SCLX.ob has always been a prized pick in our eyes at GST.com, but was never mentioned since it was followed by our sister newsletter FreeHotPennyStocks.com.

(Disclosure) –FHPS.com was engaged by a 3rd party for an investor relations awareness campaign in 2009, and was compensated $50,000 for services rendered.

FHPS.com first alerted our members on SCLX.ob at $0.15 and it is now at about $0.80 on a non split adjusted basis. Also, a few weeks ago SCLX.ob hit a high of $1.00; an insane gain of about 560%

SCLX.ob has made a crazy run over the past year, but according to Management’s, most likely sandbagged, earnings and revenue guidance for 2010, they expect to earn about $25 million in net income. This guidance is based on production of 850,000 tonnes of CWM, the “green coal” they produce, but it would seem as though since they are forecasting production in the 1m tonne rage, we could potentially anticipate Net Income to be higher in that proportion– or +25%– about $30 million for FY 2010.

Using this income figure, this company is ridiculously undervalued– about 5.3X’s 2010 earnings.

Not only do averagely growing companies (10-20%/yr) usually have an earning multiple in the 10-15X’s range (2-3 times higher than SCLX.ob’s current multiple), but the market tends to give strong earnings growers a boosted multiple of sometimes up to the growth rate (ie a PEG ratio of ~1), or a P/E of 100X’s FY 2010 earnings for SCLX.ob.

I’m not saying SCLX.ob deserves a 100X’s earnings multiple: ~$150/ share split adjusted, but even a fair multiple of 15X’s 2010 FY earnings would yield us a PPS of about: ~$22.50/ Share.

SCLX.ob currently trades at about $8.00

SCLX.ob is consistently growing earnings at about 100% – 200% each quarter, and should reflect this in its share price.

In my opinion, the only thing holding these share back is a listing to a senior exchange like the NASDAQ, and they have already made these plans clear with the hiring of Sarbanes Oxley Auditor Deloitte and Touche for the necessary compliance increases that come along with graduation from the juniors to the majors.

SCLX’s Coal Water Mixture is a clean coal technology which gives users many of the same benefits of coal energy while dramatically lessening the environmental impacts. CWM can be stored, pumped and burned as a substitute for oil and gas in modified furnaces or boilers and burns more efficiently reducing its usage.

We feel SCLX.ob deserves a strong look here.

Check out the companies latest news release regarding their Q1 earnings and MD&A complete with full year 2010 guidance outlines:

http://www.prnewswire.com/news-releases/sino-clean-energy-inc-announces-first-quarter-2010-financial-results-94084884.html

SCLX was also recently featured in an article from TheStreet.com.  The article appropriately named Top China Stocks to Buy Now. (Article can be viewed by clicking the link below)

http://www.thestreet.com/_yahoo/story/10693282/1/top-china-coal-stocks-to-buy-now.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

The article highlights the company’s attractive fundamental picture and builds a compelling case for purchasing the stock.

Happy trading!

GST.com staff