[ET Net News Agency, 30 October 2019] Daiwa Research lifted its target price for Kunlun
Energy (00135) to HK$9.3 from HK$7.8 and maintained its "buy" rating.
The research house sees additional share-price upside from a potential special dividend
post the pipeline spinoff. The overhang for the stock stems from the National Oil & Gas
Pipeline (NPC) reform and the spin-off of its SJ (Shaanxi-Beijing) pipeline asset. Since
the spinoff constitutes a major transaction that requires minority shareholders'approval,
Daiwa thinks a cash offer is more likely.
Daiwa expects that details on the spinoff may take an additional few months to finalise
in 1H 2020. Assuming that the spin-off valuation is at a 1.4x PBR to avoid impairment
loss, the spin-off pipeline value arrives at HK$28bn (HK$3.5/share) based on the 2018 book
value. Assuming an all-cash offer with 30% paid as a special dividend, the cash dividend
received would be HK$1/share. (KL)