Petro-King Oilfield Services (2178 HK) Bleaker

Transcription

Company Update, 6 January 2015
Petro-King Oilfield Services (2178 HK)
Energy & Petrochemicals - Oil & Gas Services
Market Cap: USD169m
Neutral (Maintained)
Target Price:
Price:
HKD1.22
HKD1.21
Macro
Risks
Bleaker Outlook Already Priced In
Growth
Value
Relative to Hang Seng Index (RHS)
132
5.10
120
3.60
84
3.10
72
2.60
60
2.10
48
1.60
36
1.10
24
0.60
18
16
14
12
10
8
6
4
2
12
Jul-14
May-14
Nov-14
96
Sep-14
108
4.10
Mar-14
4.60
Jan-14
Vol m
Price Close
5.60
0
0
.2
0
0
On 24 Dec, Petro-King issued a profit warning and proposed a rights .
0
offer to raise HKD151m. We see the profit warning as a negative 0
surprise and slash our FY14-16 earnings forecasts. We cut our TP to 0
HKD1.22 (0.7x FY15F P/BV, 0.8% upside). Maintain NEUTRAL as we
believe the negatives have been priced in, with its share price having
dropped 9% since the announcement.



Source: Bloomberg
Avg Turnover (HKD/USD)
2.43m/0.31m
Cons. Upside (%)
50.4
Upside (%)
0.8
52-wk Price low/high (HKD)
1.08 - 4.94
Free float (%)
30
Share outstanding (m)

1,080
Shareholders (%)
Termbary Natural Resources
Co. LTD
King Shine Group
31.5
31.4
TCL Corp
6.9
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
12.0
(16.0)
(46.9)
(46.9)
(70.9)
Relative
12.0
(14.3)
(49.2)
(47.1)
(74.4)


2

.
1
0
.
2





Profit warning a negative surprise. Based on unaudited accounts and
confirmed orders and contracts for 2014, Petro-King Oilfield Services
(Petro-King) expects to record a net loss for FY14. This came as a
negative surprise as it is much worse than our original recurring net profit
forecasts of HKD135m (-34% YoY) for FY14 and HKD114m (-14% YoY)
for 2H14.
Rights offer raises concern over cash flow. On the same day, PetroKing proposed to raise HKD151m through a rights offer at HKD0.98 per
share on the basis of one rights share for every seven existing shares.
Upon completion of the rights issue, share capital will be enlarged by
about 14%. We believe the rights offer is primarily driven by Petro-King’s
tight cash flow position and negative outlook for operation in FY15.
Share price rally on oil industry ownership reform. On 5 Jan, shares
of oilfield service providers including Petro-King rallied by 7-13%,
stimulated by news reports that China National Petroleum
Corporation (CNPC) has kicked off a mixed-ownership reform in Xinjiang.
It is expected that there will be more bold reform actions in 2015 to
encourage private capital to participate in upstream exploration and
production (E&P) operations, which may revive investments in the field.
Gloomy earnings outlook. We believe Petro-King’s operation has been
severely challenged by a tough operating environment in both domestic
and overseas markets. We now see a loss of HKD35m for 2H14 and a
loss of HKD15m for FY14. For FY15, we expect a limited recovery with a
net profit of HKD30m.
Maintain NEUTRAL, lower TP to HKD1.22. We change our valuation to
P/BV from P/E-based, given the company’s highly volatile earnings. We
cut our TP to HKD1.22, based on 0.7x FY15F P/BV, 2SD below its
forward P/BV mean. Our previous TP of HKD2.10 was based on a 12x
FY15F P/E. As its share price has dropped 9% since the announcement,
we believe the negatives have been priced in. Maintain NEUTRAL.
Forecasts and Valuations
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
1,057
1,060
867
1,014
1,141
Reported net profit (HKDm)
180
207
(22)
30
57
Recurring net profit (HKDm)
149
205
(15)
30
Recurring net profit growth (%)
69.8
37.8
(107.1)
Charles Zhang +852 2103 5842
Recurring EPS (HKD)
0.20
0.21
(0.01)
charles.zhang@rhbgroup.com
Recurring P/E (x)
6.1
5.8
P/B (x)
0.86
0.59
P/CF (x)
6.91
Shariah compliant
Total turnover (HKDm)
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
na
na
na
0.62
0.87
57
88.5
0.02
0.05
49.6
26.3
0.69
0.68
na
0.99
4.4
3.3
(3.2)
13.0
17.7
12.7
(1.0)
1.4
1.8
2.5
net cash
net cash
4.8
net cash
(111.5)
(84.2)
(72.5)
2.6
Source: Company data, RHB
See important disclosures at the end of this report
Powered by EFA
TM
Platform
1
6 January 2015
Challenging Outlook
Profit warning a negative surprise. Based on unaudited management accounts for
the 11 months ended Nov 2014 and confirmed orders and service contracts for the
month ending Dec 2014, Petro-King expects to record a net loss for FY14. This came
as a negative surprise as it is much worse than our original recurring net profit
forecasts of HKD135m (-34% YoY) for FY14 and HKD114m (-14% YoY) for 2H14.
This indicates that revenue growth and margins have deteriorated significantly in
2H14.
Falling revenue and rising costs. The company explained that the net loss was
mainly caused by declining revenue and rising operating costs. The drop in revenue
was due to a weak Chinese market and its exposure in Venezuela. The increase in
operating costs was mainly due to Petro-King’s expansion in the number of service
staff and equipment for the unconventional gas division.
Profit warning reflects a challenging operating environment. We believe PetroKing’s operation has been severely challenged by a tough operating environment,
both in domestic and overseas markets. In China, we suspect its production
enhancement segment continued to witness a decline amid a slowdown in business
volume from tight gas/oil wells in Ordos Basin. In Venezuela, receivables collection
from Petroleos de Venezuela S.A. (PDVSA) continued to be slow and restrained its
well completion revenue. Amid the recent sharp drop in oil prices, we foresee the
operating environment and earnings outlook to remain challenging and uncertain in
FY15. Based on the limited information available, we now anticipate a loss of
HKD35m for 2H14 and a loss of HKD15m for FY14. For FY15, we expect a limited
recovery with a net profit of HKD30m.
Figure 1: 2H14 results forecasts (HKDm)
Drilling
1H13
2 H13
1H14
Actual
Actual
Actual
2 H14
RHB
Diff (% )
FY 14 F
RHB
29
38
66
41
8.0
Well completion
214
39
30
21
(46.2)
51
Production enhancement
159
261
118
175
(32.7)
294
Oilfield project services
402
337
214
237
(29.7)
451
19
22
64
49
124.7
113
Consultancy services
Manufacturing & sales of tools &
equipment
106
75
206
75
228
10.8
303
Re ve nue
496
565
353
5 14
(9.0)
867
YoY chg (%)
60.1%
- 24.5%
- 28.7%
- 9.0%
COGS
(315)
(307)
(232)
(453)
47.5
(685)
G ross profit
18 1
258
12 1
61
(76.3)
18 2
YoY chg (%)
86.3%
16.3%
- 33.1%
N/A
GPM
36.5%
45.6%
34.3%
11.9%
Opex & others
Opex & others as % of revenue
O pe ra ting profit
YoY chg (%)
Operating margin
Finance expense & others
P BT
Income tax
Effective tax rate
MI
Ne t profit
(74)
(105)
(94)
(105)
14.9%
18.6%
26.7%
20.4%
15 3
13.8%
- 74.9%
N/A
21.6%
27.0%
7.6%
- 8.5%
(8)
(4)
(234.7)
(12)
(4 8 )
(131.0)
(2 9 )
10
(144.7)
10 4
15 6
19
(26)
(23)
(5)
25.4%
14.5%
24.2%
(9)
69
(6)
12 7
(1)
13
(128.8)
(17 )
- 2.0%
21.0%
5
18.9%
3
(144.8)
2
(3 5 )
(127.8)
(2 2 )
YoY chg (%)
- 7.9%
36.1%
- 80.4%
N/A
NPM - reported
13.8%
22.5%
3.8%
- 6.9%
72
13 3
20
Ne t profit - re c urring
(199)
23.0%
10 7
3
(4 4 )
(0.3)
133.9%
(3)
27
21.0%
(3 5 )
YoY chg (%)
59.6%
27.4%
- 72.0%
N/A
NPM - recurring
14.6%
23.5%
5.7%
- 6.8%
- 2.5%
(126.2)
(15 )
- 1.7%
Source: RHB
2
6 January 2015
Figure 2: Changes to our forecasts (HKDm)
FY 14 F
FY 14 F
New
Old
106
126
51
63
Production enhancement
294
377
Oilfield project services
451
567
Consultancy services
113
FY 15 F
FY 15 F
New
Old
(15.8)
117
136
(20.0)
56
68
(22.2)
323
408
(20.5)
496
612
121
(6.7)
125
303
309
(1.8)
394
Tota l re ve nue
867
997
(13 . 1)
1, 0 14
COGS
(685)
(596)
G ross profit
18 2
401
21.0%
40.2%
Drilling
Well completion
Manufacturing & sales of tools & equipment
GPM
Chg%
14.9
(5 4 . 6 )
FY 16 F
FY 16 F
New
Old
(14.2)
135
147
(8.7)
(18.5)
64
74
(13.2)
(20.8)
371
440
(15.6)
(19.1)
570
661
(13.8)
134
(6.7)
137
147
(6.7)
401
(1.8)
434
442
(1.8)
(11. 6 )
1, 14 1
1, 2 5 0
(8 . 7 )
1, 14 7
(720)
(640)
294
508
29.0%
44.2%
Chg%
12.6
(4 2 . 0 )
(764)
(672)
376
578
33.0%
46.2%
Chg%
13.7
(3 4 . 9 )
Distribution expenses
(17)
(17)
(0.7)
(20)
(20)
1.0
(23)
(22)
4.2
Marketing expenses
(26)
(30)
(13.1)
(30)
(34)
(11.6)
(34)
(37)
(8.7)
R&D
(17)
(20)
(13.1)
(20)
(23)
(11.6)
(23)
(25)
(8.7)
Other expenses (admin)
(95)
(110)
(13.1)
(112)
(126)
(11.6)
(125)
(137)
(8.7)
O pe ra ting e xpe nse s
(15 6 )
(17 7 )
(11.8)
(18 3 )
(2 0 4 )
(10.4)
(2 0 5 )
(2 2 2 )
(7.5)
Opex as % of revenue
18.0%
17.8%
18.0%
17.8%
18.0%
17.8%
(40)
(40)
-
(64)
(64)
-
(88)
(88)
(3)
(3)
-
2
2
-
2
2
50
243
86
271
5.0%
21.2%
7.5%
21.7%
D&A
Others
O pe ra ting profit
Operating margin
(17 )
- 2.0%
Interest income
Finance cost
EBT
EBT margin
Effective tax rate
NPM (reported)
7
-
7
7
-
7
7
(19)
-
(17)
(17)
-
(17)
(17)
5
18.9%
2
Ne t profit - re porte d
(2 2 )
- 2.5%
Ne t profit - re c urring
18.2%
(15 )
16 9
N/A
17.0%
(32)
N/A
18.9%
(10)
12 8
N/A
N/A
12.8%
13 5
NPM (recurring)
- 1.7%
13.5%
EP S - re c urring
(0.01)
0.13
1080.4
1080.4
S ha re s outsta nding (mn) - ba sic a s a t 3 1 De c
(79.2)
7
- 3.3%
MI
N/A
(19)
(2 9 )
Income tax
18 1
N/A
40
232
3.9%
20.2%
(8)
(44)
18.9%
18.9%
(2)
(13)
30
17 5
3.0%
15.3%
30
17 5
3.0%
15.3%
N/A
0.02
0.17
-
1234.7
1080.4
(82.8)
(82.8)
(82.8)
(82.8)
(82.8)
75
260
6.6%
20.8%
(14)
(49)
18.9%
18.9%
(4)
(15)
57
19 6
5.0%
15.7%
57
19 6
5.0%
15.7%
(85.5)
0.05
0.19
14.3
1234.7
1080.4
(68.3)
(71.1)
(71.1)
(71.1)
(71.1)
(71.1)
(75.7)
14.3
Source: RHB
3
6 January 2015
Rights offer raises concern over cash flow
Rights offer raises concern over cash flow. Petro-King also announced that it will
raise HKD151m through a rights offer at a price of HKD0.98 per rights share and on
the basis of one rights share for every seven existing shares. Upon completion of the
rights issue, its share capital will be enlarged by about 14% from 1,080.4m shares to
1,234.7m shares. We believe the rights offer is primarily driven by Petro-King’s tight
cash flow position and negative outlook for operation in FY15.
Yantai Jereh (002353 CH, NR) as an underwriter in the rights offer. Yantai Jereh
(Jereh), a leading integrated oilfield equipment and services provider whose revenue
is more than four times higher than Petro-King’s, joins the rights issue as an
underwriter. Currently, Jereh holds 0.74% of Petro-King’s shares. In the event the
rights shares cannot be fully sold, Jereh has a chance to raise its position in PetroKing to 5.44%. We see this as positive news, with the hope that Jereh may become a
major shareholder of Petro-King.
Share price rally on oil industry reform
Optimism on oil industry ownership reform. On 5 Jan, shares of oilfield service
providers rallied by 7-13% (Petro-King was up by 10%), stimulated by news reports
that CNPC has kicked off a mixed-ownership reform. According to Xinjiang local
media, CNPC kicked off a mixed-ownership reform in Xinjiang with its sales
marketing branch. On 1 Jan, CNPC officially changed the status of its sales
marketing company in Xinjiang from a branch company to a locally-registered limited
liability company, paving the way for future joint-venture cooperation with local
companies in Xinjiang. Another news report by China Securities Daily also indicates
that there will be more bold reform actions in 2015 to encourage private capital to
participate in upstream E&P operations. If this materialises, we expect the mixedownership reform of China’s oil industry, particularly in the upstream E&P sector, to
revive investments in the field and benefit oilfield service providers.
Reduce earnings forecasts, maintain NEUTRAL
Cut earnings forecasts, maintain NEUTRAL. We slash our recurring net profit
forecasts for FY14/FY15/FY16 by 111%, 83% and 71% respectively. Given the
company’s highly volatile earnings, we change our valuation to P/BV from P/E-based.
Our new TP of HKD1.22 is based on 0.7x FY15F P/BV, 2SD below its forward P/BV
mean. We believe this is justified by Petro-King's more uncertain earnings outlook.
However, as its share price has dropped by about 9% since the announcement of the
profit warning, we believe the negatives have been priced in, and we see its earnings
returning to net profit in FY15. Thus, we maintain our NEUTRAL rating.
Figure 3: Forward P/BV band
7
Share Price (HKD)
6
5
+2SD = 2.8x
4
+1SD = 2.3x
Mean = 1.8x
3
-1SD = 1.3x
2
-2SD = 0.7x
1
0
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Source: Bloomberg, RHB
4
6 January 2015
Figure 4: Peer Comparison
Com pany
Ticker
Petro-King
2178 HK
Price Mkt cap
(USDm )
1.21
169
3-m th
avg t/o
(USDm )
0.3
P/E
Hist
(x)
P/E
FY1
(x)
P/E EPS FY1 EPS FY2 3-Yr EPS PEG Div yld Div yld P/BV P/BV
Rev
FY2
YoY%
YoY% Cagr (%) (x) Hist (%) FY1 (%) Hist FY1
Hist
(x)
(x)
(x) (USDm )
6.1 (85.9) 49.6
10.0
9.7
(106.8)
(5.9)
N/A
4.1
N/A
0.6
0.6
12.1
(1.0)
4.3
2.5
3.8
3.7
1.3
1.2
13.3
11.5
9.9
7.9
1.0
3.6
4.0
1.3
1.1
15.1
14.3
14.4
11.6
1.1
1.6
2.2
2.3
2.0
14.5
14.8
6.6
1.3
2.6
2.0
1.6
1.5
15.7
0.4
3.8
3.7
1.2
1.0
(10.6) N/A
3.6
1.3
1.5
1.4
HSI
23,721
HSCEI
12,207
8.5
8.0
7.2
7.3
CSI300
3,642
16.1
13.3
11.6
21.6
13.2
13.8
12.4
29.5
(4.4)
Adjusted sector avg*
10.7
10.2
(65.7) 1.3
137
GPM
Net
ROE
ROE
Hist m argin Hist (%) FY1 (%)
(%) Hist (%)
N/A
18.5
23.6
13.2
16.2
13.9
386
N/A
12.5
16.9
16.5
407
44.3
15.1
11.4
6.0
4,399
N/A
24.5
20.4
18.6
44.3
17.4
16.2
13.7
HK listed oil & gas services
Spt Energy Group 1251 HK
1.69
334
2.1
6.9
6.6
5.3
3.6
25.0
Anton Oilfield
3337 HK
1.87
533
7.4
8.4
31.9
16.5
(73.6)
93.6
China Oilfield-H
2883 HK
13.98
13,806
41.7
7.5
6.8
7.2
10.6
(5.8)
2.4
2.8
3.8
4.3
1.2
1.2
7.6
15.1
9.7
(19.8)
37.6
2.5
1.6
3.7
3.1
1.3
1.2
Average
US oil & gas services
Schlumberger Ltd SLB US
85.67 110,240
944.0
16.8
15.4
16.8
9.0
(7.8)
3.1
5.0
1.9
1.9
2.7
2.7
45,266
21.9
14.9
17.3
17.5
Halliburton Co
39.49
33,466 1,057.6
16.7
10.0
11.7
67.3
(14.7)
16.5
0.6
1.6
1.6
2.2
2.1
29,402
15.2
7.2
24.0
22.9
Baker Hughes Inc BHI US
56.17
24,299
514.3
22.7
14.5
17.4
56.9
(16.6)
12.4
1.2
1.1
1.1
1.3
1.3
22,364
17.0
4.9
7.3
9.1
Weatherford Inte WFT US
11.65
9,015
176.1
N/A
11.3
12.1
N/A
(6.8)
(234.8) N/A
N/A
0.0
1.1
1.1
15,263
19.4
(2.3)
(4.6)
6.5
18.7
12.8
14.5
44.4
(11.5)
(50.7) 2.3
1.5
1.1
1.8
1.8
18.4
6.2
11.0
14.0
HAL US
Average
A-share oil & gas services
Yantai Jereh-A
002353 CH 31.74
4,898
70.3
28.9
20.8
14.8
38.5
40.4
38.3
0.5
0.5
0.7
3.9
3.6
590 43.26
26.84
22.76
22.74
China Oil Hbp-A
002554 CH 10.93
801
16.5
47.5
34.9
25.0
36.1
39.9
33.6
1.0
0.5
1.3
3.7
3.5
152 27.34
10.88
8.92
10.09
Gi Technologie-A 300309 CH 18.82
657
9.3
55.4
41.2
29.3
34.4
40.7
37.0
1.1
0.5
0.4
3.3
3.1
37 55.92
31.50
6.05
7.57
43.9
32.3
23.0
36.3
40.3
36.3
0.9
0.5
0.8
3.6
3.4
42.2
23.1
12.6
13.5
Average
Oil equipm ents
Hilong Holding
1623 HK
2.03
444
3.2
7.9
6.9
5.9
14.3
16.0
14.7
0.5
3.8
4.4
1.0
0.9
394 40.29
14.05
16.30
14.32
Honghua Group
196 HK
1.08
451
1.9
5.1
6.8
5.8
(24.7)
16.4
(0.4) N/A
5.6
4.3
0.6
0.6
1,294 23.68
6.68
10.73
8.43
6.5
6.8
5.9
(5.2)
16.2
4.7
4.3
0.8
0.7
32.0
10.4
13.5
11.4
Average
7.2
0.5
* adjusted sector average includes only HK and US listed oil & gas servicing companies
Source: Bloomberg, RHB
5
6 January 2015
Financial Exhibits
Profit & Loss (HKDm)
Total turnover
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
1,057
1,060
867
1,014
1,141
Cost of sales
(598)
(497)
(581)
(599)
(627)
Gross profit
459
563
286
416
513
Gen & admin expenses
(19)
(28)
(40)
(64)
(88)
Selling expenses
(23)
(19)
(17)
(20)
(23)
(218)
(249)
(243)
(284)
(319)
Operating profit
199
267
(14)
48
83
Operating EBITDA
218
295
38
124
184
Other operating costs
Depreciation of fixed assets
(7)
(26)
(39)
(64)
(88)
Amortisation of intangible assets
(12)
(2)
(13)
(13)
(13)
Operating EBIT
199
267
(14)
48
-
-
Net income from investments
(0)
Other recurring income
-
83
-
(7)
3
(3)
2
Interest income
0
13
7
7
7
Interest expense
(8)
(13)
(19)
(17)
(17)
-
-
Other non-recurring income
-
-
Pre-tax profit
232
270
(29)
40
75
Taxation
(46)
(49)
5
(8)
(14)
Minority interests
48
2
(15)
2
(2)
(4)
Profit after tax & minorities
180
(6)
207
(22)
30
57
Reported net profit
180
207
(22)
30
57
Recurring net profit
149
205
(15)
30
57
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
199
267
(14)
48
83
19
28
52
76
100
(46)
(674)
Cash flow (HKDm)
Operating profit
Depreciation & amortisation
Change in working capital
Other operating cash flow
Operating cash flow
Interest received
Interest paid
2
(8)
173
(387)
1,406
(1,474)
(3)
1,442
(1,347)
0
13
7
7
7
(13)
(19)
(17)
(17)
(35)
(37)
5
(8)
Cash flow from operations
131
(424)
1,435
(1,365)
(136)
(403)
(23)
172
(159)
(231)
(200)
Dividends paid
(13)
(120)
(53)
Proceeds from issue of shares
441
948
Other investing cash flow
Cash flow from investing activities
Increase in debt
Other financing cash flow
95
(430)
35
-
(200)
-
(200)
-
(200)
6
(8)
-
-
137
-
-
-
-
-
863
84
6
Cash at beginning of period
73
137
345
1,665
Total cash generated
64
209
1,319
(1,559)
Forex effects
(0)
-
-
-
345
(200)
-
92
137
(14)
1,504
-
(200)
Cash flow from financing activities
Implied cash at end of period
2
1,528
(8)
Tax paid
Capex
1,342
2
1,665
106
(8)
106
1,296
1,401
6
6 January 2015
Financial Exhibits
Balance Sheet (HKDm)
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Total cash and equivalents
172
506
1,825
266
1,562
Inventories
163
299
(132)
305
Accounts receivable
650
1,004
(197)
1,142
Other current assets
106
146
83
97
109
Total current assets
1,091
1,955
1,579
1,810
1,469
Tangible fixed assets
168
309
470
606
718
Intangible assets
572
570
557
544
532
2
15
15
15
15
742
894
1,042
1,165
1,265
Total other assets
Total non-current assets
Total assets
(123)
(79)
1,832
2,849
2,621
2,975
2,734
Short-term debt
199
233
371
371
371
Accounts payable
298
243
(44)
268
(32)
Other current liabilities
233
132
131
135
141
Total current liabilities
730
609
458
773
479
Other liabilities
12
15
15
15
15
Total non-current liabilities
12
15
15
15
15
Total liabilities
741
624
472
788
494
Share capital
672
1,635
1,635
1,635
1,635
Retained earnings reserve
330
520
445
481
530
50
36
36
36
36
1,053
2,191
2,116
2,152
2,200
35
33
35
39
0
(0)
Other reserves
Shareholders' equity
Minority interests
38
Other equity
-
-
Total equity
1,091
2,226
2,149
2,187
2,240
0
Total liabilities & equity
1,832
2,849
2,621
2,975
2,734
Key Ratios (HKD)
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Revenue growth (%)
89.0
0.3
(18.2)
17.0
12.4
Operating profit growth (%)
83.7
34.5
(105.2)
0.0
73.6
Net profit growth (%)
128.4
14.9
(110.6)
0.0
88.5
EPS growth (%)
127.2
(13.3)
(110.1)
0.0
88.5
7.0
46.2
(4.5)
(11.0)
2.3
Operating margin (%)
18.8
25.2
(1.6)
4.7
7.3
Net profit margin (%)
17.0
19.5
(2.5)
3.0
5.0
Return on average assets (%)
11.7
8.8
(0.8)
1.1
2.0
Return on average equity (%)
17.7
12.7
(1.0)
1.4
2.6
2.5
(12.3)
(67.7)
4.8
(53.2)
0.18
(0.43)
1.38
(1.11)
1.22
Bv per share growth (%)
Net debt to equity (%)
Recurrent cash flow per share
7
6 January 2015
SWOT Analysis
 The only China-based oilfield service company with
turbine drilling technology
 Failure of
payment by
PDVSA
 Strong ties with Sinopec, winning a large number of
multi-stage fracking jobs in bidding
 Foreign oilfield
service
companies
bolstering
business
development in
China
 Developing in-house oil servicing tools to enhance
cost competitiveness
 Possibly larger
exploration and
production
(E&P) spending
by the new
Venezuelan
Government
 Severe global
economic
slowdown may
derail capex
spending
among national
oil companies
 Strong demand
for stimulation
services due to
newly-found low
permeability oil
and gas
resources
 High reliance on Sinopec and PDVSA
 A relatively short track record
P/E (x) vs EPS growth
P/BV (x) vs ROAE
15%
140
1600%
1
13%
120
1300%
1
10%
100
1000%
1
8%
80
700%
0
5%
60
400%
0
3%
40
100%
0
0%
20
-200%
0
-3%
0
-500%
0
-5%
P/E (x) (lhs)
EPS growth (rhs)
Jan-13
P/B (x) (lhs)
Jan-16
1
Jan-15
1900%
Jan-14
18%
160
Jan-12
1
Jan-16
2200%
Jan-15
20%
180
Jan-14
1
Jan-13
2500%
Jan-12
200
Return on average equity (rhs)
Company Profile
Petro-King Oilfield Services is an independent oilfield service company that provides high-end services to national oil companies in
China and other countries. Founded in 2002, the company has grown from a consultant to a vertically-integrated oilfield service provider
with production lines of packers, valves and control panels in Singapore and Shenzhen to support its well completion and production
enhancement services.
8
6 January 2015
Recommendation Chart
Price Close
2.10
3.38
4.47
4.20
6.20
Recommendations & Target Price
na
6.50
5.50
4.50
3.50
2.50
1.50
Buy
0.50
Mar-13
Neutral
Sell
Aug-13
Trading Buy
Feb-14
Take Prof it
Not Rated
Aug-14
Source: RHB, Bloomberg
Date
Recommendation
Target Price
Price
2014-08-28
Neutral
2.10
2.26
2014-03-24
Neutral
3.38
3.50
2013-12-13
Neutral
4.47
4.32
2013-11-15
Neutral
4.47
4.10
2013-08-27
Neutral
4.47
4.06
2013-07-22
Neutral
4.20
3.60
2013-05-29
Neutral
6.20
6.07
Source: RHB, Bloomberg
9
RHB Guide to Investment Ratings
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Petro-King Oilfield Services (2178 HK) Bleaker

Transcription

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