GeoTeam Meets Companies at Annual Rodman & Renshaw Conference, Part 1

The GeoTeam attended the Rodman & Renshaw Annual Global Investment Conference from Tuesday Sept. 8  to Friday, Sept. 11, 2009.  In addition to viewing investor presentations of numerous companies, we also sat down with the management of several U.S. traded Asian based firms with intriguing growth stories.

L & L Intl Holdings (OTC BB:LLFH). Coded as a GeoBargain on May 19, 2009 at $1.90. Price ended Sept. 18, 2009, $4.75.

L & L International operates coal mining, clean coal washing, consolidation and distribution facilities.

Chief Executive Officer Dickson Lee, an energetic New York CPA turned entrepreneur, presented an exciting story. He was eager to inform investors about how the Company plans to capitalize on its growth opportunities in the coal industry - a plan that consists of a vertically integrated model expected to drive revenues and increase margins. The Company aims to become a one stop coal shop for its industrial customers. Most importantly, LLFH finally readdressed this upcoming year's guidance discussed in late April of 2009, which called for $95 million in revenues. The new guidance puts revenues at $108 million, and earnings per share at $0.94.

City Telecom Hk Ltd (NASDAQ:CTEL)

City Telecom provides integrated telecommunications services in Hong Kong.

The GeoTeam had not originally planned on meeting with City Telecom management since we had a scheduled interview with management at a later time. As chance would have it we were approached by a few conference attendees who suggested we meet with CFO NiQ Lai, who had a few free moments during lunch.

In a nutshell, since 2000 City Telecom began a transformation from an international calling card company to a provider of Hong Kong's most comprehensive fiber network, similar to the likes Verizon FiOS, but faster and built at one fifth of the cost due to Hong Kong's population density. After almost a decade of heavy investing, the Company has been able to carve out a leading position in the Hong Kong fiber market. NiQ was extremely articulate and focused with respect to City Telecom's business plan. His prior background with Credit Suisse as Head of Asia Telecom Equity Research gives him a solid understanding of the capital markets and the delicate expectations of investors. He expressed confidence in being able to deliver consistent top and bottom line growth as well as the importance of maximizing shareholder value and maintaining high corporate governance standards.

Points of interest:

• Since FY07, the Company has been harvesting positive free cash flow and actually pays a dividend - 1/3 of free cash flow (EBITDA - Capex - Net Funding Costs).
• NiQ backed up his talk and virtually put everything he had into his business when he joined in 2004.
• CTEL is net debt-free and has paid back over 80% of its $125 million in debt that it raised in 2005, capitalizing on the financial crisis to buy-back the bonds at below par.
• Hong Kong is one of the densest cities in the world with 16k people per square mile vs. 870 compared to U.S, which enables a much higher return on fibre assets.
• Due to the density, cost to build CTEL's fiber network is one fifth that of U.S.
• CTEL's revenue market share is just 5% today but it has goals of attaining 1/3rd of the market by 2016. Total revenue market pie of US$3,600 million offers plenty of growth relative to CTEL's US$190 million market cap today.
• Broadband is a semi utility-like service which has recession-resistant qualities. In a recession, people turn off their electricity appliances but broadband is a fixed monthly fee with 2 year standard contracts. Against the recessionary tide, CTEL posted record growth during its interim period six months to 28 Feb 2009 by taking market share.
• CTEL is involved in all aspects of the development and deployment of its fiber network which results in superior margins and service. CTEL's key competitive advantage is that its Fibre Network completely bypasses the incumbent, allowing CTEL to offer super bandwidth and value that cannot be matched by a legacy copper network, similar to comparing Verizon FiOS with Verizon xDSL.
• To date, CTEL has cumulative gross investment of about US$380 million in its Fibre network, more than 2x its current market cap of US$190 million.
• At below 3.8x EBITDA CTEL is selling at a discount to its average industry EBITDA multiple of 6.9x.
• CTEL has recently taken the initiative to embark on an investor relations campaign

• China ACM is poised to reap benefits from the China stimulus plan as 45% of the funds are dedicated to larger infrastructure projects. Over 75% of the Company's revenues are derived from such projects.
• Its industry has experienced growth of 25% over the past ten years with expectations that this growth rate will accelerate into the future
• The Chinese Government is intensifying its regulatory policies that forbid the use of on- site concrete production. This bodes well for ready mix concrete manufactures that offer high quality environmental friendly products.
• China ACM is focusing on higher margin projects.
• The Company plans to consider acquisitions of less efficient firms, who are having difficulties complying with government regulations, or purchasing assets from companies going out of business.
• CADC provided financial guidance for its year ended June 30, 2009 of at least $9 million in net income. This guidance translates into an implied fully diluted EPS figure of at least $0.18 for its 2009 fourth quarter and $0.64 for its full 2009 year, based on approximately 14 million shares outstanding.

• China Armco Metals is on track to commence operations of its scrap metal recycling business in its 2009 fourth quarter. This will be a new source of revenue for the Company and is expected to make a serious impact on China Armco's business as it moves through 2010. Based on current scrap metal prices, when operating at full capacity the Company's recycling segment would be capable of generating revenues of $390 million. China Armco did not provide information on when it believes full capacity can be attained, but feels comfortable that it can reach 50% capacity utilization by the end of its 2010 second quarter. For the six months 2009 CNAM reported revenues of approximately $28 million.
• China Armco should benefit from China's stimulus package.
• The recycling industry is supported by China's energy saving and pollution reduction goals.
• Such support can be translated into tax incentives available to companies engaged in this business. The currently policy is that these companies are tax exempt during the first three years of operation.
• China Armco believes that the current availability of land will facilitate expansion if needed.