Sancon (SRRY) 2010 New Year, New Growth

EPS 2009 $0.09 one cent under my expectation but OK 2009 was a transition year.
Net income for the year ended December 2009 was $2,093,688, compared to $1,652,513 in 2008, an increase of $441,175 or 27%. The increase is mainly due to the significant increase of net income in the waste service business of $377,670 or 20% although net income in the material recycling business decreased $73,305 or 83%. The dramatic decrease in SG&A expenses in the waste service business was the main reason for the increase of the net income. Net profitmargin for the year ended December 31, 2009 was 19% while it was 16% for the year 2008.

Some highlights of the 10K report that gives us some idea of the future.

In order to meet the environmental initiatives set for 2010 Shanghai World Expo and promote the concept of "waste separation and conserve resources," Shanghai Municipal Afforestation Bureau launched the "More Green for Shanghai" campaign. Sancon is the only commercial enterprise that has been invited to participate in this campaign. Sancon will place specially made bins for the collection of waste paper from college campuses and office buildings. New copy paper will be given free of charge to the campaign-participating outlets to encourage and reward recycling. The waste paper collection is expected to reach over a thousand tons in 2010.

Sancon has been also awarded a license from the local Chinese Government to collect and process electronic waste such as computers, printers and copiers, as well as electric white goods.
A new market for the company.

During the next twelve months, the company expects to take the following steps in connection with the development of their business and the implementation of their plan of operations:

Sancon intends to continue with their marketing strategies to deliver their products in China and provide their waste management service to clients;Along with the continued plastic and glass materials products the company is now processing, Sancon is also developing to process other materials, such as electronic materials, waste battery and new energy.

During the next twelve months, Sancon expects to set up larger network of collection and sales in China.

During the next twelve months, the company is planning to raise additional US$3-4 million cash to facilitate their processing capacity. The capital will be used to some or all of the following activities:
1) acquisition of other companies running similar business in China and the USA;
2) purchase of new equipment to satisfy increasing new type of materials requirements;
3) marketing and general administrative expenses for new operation in China.

The company may raise such capital through issuing common stocks or warrants.
The aggressive expansion plan will be replied on such capital support.

My conclusion is still that the company is undervalued and I believe they will show a big turnaround this year. The stock is thinly traded but has enough upside potential. My projections of EPS 2010 are still intact.