[ET Net News Agency, 13 February 2019] CICC Research said Kunlun Energy's (00135) share
price has underperformed its domestic rivals year-to-date in 2019, which is due to lower
oil prices and potential dilution from its convertible bond due in July.
In light of the share price weakness, the research house believes the potential dilution
risk and impact from lower oil prices is fully priced in.
CICC does not believe there will be more CB issuance. It believes market speculation of
new CB issuance is baseless and doesn't expect it to take place in the foreseeable future.
The company could resort to other sources to help fund its LNG terminal expansion and
phase 2 construction of its SJ Line No.4.
The stock is trading at 7.8x 2019 PE, compared with 12.0x for its H-share listed peers.
CICC said the valuation discount is unjustified, as Kunlun has a better growth outlook and
less policy risk exposure to connection fees than its peers. It deems Kunlun top pick
among Chinese gas distributors. CICC maintained its "buy" rating and target price of
HK$11.11. (KL)