Lumena 0067

[winston]

Not vested.

DJ MARKET TALK: Lumena +8.1%; Trades At Attractive Valuation
October 7, 2009

HK Economic Journal columnist tipping stock as offering good value given growth potential of medical thenardite. Stock listed in June, currently 4 analysts covering stock, tipping FY09-11 EPS of 28 fen, 44 fen, 51 fen, according to data from Thomson Reuters; if taking FY10 EPS as benchmark, stock seemingly trades at attractive 6.1X P/E though lack of established track record always a risk.

Buying momentum looks strong; post-listing high is HK$3.96 hit July 29, distant for now. Credit Suisse has Outperform rating on stock with HK$4.15 target; BOCI rates Buy, target at HK$4.92

Source: Dow Jones Newswire

[winston]

From Phillips:-

Company description

Lumena Resources Corp. engages in mining, processing and manufacturing of natural thenardite products. Thenardite is an important raw material for chemical and light industries.

The company produces 3 products, namely powder, specialty and medical thenardite.

Powder and specialty thenardite are primarily used as inert fillers in powder detergents and as processing aids in the textile and glass industries.

Medical thenardite, on the other hand, is primarily used in Chinese and western medicines as a mild laxative and an anti-inflammatory agent.

The company currently operates 2 captive underground glauberite mines, namely Dahongshan and Guangji mining area. A new site, Muma mining area was acquired last year. There are totally 57.2 million tonnes of proved and probable thenardite reserves in these 3 mining areas according to JT Boyd.

According to Behre Dolbear, a mining industry consulting firm, Lumena is the second largest thenardite producer in the world in terms of production capacity, which has domestic and global thenardite market share of approximately 23.2% and 11.3% respectively.

[winston]

From Phillips:-
June 6, 2009


Valuation

We believe that net profit of Lumena will grow 15% and 50.6% and EPS will be RMB 0.264 and RMB 0.398 in 2009 and 2010 respectively. In order to balance the potential growth and risk of bearing high level of debt, we value Lumena at 10 P/E, which imply a 0.3 PE/G ratio for the average of next 2 years. 12 months target price is HKD 3.04. The rating is buy.


Risks

Prospect of Lumena depends on the demand for specialty and medical thenardite. If the demand growth is less than expected, Lumena's revenue may drop drastically. In additions, rise in coal price may harm Lumena's profitability as 45.9% of total cost accounted for the consumption of coal.

As Lumena is located in Sichuan province, natural disaster, especially earthquake may affect the company in an unimaginable way.