Petrochina 0857

[winston]

Not vested. From Phillips:-


Valuation

1. PetroChina will see a slower growth rate, 11.81%, relative to its peers in 2010. We estimate that growth rate in 2011e will improve, only relatively speaking.
2. It is currently trading at a forward p/e of 11.40x, higher than COSL and Sinopec, but lower than CNOOC.
3. Roe in both 2010e and 2011e are marginally lower than the industrial average.
4. We see profit margin improved steadily from 2009a to 2011e
5. 70% of natural gas market shares in domestic China. We believe the Group will benefit greatly riding the natural gas pricing reform mechanism in the following 2 years.


Our view: neutral due to slow growth rate, high capex, but slightly improving profit margins and large natural gas market shares. We lower our TP to HK$8.21 from HK$8.93. The target price is based on the estimated 2010e p/e of 11.40 of our FY10e earning estimate.

Among the industry, we like CNOOC, COSL, PetroChina, and Sinopec in this order. The table below illustrates the ranking in terms of a set of criteria.

Risks:

1. Price fluctuation of crude oil and refined products
2. Foreign exchange rate risk. We estimate that every 5% of RMB appreciation will result in a loss of 5% - 8% of operational profit.
3. Uncertainty of the crude oil and gas reserve risk as the reliability of reserves estimated depends on a number of factors. Results of drilling, testing and exploration may be revised down after the official evaluation.

[winston]

Not vested. Fron Phillips:-

Valuation

We lowered our 2010 eps due to a lower than expected profit margin in 1H10; however, we expect the profit margin to improve slightly in 2011 due to the potential increase of natural gas price and better refining margin.

Our 12-month TP for PetroChina is HK$8.99, based on the 2011e p/e of 10.26x. PetroChina is currently trading at 9.9x of our 2011e eps

We continue liking CNOOC the best within the sector due to its fast growth rate, efficient cost control, and lack of exposure to the resource tax attack.


Risks

Upside risks
1. Higher than expected realized oil price
2. Refining market recovers faster than expected
3. Unexpected discoveries of oil and gas reserves

Downside risks:
1. Volatile oil and oil products` prices
2. Foreign exchange rate risks. We estimate that every 5% of RMB appreciation will result in a loss of 5% - 8% of operational profit
3. Purchase cost continues increasing
4. Safety risk. Accidents will hurt both earnings and investors` confident

[winston]

Not vested. And will they be capping the price of Diesel and Petrol as well ?

DJ MARKET TALK: Deutsche Bank Raises PetroChina Target To HK$9.53

1043 [Dow Jones] STOCK CALL: Deutsche Bank raises PetroChina (0857.HK) target price to HK$9.53 from HK$9.14 after house raised oil price forecasts and reworked some gas assumptions.

Says the cost of PetroChina's gas imports will increase after the rise in oil prices as roughly 50%-60% of PetroChina's gas imports are linked to the price of oil.

Adds consensus is that China needs to raise domestic gas prices by an additional 15%-25% to offset potential losses on expensive gas imports.

Notes under house oil price assumptions, house suspects the NDRC will need to raise domestic gas prices by 75% (2010-15) just to catch up to rising gas import costs. Keeps at Hold.

Source: Dow Jones Newswire

[winston]

Not vested

DJ MARKET TALK: Goldman Keeps PetroChina At Sell

1531 [Dow Jones] STOCK CALL: Goldman Sachs keeps PetroChina (0857.HK) at Sell after it announced a C$5.4 billion deal with Encana Corp. (ECA.T) for a half stake in Encana's Cutbank Ridge assets in Canada.

It says the impact on PetroChina would be modest, in house view, given the small relative size. It adds, based on Encana's press release, the 50% interest represents current daily production of about 255 million cubic feet per day, which house estimates would be about 3.5% of PetroChina's 2011 gas production and 1.2% of its total oil and gas production.

The house notes the valuation is US$32.6/boe of proved reserves vs PetroChina's own EV/end-2009 proved reserves of US$12.8/boe and Encana's US$14.1/boe. It tips PetroChina may benefit from Encana's experience in unconventional gas development given that Montney is a shale gas play. The stock is down 2.7% at HK$10.26.


Source: Dow Jones Newswire

[winston]

Not vested. From Phillips:-

VALUATION: Dividend payout ratio remains at 45%, or RMB0.18/share (as RMB0.16/share was paid in 1H10). We appreciate PetroChina's strong reserve position and natural gas expansion plan, but we find the Group lack of aggressive growing force.

We maintain our NEUTRAL rating with a 12-month target price of HK$11.2. We use DCF to value the E&P segment, with the assumption of an average oil price at US$95/bbl in 2011.

We give an average P/E of 6.5x to the remaining segments. We expect the forward p/e will be trading between the historical forward mean and positive one standard deviation, which is between 9x to 11x.


RISKS

PetroChina is exposed to foreign exchange rate risk, especially due to the wider RMB fluctuation range. Unexpected fluctuation of oil prices will also affect the profits as E&P and refining segments benefit from different directions of the oil prices movement.

Profitability from the refining segment also worries us. Refining margin hasn`t seen improvement, but we realize that this matter falls within government policy.

[winston]

Not vested. Looks like I better be careful if I want to buy a Put on this one ...

DJ MARKET TALK: Jefferies Keeps PetroChina At Buy; HK$15 Target

1116 [Dow Jones] STOCK CALL: Jefferies keeps PetroChina (0857.HK) at Buy after its parent CNPC said it intends to increase its shareholdings in PetroChina to up to 2% of the total shares within 12 months.

The house believes this is a solid vote of confidence in PetroChina's assets, business model and regulatory tailwind. The house notes CNPC instituted a similar plan in September 2008, which did not result in significant purchases.

The house believes the current share purchase plan is occurring in a different environment, for different reasons, and could result in more aggressive share purchases.

"If the increase in shareholding is substantial, we believe it will be largely conducted through H-shares, as only 2.2% of the shares are publicly owned on the A-share exchange," says Jefferies.

It keeps the target price at HK$15.00. The stock is 0.2% lower at HK$10.92.


Source: Dow Jones Newswire

[winston]

Not vested

DJ MARKET TALK: PetroChina +0.5%; CNPC Stake Buy Positive - GS

1431 [Dow Jones] PetroChina (0857.HK) is up 0.5% at HK$11.34, extending from its three-session 7.0% rise, after the company announced Friday its controlling shareholder China National Petroleum Corp. raised its stake in the company as it views the stock price as undervalued.

"While we believe the stake increase is technically supportive for PetroChina as shown in its recent share performance, we remain concerned about the mismatch between PetroChina's valuations and its fundamentals over the next 12 months," says Goldman Sachs.

PetroChina trades like an oil stock, but it has higher refining volume than oil production, it notes. Goldman also believes PetroChina is most vulnerable to potential reforms such as resource tax and is less favored than Sinopec (0386.HK) on fuel consumption tax reform.

It keeps PetroChina at Sell with a target of HK$9.40.


Source: Dow Jones Newswire

[winston]

not vested

PetroChina Target Cut To HK$14.00 From HK$15.00 By Jeffries

[winston]

not vested

DJ MARKET TALK: PetroChina CLSA's Preferred Long-Term Buy

1455 [Dow Jones] CLSA says China's oil trio is transforming from state-controlled, national oil companies (NOCs) to earnings-motivated, international oil companies (IOCs);

It says Sinopec (0386.HK) is the furthest down the evolutionary path with PetroChina (0857.HK) second and Cnooc (0883.HK) third.

"We expect earnings to improve as all three become more commercial. But capex should grow as each battles declining production."

The house says PetroChina is its preferred long-term Buy, due to increasing demand for gas, its longer reserve life, production profile and exposure to unconventional gas. PetroChina is up 1.8% at HK$9.61.

Source: Dow Jones Newswire

[winston]

not vested

DJ MARKET TALK: Sinopec, PetroChina Face NDRC Control Risk - MS

1423 [Dow Jones] After China's latest fuel price cut, Morgan Stanley estimates Sinopec's (0386.HK) current refining margin would turn from marginally breakeven into a loss of US$3-4/bbl.

It says this cut suggests the NDRC is mindful of the risks of slowdown and is hence taking a conservative approach to ensure the demand balance through an oil product price cut.

It adds, while acknowledging the refining losses, NDRC noted it will consider shortening the pricing review period and adjusting benchmark crude types on fine-tuning the framework of the current mechanism.

"We believe investors may take this negatively as this would suggest and PetroChina's (0857.HK) downstream earnings remain at risk given NDRC control."

Sinopec is off 4.9% at HK$7.12, PetroChina is down 2.8% at HK$9.05, vs the HSI's 0.4% retreat.

Source: Dow Jones Newswire