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.
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