Sancon (SRRY) undervalued environmental player

Sancon Resources Recovery, Inc. is an environmental service and waste management company that operates recycling facilities in China and Australia. Sancon specializes in the collection and recovery of industrial and commercial solid wastes such as plastic, paper, cardboard, and glass. The recycled materials are re-used by Sancon's manufacturing customers in China to make a wide variety of new products including outdoor furniture, construction materials, building materials, road surface, and various new products. Sancon's China operation is licensed by the Chinese government for waste management services, and is certified with ISO9001 and ISO14001 standards.

Environmental industry facing significant opportunities Due to the serious environment pollution problems faced in China, recently Chinese government emphasis energy saving, emission reduction and environmental protection at the highest level ever. China Bureau of Environment Protection budget 2%-2.5% of GDP ($4billion) per year for environment protection projects starting from 2006. Chinese waste management market is estimated at $35 billion by 2010.

Net income for the nine months period ended September 30, 2009 was $1.61 million, or $0.07 per share, compared to $1.45 million, or $0.07 per share in the year ago period, an increase of $164,131 or 11%. In order to control the cost, the company has eliminated numerous outsourced services and consulting fees. This contributed greatly to the increase of net income for the nine months period ended September 30, 2009.

Earnings per share for 2009 could be around $ 0.10.

In 2010 Sancon can profit more because their operations in Australia and China are both emerging out of the global economic crisis with more efficiency. The fourth quarter of last year the company concluded a preliminary memorandum of understanding with an electronic waste processing company in Hunan, China. Relying on this company's R&D team, the MoU also include building China's largest waste battery recycling site on a 10-hectare land. In Australia, Sancon founded the Algal Fuels Consortium together with the Government of South Australia, South Australian Research & Development Institute (SARDI), Flinders University, Commonwealth Scientific Industrial Research Organization (CSIRO), and Flinders Partners. The consortium is finalizing a technology for generating biomass from Captured CO2 emissions. Sancon has the right to commercialize this renewable energy technology in Australia and China.

My expectations in 2010 are much higher revenues and earnings. In my opinion net income per share could be between $ 0.14 - $ 0.16. The current stock price doesn't reflect the potential of this promising company.

POSITION: LONG (ENTRY: $ 0.42)