EX-99.1 2 ex99_1.htm EXHIBIT 99.1 ex99_1.htm
Exhibit 99.1
Longwei Petroleum Investment Holding Limited
March 23, 2010
Confidential
1
 
 

 
Forward Looking Statements   
Statements contained in this presentation may be considered “forward-looking statements”
within the meaning of U.S. federal securities laws. The matters discussed herein are based
on current management expectations that involve risks and uncertainties that may result in
such expectations not being realized. Actual outcomes and results may differ materially from
what is expressed or forecasted in such forward-looking statements due to numerous
potential risks and uncertainties including such risks and factors described in presentation
prepared by Longwei Petroleum Investment Holding Ltd. (“Longwei” or the “Company”)
management. Such forward-looking statements speak only as of the date on which they are
made and Longwei does not undertake any obligation to update any forward-looking
statements to reflect events or circumstances after the date of the presentation.
2
 
 

 
3
Executive Summary
§ Longwei Petroleum Investment Holding Limited, a Colorado
 corporation, is one of the leading distributors/wholesalers of
 diesel, gasoline, kerosene and fuel oils in Taiyuan City and
 Gujiao City in Shanxi Province, Peoples Republic of China
 (PRC).
§ The Company’s operating subsidiary, Taiyuan Longwei
 (“Longwei”), was founded in the PRC in 1995 and is fully
 licensed to operate as a finish oil wholesaler in the PRC.
§ Longwei purchases diesel, gasoline, fuel oils and kerosene from oil refineries and other
 Chinese suppliers with whom the Company has had long lasting business relations.
§ The Company’s customer list includes a diversified grouping of primary fuel users.
Shanxi Province
Diesel, Gasoline, Kerosene and Fuel Oils Customers
Approx. Percent of
FY 2009 Revenues
1. Coal plants and other power supply customers   
2. Large-scale gas stations located in Taiyuan City, Shanxi Province 
3. Small, independent gas stations located in Taiyuan City, Shanxi Province
45%
45%
5%
 
 

 
4
Executive Summary, continued
§ Since 1995, Longwei has owned and operated an ISO9000 certified fuel storage facility
 with 14 storage tanks (8 primary tanks, 6 short term storage tanks) with a total capacity
 of 50,000 metric tons (mt) at Taiyuan City. In addition, the Company owns a second
 fuel storage facility that has a total of 8 storage tanks with a total capacity of 70,000 mt
 in Gujiao City. The Gujiao facility began operations in October 2009 and was fully
 operational on January 1, 2010.
§ Longwei Petroleum Investment Holding Limited was incorporated under the laws of the
 State of Colorado in 2000 and conducted no business operations until October 16,
 2007, when it acquired the business of Longwei in a “reverse merger” transaction.
§ The Company has 65 employees, including three management personnel.
Gujiao Facility Storage Tanks (8)
Taiyuan Facility Storage Tanks (8)
 
 

 
5

China, Largest Automobile Market in the World & Growing
 
 
§ Longwei is well positioned to benefit from strong projected growth in demand for
 refined petroleum products in the PRC
 Per capita consumption of diesel, gasoline and other refined petroleum products is
 expected to continue to grow strongly throughout the PRC, including Taiyuan City,
 Shanxi Province, due to a number of factors, including increased demand for power
 supply and significant projected increases in per capital motor vehicle ownership and
 continued strong economic growth.
Growth in the auto industry in China is fairly
well know at this point but the growth has
been stronger than expected in the past
year and in recent months.
According to the Associated Press, in 2009
China overtook the United States of America
as the largest automobile market in the
world. Total vehicle sales in 2009 were 13.6
million. John Bonnell, a J.D. Power analyst
stated “Its very, very strong growth, far
beyond expectations we had in the early
part of 2009.”
 
 

 
6
 
 
§ Strong competitive position and participation in high growth markets
 In 1995, Longwei was granted a Finish Oil Wholesale license by the PRC which allows the
 Company to purchase refined petroleum products directly from refineries in China. In
 addition, Longwei has a license for Dangerous Chemical Products Business which allows
 the Company to transport gasoline and diesel oil products. The Company believes that
 such licenses are difficult to obtain and limit new entrants into its business.

 Due to many factors, including rough terrain, there are no oil pipelines in Shanxi. Yet
 Shanxi is providing energy to much of Northern China every day and is a critical player in
 the economic growth China has generated in recent years and will continue to be a critical
 player in years to come. The lack of a pipeline creates an extreme competitive advantage
 whereby storage capacity and solid supply chains win customers more so than price per
 unit of product. Longwei has the largest storage capacity of any non-government operated
 fuel wholesaler in Shanxi Province.
 Longwei has two significant competitors in Taiyuan (there are only two other non-
 government operated fuel wholesalers).Longwei has
no significant competitiors in
 Gujiao.

Competitive Advantages: Storage & Distribution Network
 
 

 
7
Product Revenues and Agency Fees
§ Longwei distributes petroleum products to
 wholesalers as well as to retail and commercial
 customers in Shanxi Province. Sales by
 product line in fiscal 2009 are summarized
 below:
§ Agency fees are earned for purchasing
 petroleum products from refineries on behalf of
 wholesalers who lack the necessary licenses to
 make such purchases directly themselves.
Railroad Station
Longwei Gasoline Station
 
 

 
8
Longwei Suppliers
§ Longwei purchases diesel, gasoline, fuel oil and kerosene directly from oil
 refiners and other suppliers with whom the Company believes it has excellent
 relations.
§ Since inception, Longwei has not experienced any difficulty in obtaining finished
 goods or raw materials essential to its business.
 
 

 
9
Sales and Marketing
Direct Marketing : Longwei employs its own sales
and marketing staff to directly establish the distribution
and sales networks with its customers. Its sales
representatives regularly visit gas stations and fuel oil
consumption intensive enterprises within its
distribution footprint.
Referrals: Referrals from existing customers continue
to be a strong source of new customers.
Major New Customers: In November 2009, Longwei
entered into contracts with 6 new significant customers
who Longwei will service through the Gujiao facility.
Longwei has identified an additional 7 significant
customers that Longwei will aggressively seek
business with and is hopeful to sign these customers
to contracts for the 2010 calendar year. One of these 7
additional customers has verbally committed to
ordering products through Longwei.
Distribution Footprint Covered by
Longwei’s Storage Locations
 
 

 
10
§ Business Strategy
 § Key components of the Company’s business strategy include:
 § Pursue internal growth by attracting new customers through competitive
 pricing, timely delivery, and the highest quality products, and
 § Pursue internal growth by expanding the Company’s product storage
 capacity, and
 § Expand geographically.

Growth Strategy
 
 

 
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§ Strong historical revenue growth

 
 
 
 
 
 
 
 
Sales growth attributed to:
 - strong economic growth in Shanxi Province
 - increased demand for diesel and gasoline
 - increased prices for diesel, gasoline, fuel oils and kerosene

Selected Financial Data
Compounded Annual Growth
Fiscal Year
‘05-’09
Fiscal Year
‘08-’09
 
 
 
Petroleum Product Sales Volume
43.7%
33.4%
Petroleum Products Revenue
46.4%
39.5%
Total Revenues
48.1%
36.9%
 
 

 
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§  Geographic Expansion
§ Longwei expanded its finish oil distribution / wholesale
 business into the nearby city of Gujiao City, which is
 located in Shanxi Province approximately 50 km from
 Taiyuan City and is considered to be a key industrial
 center in China for energy production.
§ Longwei has already established a solid customer base in
 Gujiao and generated a total of $8.5 million in revenues at
 Gujiao from October 1, 2009 through December 31, 2009.
 The revenues generated during this period were not
 included in Longwei’s financial projections released
 previous to the investor presented filed on a Form 8-K
 with the SEC on March 23, 2010. Gujiao is now expected
 to generate at least $60 million in revenues during the
 fiscal year ending June 30, 2010.
§ As of March 23, 2010, Longwei is servicing 20 clients
 from its Gujiao facility. Longwei has not generated agency
 fee revenues at its new Gujiao facility thus far.
Longwei’s Current
Storage
New Gujiao
Storage

Expansion Leads to Growth
 
 

 
13

Gujiao - The New Facility
 
 

 
14

Historical Financials
 
 

 
15
 
 
§ Strong Balance Sheet

Continued Strong Financial Position
 
 

 
16

Projected Financials
 
 

 
Management has made several significant assumptions and estimates with regard to its financial forecasts provided herein.
Management wishes to explain certain assumptions made within these financial forecasts. These certain assumptions, such as
predictions of future price quotations of Longwei’s common stock and the timing and size of conversions of Longwei’s preferred
stock and stock warrants, are inherently difficult to predict. As a result, management has used its best efforts to provide what it
believes are appropriate and conservative assumptions with regard to these certain assumptions. Management believes the
following assumptions are important to note when reviewing the revised guidance.
 
1. Management has estimated conversions of its current outstanding preferred stock to common stock will result in an additional 3.5
million shares of common stock being issued between March 8, 2010 and June 30, 2010.
2. Management has estimated conversions of its current outstanding preferred stock to common stock will result in an additional 5.4
million shares of common stock being issued between July 1, 2010 and June 30, 2011.
3. Management has estimated exercises of its current outstanding stock warrants to common stock will result in an additional 1.3
million shares of common stock being issued between March 8, 2010 and June 30, 2010.
4. Management has estimated exercises of its current outstanding stock warrants to common stock will result in an additional 6.7
million shares of common stock being issued between July 1, 2010 and June 30, 2011.
5. Management has made the assumption that other than those stock issuances identified herein, no other significant issuances of
its common stock will occur between March 8, 2010 and June 30, 2011.
6. Management has made the assumption that Longwei’s stock price as quoted on a U.S. Stock Exchange on June 30, 2010, will be
$3.25 per share of common stock.
7. Management has made the assumption that Longwei’s stock price as quoted on a U.S. Stock Exchange on June 30, 2011, will be
$4.25 per share of common stock.
8. All other assumptions made by management during the preparation of its revised financial forecast were made utilizing current
financial data, knowledge of pending customer orders, without applying discounts to assumptions regarding fair market valuations
where discounts might be appropriate but Longwei chose to use a conservative approach and did not utilize discounts, with an
understanding of historical trends with regard to Longwei’s business, with a basic understanding of the current currency exchange
rate policies of China, and a basic understanding of the likelihood that current government and independent estimates of continued
economic growth within China and specifically within Shanxi Province, China, will be reasonably correct in the years ending June 30,
2010 and June 30, 2011, respectively.

17

Projected Financials, Key Assumptions
 
 

 
(a) Any references to “Adjusted" refer to the exclusion of the expense associated with
 the change in the fair market value of Longwei's outstanding stock warrants,
 except in the case of “Adjusted EPS" which refers to the exclusion of the expense
 associated with the change in the fair market value of Longwei's outstanding stock
 warrants, as well as the exclusion of the impact of the one time deemed dividend
 of $8.6 M associated with the October 2009 Financing.
(b) Six Months YTD data and percentages are compared to the prior YTD figures
 reported by Longwei for the period from July 1, 2008 through December 31, 2008
 as reported in Longwei’s 10-Q filed on February 13, 2010 and generally reflect
 one half of a full year of operations. Adjusted EPS is defined above but it is also
 important to recognize that Adjusted EPS for the six months ended December 31,
 2009 was $0.21 as compared to Adjusted EPS for all of fiscal 2009 of $0.29.
(c) The stock warrants are adjusted to fair market value at each reporting period.
 Each adjustment is not a “reversable” transaction. However, if the future fair
 market value of the stock warrants is calculated to be less than the fair market
 value in a previous period, then the stock warrants will be adjusted to fair market
 value resulting in an increase to net income for the positive P&L effect of
 decreasing the recorded fair market value of the stock warrants.

Historical Financials, continued
18
 
 

 
19

Reconciliation of Adjusted Figures to Unadjusted Figures
 
 

 
20
Capital Structure
This financial information is qualified in its
entirety by the financial information contained in
the Company’s public filings with the SEC.
 
 

 
21
Corporate Structure
§ July 1995 - Taiyuan Longwei founded July 1995.
§ March 2000 - Longwei Petroleum Investment
 Holding Limited (“Longwei Petroleum”) incorporated
 in Colorado under the name Tabatha II, Inc.
§ April 2006 - Longwei Petroleum Investment Holding
 Limited (“Longwei Petroleum BVI”) incorporated in
 the British Virgin Islands and acquires 100% of
 Taiyuan Yahuan Energy Conversion Co., Ltd. and
 its subsidiary.
§ October 2007 - Longwei Petroleum, a Colorado
 corporation (formerly known as Tabatha II, Inc.)
 acquires 100% of Longwei Petroleum BVI in a
 “reverse merger” transaction. The shareholders of
 Longwei Petroleum BVI received 69 million shares
 of common stock in Longwei Petroleum, a Colorado
 corporation, representing 92% of the Company’s
 outstanding share capitalization.
 
 

 
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Management
Cai Yongjun - Chairman and Chief Executive Officer
§ CEO of Taiyuan Longwei since its founding in 1995
§ Has over 12 years experience in the trading, storage and handling of petroleum
 products
§ Attended Shanxi University where he majored in business administration
Xue Yongping - Director, Secretary and Treasurer
§ Secretary and Treasurer of Taiyuan Longwei since November 1998
§ Previously served as Deputy General Manager of Taiyuan Hua Xin Trading
 Company, a fuel oil distributor/wholesaler
§ Received law degree from Shanxi Law School
James Crane - Chief Financial Officer
§ Named Chief Financial Officer on June 30, 2009
§ Certified Public Accountant
§ Trained at a Big Four accounting firm in the US
§ Has served as Chief Financial Officer of a variety of publicly-traded companies,
 including companies operating exclusively in the People’s Republic of China
 
 

 
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Summary
§ A leading wholesaler / distributor of diesel, gasoline, fuel oil and kerosene in Taiyuan City,
 and Gujiao City, in Shanxi Province, PRC.
§ Business founded 1995. Strong competitive position in a challenging geographic
 marketplace in Shanxi Province with 120,000 metric tons (mt) of storage tank capacity.
§ Revenues have increased at a 48+% CAGR% between 2005 and 2009 due to strong
 increases in demand for diesel and gasoline in Shanxi Province.
§ Highly profitable with audited FY 2009 Revenues, Operating Profit and Net Income of
 $196.8 M, $39.5 M and $21.8 M, respectively.
§ Operating Profit is projected to increase to $56.8 M in FY 2010 (as the new storage tanks
 are expected to be placed into service during the second half of this fiscal year).
§ Strong balance sheet with Stockholders’ Equity of $128.2 M and no long-term debt or
 other long-term liabilities as of December 31, 2009.
§ Management currently owns 49% of the shares outstanding (42.1 M shares) and has
 pledged a total of 13.5 M shares of common stock (not included in totals above) they
 already owned in order to close the October 2009 Financing. Management will receive the
 shares back without further liability or potential loss of the shares, if Longwei generates
 net income of $23.9 M for the year ending June 30, 2010.
§ Longwei has announced its intention to uplist to the NYSE Amex stock exchange. Three
 new independent board members were announced on March 23, 2010
§ As of March 22, 2010, Longwei’s current price to earnings ratio based on the trailing
 twelve months adjusted net income is 7.26, well below industry comparables.