Friday, October 12, 2007


Next Best Thing: CNOOC


Seeing the performances of BOC, Petrochina and Shenhua is like getting the top 3 prized in 4D. Readers who have positions in them can do what they like: trade, take profit or just take the winnings and run. Its frothy both in Shanghai and HK. Bulls roam the streets. Picking the right China covered warrant is not difficult, just do a bit of homework. BOC 's recent quarterly earnings were splendid, and you can easily see that analysts will be clamouring to upgrade their price targets. As for Shenhua, the H-share discount, the A-share listing, the inclusion into important indices, the status as top in their industry - are all requisite factors sustaining its uptrend. May best bet from day one, Petrochina, should do even better than Shenhua.

What about the rest? Are there any other picks? Well, the selection process is quite straight forward. First, pick those WITHOUT an A-share listing. That would cut out a lot of them. Those without a Shanghai listing are just a few steps behind Shenhua and Petrochina. Spurts of buying activity will be triggered on announcement of a plan to do an A-share listing. Another spurt will follow on company's and Beijing's approval. Then another spurt will arrive when an actual date of listing is set.

Secondly, if its not an industry leader, it might be best to sell just before their Shanghai debut as the H-share will dip following the Shanghai listing. However, if they are market leaders in their industry or have a near monopolistic hold like Petrochina, then the uptrend will be greater all along the path and even after the listing. Shenhua was a fine candidate. Petrochina is my akin to my pet. The next best thing ...

CNOOC,the Hong Kong-listed arm of China National Offshore Oil Corp. CNOOC is among the large-cap Chinese oil majors, a big plus point. It is a purely upstream company, thus it has the highest oil price leverage among peers - a fact which should PERK UP INVESTORS at a time of high oil prices. CNOOC's shares have even outperformed Petrochina and Sinopec based on the leverage factor alone.

CNOOC has one of the best production growth outlooks, at an average of 15%-17% between 2007 and 2009, among global integrated oil producers. The high growth rate should be sustained beyond 2009 because of recent discoveries such as Egina in Nigeria and Jinzhou 25-1, offshore China.

Ah, yes, the company has also gotten approval for an A-share listing recently. Owing to its high correlation to the price of oil, one can trade the covered warrants just based on the fluctuations of oil prices as a guide. The LH11-1 Liuhua oilfield now back in production mode has caused many analysts to upgrade their near term and long term production figures.

CNOOC could see a production compound average growth rate(CAGR) of between 11%-22% between 2006 and 2010.

CNOOC-C1

almost zero premium

gearing at just 3.5x, not terribly exciting but its decent

maturity 25 february 2008

anything below 0.40 would be a good entry level

5 comments:

xatomic said...

yeah agreed on the same foresight..

will b betting on this rather than petrochina as it has more correlation with the high oil price environment now

deborah said...

Dali dear,

Thanks for all your winning recommendations..

All credit given to your blog, I started to look seriously at HK china warrants a fortnite ago. U hve taught us what to look for, and yes, I am happy to know that my CNOOC pick a few days ago when it was sidelined at below 27 sen.. is in line with your expert advice.
I traced this list of top 100 companies in china, and found CNOOC very attractive, as its profit for 2006 as a % of sales was superb at 35%!! That is the top compared to the rest. And yes, after witnessing the shenhua fever, the likelihood of CNOOC listing hype (hopefully b4 the CNOOC-C1 expires) would be an icing on the cake. Low historical PE was also comforting.

Another thing I noticed lately, whenever u make a recommendation or speak positively, the price and volume move. We need to keep a cool head, and do some homework ourselves, so that we cld initiate our buys when the rush has not yet started.... But of course, that is easier said than done, but we nevertheless must try to do..... U are teaching us to fish, so hopefully we can catch our own fish, some of the time... Of course, in the meantime, we got to get our fish here.

Thanks again, my CW Guru... (and I am not speaklng vulgarity.... it is said in all sincerity as I know, u share with all sincerity in this blog...)

As for petrochina, I wld say to xatomic, keep ur eyes on them warrants.. watch for an opportunity to get a piece of the action... With historical PE of less than 20 times and oil rising to $83, the prospects are simply irresistible ...

Puntamentalist said...

CNOOC (883) has not even announced an A-share listing yet although it should be likely in 2008. Its subsidiary China Oilfield (2883) A-share has already been listed, tripling in debut and went limit up again yesterday.

yau123 said...

i definately agreed Dali. i am the first time leave a comment but i read Dali's blog few months ago. CNOOC also performed very well in H-shares . i think the cnooc cw in malaysia will do better than petchina cw. my tp for this counter is 60sen cnooc h-share definately will trade at pe 20 for sure.

Wesurvive said...

Fairly good piece on CNOOC Dali..

Would like to highlight that due to legislative listing restriction on HK Red Chip, which currently prohibiting HK/Mainland duo-listing, CNOOC has yet to obtain approvals from any authorities for an A-share listing.

But yesterday top Chinese official's comment that amendment to the policies restriction is UNDERWAY has pave the ways for A-share listing for Red Chips. The positive development has reflected upon on today's resilient performance of HK-RC Index despite general market correction.

ChinaMobile, which will be the 1st Red to have A-share listing, topped the volume chart. With several House upgrades and TPx of HK200, some of you might be interested in building up position, despite PE of 40++ or simply await Momentum Trade opportunity (Unlike in HK, its kind of unfortunate back here in Msia that RMB appreciation against Ringgit will be relatively gradual, your CW just cant wait..If not what is this PE of 40+ le?! It may only be in the mid-twenties in a couple of years for your current crops of acquisition.)

If you lives by volatility and arms yourself with the right instruments, you will love the volatilities as presented by HK.

Ignore HK and you are ignoring a beckoning fortunes, gift wrapped to you by OSK and CIMB.

So called them blood suckers no more, OK!?

Wesurvive