[ET Net News Agency, 23 November 2020] Goldman Sachs initiated coverage on Kunlun
Energy (00135) with a "neutral" rating and a target price of HK$6.7.
The research house said Kunlun has become PetroChina's main gas distribution subsidiary
since the 2018 restructuring, a change that has significantly improved Kunlun's gas sales
outlook. Notably, the company is in the process of reducing its operating segments and
focusing on gas distribution, with possibilities to sell its pipeline business (which
currently contributes 50% of operating income) to PipeChina, and plans to exit the
upstream oil and gas production over the coming years.
Goldman sees a relatively balanced risk-reward for Kunlun at current valuation levels,
trading at 10x P/E on pro-forma 2021-22 average core EPS excluding pipeline segment, which
is largely in line with its historical 4-year average. (KL)