investingfromtheright

I am retired and take educated guesses on all things financial.

January 30, 2008

February 1, 2008: China Recycled: Going Green With Sancon Recovery Services

Until recently, Chinese policy was to promote economic expansion regardless of environmental consequences. Besides, the environmentalist zealots had given China a pass on the Kyoto Treaty protocols. Why worry about pollutants and toxic residue when the Al Gore's of the world had turned the other cheek on the issue, giving Third World nations a free pass on trash?

Then came the Olympic bid success. Oops. Better clean up. Then, astute observers, noting the hypocrisy of Kyoto, demanded that China respond to environmental issues or face trade penalties and other unpleasant sanctions unless major environmental issues were addressed. Reluctantly, the Big Reds had to support projects to clean up the most exposed (to foreign eyes) western cities in the country. Especially the large cities. Enter Sancon Resources Recovery (SRRY).

SRRY is a tiny company (only $5m in market capitalization) that is expanding quickly, with Chinese government blessing and support, to be one of the main resource recovery services primarily in the western urban areas of the country. Established in 2002, Sancon today has environmental service plants based in Shanghai, Chengdu, Tianjin, Nanjing and Dongguan with more planned, In fact, Sancon plans to deploy waste logistic sites in over 30 Chinese cities during 2008. Sancon is currently the only environmental service company specializing in industrial waste management in China that has such nation-wide coverage.Sancon also has numerous recycling schemes in Australia that allows the company to play both ends of the recycling process (trash from Australia is sold to Chinese companies through Sancon China to recycle into goods for both domestic consumption and export).

Sancon is not only a waste recovery company. Its trading operation obtain approximately 25,000 tons of recycled raw materials (primarily plastics, cardboard, paper and glass)from the United States, Japan, Australia and various European countries each year. Sancon, nominally headquartered in Australia, is one of the few foreign-owned companies to attain a government Waste Management License from the Chinese Government. Sancon also has interets in "green" energy generation projects.

Trading about 20,000 shares per day, SRRY was last priced at $0.23 per share. Finances are transparent and follow Australian accounting models. Sancon is not currently profitable, but is well on its way towards becoming a success story in the feast or famine Chinese securities market.Importantly, the Chinese Government by their deeds wants this company to succeed. Well-connected Chinese nationals control the majority of executive positions in the firm.

I'll be the first to admit that this company may fall flat and fail. Sancon Recovery Services is not for anyone but the most adventuresome investor. That said, it also has the potential to become a superb ground floor investment that is currently operating underneath practically everyone's radar screen. Whether you are a believer or a sceptic, SRRY is worth a look. The company website is www.sanconinc.com

If you decide to buy shares, I recommend limit orders. And patience.

DISCLOSURE: THE AUTHOR HOLDS A POSITION IN SRRY.

Links to this post:

Create a Link

<< Home