3 and #4 fuels can replace traditional diesel oil, commonly known as #0 diesel oil, which is used by most small to medium sized vessels.
AMCF generates virtually all of all of their millions in revenue from their own brands of blended oil products.
With the proposed expansion proposals and their commitment to quality, Andatee China seems poised for tremendous growth as seafaring commerce continues to recover in 2010 and beyond.
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