New Oriental Energy & Chemical Corp. (NasdaqCM: NOEC)

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With oil prices at record highs, at last it appears that there is real interest in alternative fuels and energy. Most pragmatic speculators realize that real change is driven by economics not ethos, which occurs only when gas is so expensive that alternatives become financially attractive. So, we're scouring through market reports and hitting up our sources looking for real deals in this space. 

Today's featured company New Oriental Energy & Chemical Corp. (NasdaqCM: NOEC) may be as 'real' as they come, with a diversified business plan and a shiny new NASDAQ listing.  It doesn't hurt that they are positioned to service the massive, white hot Chinese market either.

About New Oriental

New Oriental Energy & Chemical Corp. ("New Oriental" "NOEC") is an emerging alternative fuel and specialty chemical manufacturer based in Henan Province, the People's Republic of China.   New Oriental, which was incorporated in 2003 and is headquartered in Xinyang, China is focused on the production of Dimethyl ether (DME), methanol and fertilizer products.  The company expects to begin production of bio-diesel within the next year. 

The Company will sell its products primarily through a network of distribution partners that will service the ever-growing demands of cleaner energy in China and will export its products through the same network to countries around the world. 

NOEC, through its subsidiary, Henan Jinding Chemical Co., Ltd., ("Henan") offers urea and coal-based chemicals, including ammonium bicarbonate and liquid ammonia for nitrogenous fertilizers and raw materials of chemical products; methanol, which is used for the production of medicine, pesticide, dye, plastic, synthetic protein, fiber, formaldehyde, and methyl ether; and dimethyl ether that is used as an additive for liquefied petroleum gas (LPG) and non-industrial fuel substitute to LPG and for residential and automotive uses, and as a refrigerant for refrigerators and air conditioners. Henan serves chemical, pharmaceutical, light, and textile industries. 

Mr. Ben Wang, age 34, has experience in public company analysis, qualitative and quantitative financial analysis, including modeling and forecasting. Most recently he was an equity research analyst at the Beijing offices of Brean Murray Carret Co., Ltd., a boutique institutional investment bank and research firm. Prior to that he did risk solutions consulting for Standard and Poor's, and was a senior equity research analyst for Century Securities Co. Mr. Wang earned his Ph. D. from the Department of Decisions, Risk & Operations Management at Columbia Business School in New York, NY in 2003. He was awarded an M.E. in Electrical Engineering from Tsinghua University in Beijing and a B.E. in Electronic Engineering from Chengdu's University of Electronic Science & Technology of China.

"We believe Mr. Wang will be an excellent addition to our senior management team. We anticipate fiscal 2008 to be an inflection point for the Company as alternative fuels begin to comprise a larger and growing portion of our revenue base. Mr. Wang will continue to improve and integrate new financial controls to improve reporting and analysis as our organization pursues this growth strategy. Mr. Wang's engineering background and experience in the public markets will benefit our Company's ability to articulate its story to the investment community, establish and maintain relationships with key institutional investors and sell side analysts, which should create further diversification of our shareholder base."

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Press Release Source: New Oriental Energy & Chemical Corp. 
Monday August 27, 9:34 am ET 

NEW YORK--(BUSINESS WIRE)--New Oriental Energy & Chemical Corp. (Nasdaq:NOEC - News), a specialty chemical and emerging alternative fuel manufacturer based in The People's Republic of China (PRC), today announced that management will present at the Roth Capital Partners New York Conference, which will be held on September 5 - 6 at the Westin Hotel, located at Times Square in New York, New York.

Mr. Ben Wang, CFO of New Oriental, will present on behalf of the Company on Thursday, September 6th at 2:00 p.m. in Track 7 (The Ambassador II Room), with a break-out period immediately following. Mr. Wang will provide investors with a corporate overview, including a discussion of the Company's core and alternative energy products, its production capabilities, the evolution and drivers of the alternative energy market, in addition to providing a summary of recent financial results and future growth initiatives. more

CHINA and the GREEN ENERGY MARKET

In January 2006, the Chinese government introduced the Renewable Energy Law in an effort to reduce the country’s reliance on oil imports and to increase the uptake of alternative fuels. China aims to use 6.7 million tonnes of ethanol and 11 million tonnes of biodiesel by 2010, meeting 10 percent of its forecast transport fuel demand. China, the world's second largest energy consumer, has issued a package of policies, including risk reserves, subsidies and tax breaks, to encourage the development of the bio-energy and bio-chemical industries in the country to stave off energy crisis.

• 88% are concerned about climate change. 
• 97% think their Government should do more to tackle global warming. 
• 63% think that China is too dependent on fossil fuels. 
• 56% think that China is too reliant on foreign oil. 
• 91% think that a minimum 25% of electricity should be generated from renewable energy sources. 

"We are actively soliciting orders from customers in advance of the pending completion of our DME production facility expansion and believe we will be able to quickly utilize our new capacity to exponentially increase revenue. At the end of 2006 it was estimated that in total there was only 300,000 tons of DME production capacity throughout China. Recently industry experts have estimated that growth in demand for DME in China alone would increase at a 66 percent CAGR over the next nine years to 28.9 million tons of demand annually. 

Supporting this trend is the fact that China is a net importer of LPG and purchases approximately 27 percent of its total current consumption from International sources while consuming approximately 24 million tons in 2007 equating to $16 billion in total sales. With our first mover advantage, 150,000 tons of available DME capacity, limited competition and superior product offering in comparison to LPG, we are well positioned to capitalize on this large market opportunity as consumers look to purchase DME rather than LPG. Based on these trends we anticipate that we will continue to post meaningful revenue and net income growth throughout the balance of this year." 

Press Release Source: New Oriental Energy & Chemical Corp. 
Thursday September 6, 10:00 am ET 

NEW YORK, NY--(MARKET WIRE)--Sep 6, 2007 -- New Oriental Energy & Chemical Corp. (NasdaqCM:NOEC - News), a specialty chemical and emerging alternative fuel manufacturer in The People's Republic of China (PRC), today announced the Company has secured several new DME contracts while commencing production of the Company's new DME facility ahead of schedule.

As part of the Company's increase in DME capacity from 50,000 tons of annual production capacity to 150,000 tons, management has been actively building a pipeline of new contracts with major distributors in the region. The Company has been awarded a total of $4.3 million in new monthly contracts, which is expected to begin contributing to revenue in the second fiscal quarter of this year. To December 2007, 90% of the total output had been pre-ordered by the customers. New customers include Xin-Ao Group, Jing-Zhou-Long Teng Group and Luo-Yang-Er-Yun. These orders represent initial purchase commitments and management expects to solicit both follow on orders from these customers in addition to new perspective distribution agreements in the near term.

To meet this demand, management has begun to utilize the additional 100,000 tons of capacity beginning in August, ahead of the previously stated September launch. DME production in August was estimated to be approximately 8,000 tons and is expected to increase to 10,000 tons per month by the end of September. Going forward, management will look to increase monthly DME production capacity to approximately 10,500 tons of DME output which under an ideal operating capacity scenario would equate to approximately $57 million in full year revenue at current market prices.

Demand for DME remains strong given the measurable discount in price in relation to liquid petroleum gas (LPG) for use in home heating and cooking and to diesel for commercial and residential vehicles. In addition to the lower cost, DME holds many other significant benefits such as reduced emissions, increased energy efficiency and ease of use.

"We are pleased to report that we are ahead of schedule in launching production of our new DME facility while securing new orders to ensure the highest utilization of our assets," commented Mr. Chen Si Qiang, the Company's Chief Executive Officer. "With our move to 150,000 tons of available DME capacity we believe we are one of the largest producers in China. Given the Country's insatiable appetite towards energy consumption and a desire to reduce dependency on foreign oil by the Central Government in addition to mounting environmental concerns we believe New Oriental is well positioned to capture a large percentage of this future growing business as DME gains momentum in the market. We look forward to showing traction on these initiatives when we report our second quarter results in mid November," concluded Mr. Qiang. more

Financial Highlights For  NOEC

"We believe that NOEC is well-positioned to benefit from the favorable trend in its core business (fertilizers) while capitalizing on the growing opportunity of the alternative fuel market.

We believe that NOEC is attractively valued in relation to the industry average. Since the company operates in two industries, we believe that it is more appropriate to use the average of the figure derived from the agricultural chemical industry and specialty chemical industry as the basis for our valuation. The company is embarking on several large investment projects to expand its production capacity while developing new alternative fuels similar to DME and methanol. NOEC is already in the process of developing biodiesel and expects to add 300,000 tons of annual production to its product mix in the next three years. On the basis of the favorable market outlook and the company's aggressive expansion strategy, we expect that its revenue will grow at an annually compounded rate of 50.31% for the next two years. We expect that earnings will grow at an annually compounded rate of 57.81% in the same period. On the basis of the company's potential for growth, we generate a 12-month target price of $8.75, which translates into a forward P/E of 20.8x projected earnings for FY07.''

The analysts contributing to this report do not hold any shares of NOEC. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts' personal views as to the subject securities and issuers. RedChip certifies that no part of the analysts' compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. As such, the report should not be construed as advice designed to meet the particular investment needs of any investor. NOEC is not a client of RedChip Companies, or any of its affiliates.

By increasing the output of fertilizer products and reinforcing sales effort, the gross profit of fertilizer products increased by 77.79% compared to the same period last year. In addition, the Company adjusted its product mix with an increase on alternative energy products. Through its efforts to cut down the negative impact of the increase in the price of raw materials, the Company's gross profit for alternative energy products increased 13.58% compared to the same period last year. 

The Company achieved revenue growth in all of its primary geographic markets for the three month period ended June 30, 2007. This increase reflected the Company's expansion of its production, reinforcement of its marketing team and development of its potential markets.
 

• --  First Quarter Revenues Increased 60% to $14.7 million
• --  Alternative Fuel Revenue Increased 63% to $4.5 million
• --  Annual DME production capacity to double with completion of plant expansion in September

TO CONTACT NEW ORIENTAL

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