Tuesday, September 29, 2009

More color on RINO (Rino International) and why this monster may just be getting started

This is a blurb from briefing.com - a great info tool you should think about paying for

"RINO is a small cap name we have been following for a while. We initially wrote it up on Jun 24 at $8.75, when it was still trading on the bulletin boards (see InPlay archive). The stock is up 130%, but since then, the co has reported strong Q2 results and the Chinese government has announced tougher pollution controls, so we wanted to revisit the story.

Rino makes environmental protection equipment for the steel industry in China. Specifically, Rino makes wastewater treatment, flue gas desulphurization (FGD) equipment, and high temperature anti-oxidation systems, which are all designed to reduce industrial pollution. To provide some quick background, the sinter at a steel plant contains equipment where powdered iron-ore is mixed with coking coal. This results in significant amounts of air pollution, including SO2 (sulphur dioxide), NO2 (nitrogen dioxide), dust and metal particles. Rino was the first company in China to develop an FGD system specifically made for the sinter. It curbs pollutants and reduces SO2 emissions by up to 99%. As a result, Rino has a first mover advantage and a dominant market position (of the 40 sinter FGD installations in China thus far, Rino accounts for 28 of these.)

As part of China's pollution reduction initiative, the Chinese government recently announced a plan which calls for the number of sinters to be equipped with FGD systems to double annually through 2011. China is estimated to have about 500 sinters, less than 10% of which have been equipped with FGD systems. Rino anticipates its growth will accelerate over the coming year as the government mandate creates an impetus for steel cos to become compliant. Rino has seen new bidding activity pick up and is currently pursuing a couple of very large sinter projects. If you run the numbers, that's a lot of potential growth. There are currently 40 FGD installations, which should double to 80 next year, then 160 in 2011.

A quick look at the financials shows the company is doing well. The co is profitable and 1H09 revenue rose 42% yr/yr to $76.3 mln and EPS more than doubled to $0.89 on nearly 30% operating margin. The balance sheet is solid with $52 mln in cash/inv, or about $2 per share, and no LT debt. Looking ahead, Rino expects to soon begin construction on a new production facility that should be operational next summer. This will significantly expand Rino's production capacity and allow the co to take advantage of the new FGD regulations.

On a final note, we think Rino is still below many radar screens as it only recently came over from the bulletin boards. Also, even after its strong run, it trades at a forward P/E of just 9.6x (one estimate), so it's still attractively valued. However, it made its debut on the IBD 100 at #2 today, so we expect that will raise its profile. Mkt cap $504 mln, float 7.2 mln, avg vol 512k."

I have been in since the 11-14 range and think RINO has $25-$30 potential in 2009


  1. My price targets for RINO (a very low float stock):
    2009: At least $30 (the stock should catch up to DGW because RINO's eps are going to be close to $2 in this fiscal year);
    2010: $75 (sales will accelerate, we should see eps of a least $3)
    2011: $150 (Since RINO is the dominant player in its field, sales will continue to be very strong, eps should be at least $4.50).

  2. RINO strong in a tough market - nice

    let's see if it can remain green!

  3. I am not sure RINO will be $150 stock in 2011 but it certainly could be a $50-75 stock with the growth it has ahead of it... but hey it's at $20 now so we agree huge upside!

  4. Honest trader:
    In my opinion, your projections are too conservative for RINO. Did you know that Piper Jaffray just raised its price target to $45 for DGW and that company will not have close to $2 eps in 2009? Don't get me wrong, I really like DGW, but I believe that RINO has more potential in the near term and will be trading at a higher price than DGW shortly. As I said In my earlier comment about Rino, $75 is for 2010. For 2011, I predicted $150 but I would not be surprised to see $200 (the company is the leader in its field and will introduce its sludge treatment product before Christmas). My only fear further down the road is hyperinflation. If we can have a lengthy bull market, the sky is the limit for RINO and DGW.

  5. well - i hope I am conservative and it goes to $100+! I know I am not selling too much down here despite the run...

  6. also, RINO has almost no coverage and I wouldn't be surprised if some houses pick up coverage soon on this monster with $30 or so targets

  7. on your comment on hyperinflation... I think inflation will come. I am long precious metals and some agricultural commodities and short US long term Treasuries based on that angle. UST's may work over the near term from a long perspective, but long term they have to be one of the worst investments I can think of right now.


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