*BUY - Huscoke Resources (和嘉資源) 704.HK*

*BUY - Huscoke Resources (和嘉資源) 704.HK*

Huscoke Resources is a Mainland Chinese company that engages in coal washing
and trading (mid- to down-stream operations in the value chain).  It is
actively looking for opportunities to purchase coal mines (upstream assets),
which will transform the company into an integrated coal player.

Its stock closed at $0.222 this Friday (August 19, 2011), representing 7.9x
P/E based on 2010 EPS and 0.48x P/B based on 2011 BV.  The company will
announce first half 2011 results next Friday (August 26, 2011) and I expect
that results will be very good as the company has vastly expanded capacity
since the same period last year, and coking coal prices have, on average,
increased 6-8% in the past 6 months.  Overall, for 2011, I expect the
company will at least increase EPS by 50%.  If true, P/E based on 2011 EPS
will be less than 5.3x, vs. 9-11x for most comparable coal companies (which
have lower growth rates).  Stock price has fallen significantly in the past
year alongside weak market sentiments for SMEs generally and lack of
company-specific news.  But share price had huge rallies in the third
quarter of 2009 and 2010... and has so far been quiet in 2011.

No analyst cover this stock actively (there are two local securities firms
that have issued research reports on this company but their reports are
dated), which partially explains the shares being undervalued.  I believe
this stock should be worth $0.4 (almost double of this Friday's closing
price of $0.222).  Short-term catalysts include (a) strong first half 2011
earnings to be announced next Friday and (b) market rebound generally.
 Medium-term catalysts include (a) purchase of coal mines and (b) more
research analyst coverage.

Also note that Mr. Chim Pui Chung and China Construction Bank are current
shareholders/CB holders.

I strongly advise you to do your own research / adequate homework before
deciding whether to buy this stock.

- Blogmaster
 August 19, 2011