China Natural Gas (CHNG.OB): Buy/Hold
Business: end user delivery of natural gas services to residential, commercial and industrial customers; wholesale natural gas to retail natural gas filling stations; and retail natural gas at company-owned natural gas filling stations mainly in Xian province.
Shares out(mm): 29.5 (24.2 as of 2Q07 and about 5.3 in 8/07 private placement)
Mkt Cap (mm): $392 ($13.30/share on 10/16/07)
Highlights:
- 20 CNG stations as of 3Q07. Expect 23 by end of 2007 and 42 by end of 2008
- building a diversified natural gas project, which when completed will enable China Natural Gas to produce various natural gas products, including liquefied natural gas (“LNG”), liquefied petroleum gas, dry ice, and sulfur
- talking with Thai government company about CNG stations in Thailand as well as consulting services (not reflected in guidance)
- net positive cash
According to 2Q results press release, management estimates:
2007: 32mm; 9.3mm net
2008: 70+% revenue and income growth (implies revenue of 54mm and net 15.8mm)
These imply PEs in 2007 of 42 and 2008 of 23.
Conclusion: potentially a great growth story, but huge run-up in price and a fairly rich valuation. SNEN may be a better value story though they are in an earlier stage of development.
References:
2Q07 Results
Natural Gas Project
August 2007 private placement
