Friday, March 30, 2012

Hengyang Petrochemical Logistics: Coveted locations (OCBC)

We visited Hengyang Petrochemical Logistics’ port and storage facilities at Deqiao and Jiangyin along the Yangtze River in China. We anticipate that revenue could increase by ~38% in 2012 with a full-year contribution from the Deqiao facility, which came into operation in Nov 2011. In addition, the company has won coveted logistics sites at Chongqing and Wuhan. In 2012, it expects to complete the first phases of these sites and a site in Yueyang. Hengyang will need to raise additional funding for these sites. We have NO RATING on Hengyang. Although it does not currently offer dividends, it is trading at a historical P/E of 13x, which is lower than its peer group’s average of 22x. According to Bloomberg, there is no target price available for this stock.

Servicing oil majors.
We visited Hengyang’s port and storage facilities at Deqiao and Jiangyin. Listed on Catalist since Oct 2009, Hengyang is chiefly engaged in the storage and transportation of liquid petrochemical products in the Yangtze River Delta. At the mouth of the Yangtze sits Shanghai, the nexus of petrochemical logistics in China. Hengyang clients include BP, Shell, BASF, Sinopec, CNPC and CNOOC. Hengyang believes that there are few peers where it operates with as impressive a list of clients. With the Deqiao facility operating since Nov last year, we anticipate that revenue could increase by ~RMB33.5m in 2012, representing a ~38% YoY increase from 2011 revenue of RMB89.0m, given that RMB$6.7m of revenue in 2011 was due to the two-month contribution from Deqiao.

Prime locations.
Hengyang won coveted petrochemical logistics sites along the Yangtze River at Chongqing and Wuhan. The Wuhan site is in a large industrial zone which has been designated as a petrochemical park. The Chongqing site is at the Chongqing Chemical Park in Changshou district. These sites are its current priority. Hengyang is also developing a site at Yueyang. The three sites are upstream of where the Hengyang currently operates. The company will need to raise additional funds for the projects. It expects to spend RMB500m on the Chongqing and Wuhan projects combined, with RMB200-300m on the first phases that they are aiming to complete in 2012. The company recently raised S$16.8m in a S$0.30 rights issue this year.

Undervalued compared to peers.
Hengyang currently does not offer dividends. However, it appears undervalued with its historical P/E of 13x, versus a median P/E of 22x among peers listed in Singapore and China.

Not Rated.
We have NO RATING on Hengyang. According to Bloomberg, there is no target price available for this stock.

Source/Extract/Excerpts/来源/转贴/摘录: OCBC Investment Research
Publish date: 30/03/121

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