Agoracom Blog

Chinese Small-Cap Company Feature: Sancon Resources Recovery

Posted by AGORACOM at 2:33 AM on Wednesday, November 19th, 2008

As many of you know, we are very bullish on the long-term future of Chinese Small Cap Companies for two reasons:

1]  The obvious reason – China is the fastest growing economy on the planet and nothing is going to slow down its ascent over the next 50 years and beyond. Investing in growth companies there just makes too much sense.

2]  Many Small Cap Chinese Companies are listing in the US (OTCBB, AMEX and graduating higher) with great financial results.  Unlike many dubious US Small Cap Companies, Chinese Companies don’t seem to believe in losing money or failing to execute in a business plan.  As such, 7-digit revenues and profits are very common.

AGORACOM AS A STARTING POINT FOR CHINESE SMALL CAP COMPANIES

In addition to the featured company below, you can refer to our China category for other featured Chinese Small-Cap Companies, or view our extensive coverage of them on AGORACOM TV .  As always, we will disclose any IR relationship with any public company.  Given the sheer number of great Chinese Small-Cap Companies out there, you can expect us NOT to have an IR relationship with most of these companies.

TODAY’S FEATURED COMPANY

Sancon Resources Recovery, Inc. (OTCBB:SRRY)

Sancon is a rapidly growing environmental services and waste recycling company, with operations in both China and Australia.  The Company recently announced record third quarter results for the period ended September 30, 2008, which were covered on AGORACOM TV.  Highlights are as follows:

For Quarter Ended September 30, 2008

  • The Company generated record 2008 third quarter revenue of $3.88 million, a 189.3% increase compared to $1.34 million in the 2007 third quarter. The quarterly revenue was the highest in the Company’s history
  • Gross profit increased to $1.79 million compared to $0.42 million in the year earlier period.
  • Gross margin increased from 31.6% in the 2007 third quarter to 46.1% in the 2008 third quarter due to increased sales of higher margin services in China.
  • Net income was a record $0.46 million, or $0.02 per diluted share, compared to net income of $0.08 million, or net income of $0.00 per share in the year ago period. This was the Company’s third consecutive quarter of profitability.

For the nine months ended September 30, 2008:

  • Sancon had revenue of $9.77 million, a 240.1% increase compared to $2.87 million in the first nine months of 2007.
  • Gross profit increased to $4.66 million in the 2008 nine months compared to $0.74 million in the year-earlier period.
  • Gross margin increased from 25.6% in the 2007 nine months period to 47.7% in the 2008 nine month period.
  • Net income for the first nine months was $1.45 million, or $0.07 per diluted share, compared to a loss of $(0.14) million, or a loss of $(0.01) per share in the year ago period.

“We believe that the investments we are making in infrastructure will dovetail
the Chinese government’s environmental initiatives which should support the
growth in our business for the rest of the year as well as into 2009.”

Jack Chen, Chief Executive Officer.

Business Outlook:

The Company reiterated its previous guidance for Sancon to generate 2008 revenue of between $11 million and $12 million. The Company has reduced its net income forecast to between $1.9 to $2.0 million, or $0.08 to $0.09 per share from $2.0 million to $2.1 million and $0.09 to $0.1 per share.

END

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