Stock Alert for Sino Clean Energy Inc. (SCEI)
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    Stock Report for Sino Clean Energy Inc. (SCEI)

    Sino Clean Energy (SCEI) is a commercial producer and distributor of coal-water slurry fuel (CWSF) commonly referred to as Coal Water Mixture (CWM) which is clean fuel that consists of fine coal particles suspended in water. The Company’s clean fuel is used in boilers and furnaces to generate steam and heat for commercial, industrial, residential and government clients throughout China. According to data provided in Frost & Sullivan’s 2010 Chinese CWSF market report, SCEI ranked the third largest producer of CWSF by sales in China. The Company has seven production lines located in Shaanxi, Liaoning and Guangdong provinces.

    Share Statistics (02-Mar-11) FY2009 FY2010 % Chg Q32010 Q32011 % Chg
    Symbol SCEI Revenue, $Mn 46.01 106.27 131.0% 24.91 17.15 -31.2%
    Current price $2.76 Gross marg. 37.1% 39.4% 6.2% 38.7% 33.4% -13.7%
    52wk Range: $0.65-$6.86 Oper. margin 32.6% 21.3%
    Avg Vol (3m): 416,087 Net margin -75.7% 45.2% -159.7% 22.5% 19.1% -15.1%
    Market Cap. 64.98M
    Shares Outstanding 23.54M EPS, $ -3.56 2.70 -175.8% 0.30 0.14 -53.3%

    Source:, SEC Filings.

    Investment Highlights

    Shares of Sino Clean Energy (SCEI) rose 30.19% to $2.76 in Friday’s trade, extending the previous day’s gains when it jumped over 40%. Over 6.26 million shares traded hands during the session, versus the 10-day average of 1.01 million.  SCEI has traded in a range between $0.65 to $6.86 in the last 52 weeks.

    Shares of the China-based coal-water slurry fuel producer have gained 68.3% in the last five days and 117.3% in the last month.  Year-to-date, the stock is down 55.2%.

    Investors boosted shares of SCEI last week after the Company announced that Thornhill Capital LLC recently completed its Asset and Cash Verification Reports for the Audit Committee of the Company.

    As previously noted, the Audit Committee engaged Thornhill, an independent third-party evaluation agency, to conduct certain analyses to assist the Audit Committee and its professionals to investigate allegations made by short sellers.

    SCEI in November announced Thornhill’s reconciliation of the Company’s tax returns filed with the State Administration of Taxation and its filings with the State Administration of Industry and Commerce against audited financial information filed with U.S. Securities and Exchange Commission under U.S. GAAP. Since that time, the Audit Committee requested Thornhill to do additional work, and provide additional reports, regarding verification of fixed assets and cash. Thornhill has now completed its analysis and provided its reports on these two additional matters.

    “We welcome the internal investigation being conducted by the Audit Committee generally and, specifically, the completion of Thornhill’s verifications, commented Baowen Ren, chairmand and CEO of SINO. “These positive reports should adequately address any reasonable concerns raised about the Company’s credibility and profitability in the pertinent areas and help put the short sellers’ claims in proper perspective. We look forward to providing other updates at the Company’s next earnings call.”


    Financial Summary

    SCEI reported unaudited revenue of $17.2 million in the third quarter 2011, down 31.2% from $24.9 million in the same period of 2010.  The Company mainly attributed the result to a decrease in sales to its major customer, Haizhong Heating.  The customer suspended operations of its CWSF boilers due to the modification of a pipeline in certain areas of the Ming Fa real estate development project in the second quarter of 2011. The reduction in sales volume due to this business interruption is 81,251 metric tons compared with the same period of 2010.  In addition, the Company’s subsidiary Shaanxi Suo’ang New Energy lost one customer to a new competitor and one customer suspended operations during the third quarter. The reduction in sales volume because of these customers was 71,910 metric tons as compared with sales in same period of 2010.

    Unaudited net income for the third quarter was $3.3 million, a decrease of 41.7% from $5.6 million in the same quarter of 2010. Non-GAAP adjusted earnings, which excludes change in fair value of derivative liabilities of $2.7 million and gain on extinguishment of derivative liability of $3.1 million, was $2.8 million, a decrease of 56.7% from $6.6 million in the same quarter of 2010. Earnings per share were $0.14. Adjusted earnings per share were $0.11.

    As of September 30, 2011, the Company had cash and cash equivalents of $59.4 million, compared to $52.1 million as of December 31, 2010. Net cash generated from operations was $2.5 million in the nine months ended September 30, 2011, compared to $21.3 million in the nine months ended September 30, 2010. This decline was mainly due to the decrease in amortization of discount on convertible notes and the increase in accounts receivables. The Company had working capital of $83.0 million at September 30, 2011 and a current ratio of 16-to-1.


    Financial Strength (02-Mar-12)




    S&P 500

    Quick Ratio (MRQ) 16.01 2.04 0.58 0.65
    Current Ratio (MRQ) 16.41 16.13 0.82 1.00
    LT Debt to Equity (MRQ) 0.14 16.48 15.30 171.80
    Total Debt to Equity (MRQ) 0.15 21.80 20.10 224.97
    Interest Coverage (TTM) -17.01 3.83 26.04

    Source:, SEC Filings.

    Technical Analysis


    The MACD for SCEI currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

    SCEI is above the upper Bollinger Band, implying that it is currently extended from its recent trend. Be aware, however, that a cross outside of the Bollinger Bands can sometimes be a signal of trend strength and not, necessarily, trend reversal.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Mar02-2012 symbol Share, $ $ Mn 2011 2012 2011 2012
    China Integrated Energy Inc. CBEH 0.75 29.63M n/a n/a 0.05 0.04
    Gushan Environmental Energy Ltd. GU 1.46 24.63M n/a n/a 0.10 0.06
    China Petroleum & Chemical Corp. SNP 114.93 99.41B 10.96 9.66 0.28 0.27
    Synthetics Median       19.57 n/a 1.25 n/a
    Sino Clean Energy Inc. SCEI 2.76 64.98M n/a n/a n/a n/a

    Source: Thomson Financial

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