LLEN - Previously announced Washing facility Purchase
"All it takes is one bad acquisition deal to screw up a good thing"
- The most recent purchase was exceedingly cheap some where around 1 x earnings.
Current Washing Facilities (think)
L&L Coal Partners 200,000-250,000
Hon Shen Coal 300,000
Total 500,000-550,000
Dirty approximation of Gross profits into Net Income: 0.43
(Net Income / Gross Profits) (9,957,243/22,991,922).
According to spreadsheet
Current Washing Revenue
Price Per Tonne $74 - 82
Tonnes 600,000
Washing revenue: 40,950,000
Gross Margin 12%
Gross Profit 4.9 M
Net at 0.43 2.1 M
New Facility
Price Per Tonne $130
Tonnes 150,000
Washing revenue: 19,500,000
Assuming Gross Margin 10 - 12%
Gross Profit $2M - $2.3M
Net at 0.43 $0.8 M - 1 M
PUDA's Washing Facilities Gross Margins
Getting another data point - PUDA who are soley, in previous quarters at least, Coking coal washers they have gross margin last Q of 10% - previous 2Q's it was 8%. In 2008 13% and 2007 17% - so there's some flexibility.
ROI for LLEN's purchase
So, my estimate is that they are going to return in profits the cost in 1 - 1 1/4 years. Typically, purchases are more like 10 times earnings.
They are also talking about upgrading it to 600,000 so, that would be 4 times as much or $3.4 - $4 M net income per year. In FY 10 ending in April they are gunning for in the 30 Million net income region so *if/when* the new facility runs at 600,000 it will add on 10% to income.
The only disparity I can see is the price per tonne between new $130 and old (estimated) $74-82 facilities - I am assuming the new facility is washing coking coal and the old one mainly thermal.
rich
