[ET Net News Agency, 24 May 2018] Citi Research raised its target price for China
Resources Gas (CRG)(01193) to HK$36 from HK$32.5, and retained its "buy" rating.
The research house said the target price hike incorporates an extra profit upside from
gas storage facilities (capex estimated at Rmb9.6bn) and a lower WACC given less
investment risk from gas shortages after the increased storage capacity. If this extra
capex is spent over five years in 2019-23, it would raise budgeted capex of HK$7.8bn in
2019 by 25%.
Assuming 10% ROI, the gas storage facilities would add to net profit gradually,
including HK$1,190m in 2023E, or 16.4% of its net profit in that year.
Citi said CRG's 14x 2019 PER looks undemanding versus 13% 2018-20E EPS CAGR.
It added that CRG's retail natural gas (NG) sales growth was +21.4% yoy in 1Q and over
20% yoy in 4-month 2018, exceeding its target of 15-20% yoy in 2018. Citi expects the high
retail NG sales volume growth to persist amid rising crude oil prices, up 16-17%
year-to-date. (KL)