RedChip Visibility, a division of RedChip Companies, recently released a research update on Longwei Petroleum Investment Holding (OTCBB: LPIH), a diesel, gasoline, fuel oil, and solvent oil distributor operating in China’s Shanxi Province. In the report, RedChip analyst Rahul Sowani reaffirmed a Strong Buy rating on LPIH and raised the target price from $5.00 to $6.50.
The target price upgrade was primarily due to Longwei’s strong results for the second quarter of fiscal 2010, in which top- and bottom-line growth exceeded both RedChip expectations and management guidance. Revenue for the quarter was 12% higher than expected, boosted largely by sales at the company’s new oil storage facility in Gujiao, which began operations at the beginning of calendar 2010. Higher fixed costs at the new facility brought operating margins down slightly, but increased capacity utilization and an attractive long-term inventory contract with a major supplier were expected to help lower unit costs and bring margins back up in the second half of fiscal 2010.
Explaining the rationale behind the target price increase, Sowani said:
LPIH is uniquely positioned as the sole licensed intermediary in the Gujiao area that operates its own large scale storage tanks. We expect the Company to earn contracts from the large industrial customers in Gujiao as LPIH’s 70,000 metric ton facility is able to serve seven out of the eleven largest potential customers in Gujiao.
The Gujiao facility presents a unique growth opportunity for Longwei, as it has no significant competitors in the region. The company has already secured contracts with six major local clients who will receive service through the Gujiao facility and is aggressively pursuing business with the other seven potential customers it has identified in the region.
Another promising sign for investors is the addition of Gerald DeCiccio, Doug Cole, and Xiaoping Xue as independent directors on March 23, 2010. By adding new board members, Longwei has demonstrated its commitment to meeting requirements in preparation for a potential uplisting to the NYSE Amex exchange, which would greatly improve its market visibility and potential for new capital inflow.
To receive a complimentary copy of the RedChip Visibility Research Report for Longwei, please visit:
http://www.redchip.com/about/aboutmain.asp?page=vreport&reportid=229&from=clientsidebar
Disclosure: Longwei Petroleum Investment Holding, Ltd. is a client of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.