China Growth Stocks

[FLBullHunter]

LLEN: The problem I see with this stock is all the planned dilution ...

With the Company indicating that it will need to raise more money through equity raises in 2010, another offering at a significant discount to the prevailing stock price could drive shares lower.

.... and the outstanding warrants that are in-the-money and will add to the outstanding share count when exercised later this year ....

Nearly 3.5 million warrants outstanding are set to expire with a weighted average remaining life of 0.66 years and exercise prices ranging from $1.00 - $2.60.

... combined with their business model which is a traditionally low-margin business .....

(coal washing is a low margin business on its own, but if LLEN is able to supply the majority of the coal from its own facilities, then the washed coal product will become a high margin product for LLEN).

... does not add up to the upgraded 12 month price target of $13 that Redchip states in their investment conclusion. To me, that is pie-in-the-sky.

We maintain our Buy rating on LLEN, and raise our twelve month price target to $13.00. Our price target is derived by applying the median P/E multiple of 13.6x (taken from our American listed coal companies peer group) to our 12-month forward EPS estimate of $1.16. We have applied a risk factor of 20%, taking into account the potential uncertainties arising from further share dilution and the unpredictable nature of growing the Company through mostly inorganic means.