Monday, February 8th, 2010
Top 3 Undervalued Chinese Oil Stocks for 2010
CNOOC Limited (NYSE:CEO), China Petroleum & Chemical Corp. (NYSE:SNP), and China North East Petroleum Holding Ltd. (AMEX:NEP) are three Chinese oil companies to watch.
China’s Exxon Mobil: CNOOC Limited
CNOOC Limited (CEO, Free Analysis), a producer of offshore crude oil and natural gas in China, sports a trailing 12-month price-earnings ratio of just 15.6x while posting a five year earnings growth rate of over 25%. Meanwhile, the company also expects net production of 275-290 million barrels of oil equivalent in 2010 compared to 226-228 million barrels in 2009.
These results compare to a trailing 12-month price-earnings ratio of 16.26x for Exxon Mobil Corporation (XOM), despite posting sharply lower five year earnings growth of just 0.47%. Meanwhile, many investors expect the sector as a whole to benefit as oil prices appear poised to rise as the global economic recovery takes effect.
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China Petroleum Appears to be Discounted
China Petroleum & Chemical Corp. (SNP, Free Analysis), a Chinese energy and chemical company, has seen its shares drop in recent weeks thanks to the banking concerns in the country, but some experts see the stock as being undervalued. The company trades at just 8.24x its trailing 12-month earnings, despite posting strong results over its trailing 12-month period.
The company’s stock trades with a price-earnings to growth ratio of just 0.23, indicating that it appears sharply undervalued given its growth rates. Meanwhile, the company’s return on equity stands at a strong 19%. However, investors should be aware of the company’s debt levels and a sharp drop in margins when considering an investment.
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China North East Petroleum’s Compelling Valuation
China North East Petroleum Holding Ltd. (NEP, Free Analysis), a Chinese oil exploration and production company, has seen its shares rise sharply since 2009 but remains a compelling value play. Trading at just 11.48x its trailing 12-month earnings, the firm is one of the few non-state-owned oil companies which operates over 250 producing wells in four oil fields.
China North East Petroleum operates a 20 year oil lease with PetroChina (PTR), which has led to lower overhead costs and scalable operations. Meanwhile, its recent acquisition of an oilfield services company has transformed it into a more vertically-integrated operator. The company has also generated consistently strong cash flow that has drive a continuous growth cycle.
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Written by Rick Telfur
