In the earnings conference call, CFO Jim Crane was very optimistic on Longwei’s future, especially with the new addition of the Company’s facility in Gujiao which more than doubles the Company’s storage capacity for its products from 50,000 metric tons to 120,000 metric tons. The new facility became operational just recently and has already generated $8.5 million in revenue for the company from October 1, 2009 to December 31, 2009. These revenues are attributed to the signing of six contracts by customers in the Gujiao area.

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 One factor contributing to the Company’s improved results is the agency fees Longwei earns for purchasing petroleum products from refineries on behalf of wholesalers who lack the necessary licenses to make such purchases directly themselves. These agency fees are currently yielding 100% profit and go directly to the bottom line. Agency fees for the Gujiao facility should be recognized within the next two fiscal quarters according to Crane, and while the shear number of agency deals available in the Gujiao area is smaller than the areas around Longwei’s primary facility in Taiyuan, the potential value for each deal in the Gujiao area is much higher. Currently agency fees contribute about 6% of total revenues, but the Company expects agency fees to increase to around 11% given the opportunities in the Gujiao area.

 

One point that caught our attention (but was nearly glossed over by the Company) was the mention that Longwei could soon be uplisting to the NYSE Amex in the coming months. Also look for the Company to issue revised guidance by mid-March which could provide a nice move for the stock if it’s as good as we’re expecting.

 

With expected revenue growth of 45% to 55% and expected non-GAAP net income growth of 65-80% for FY10, Longwei is poised to have an incredible year.