Anton Oilfield Services | 3337.HK China PutiSchlumberger (SLB US), the largest global oilfield...
Transcript of Anton Oilfield Services | 3337.HK China PutiSchlumberger (SLB US), the largest global oilfield...
Page 1 of 15
Company Report
22 October 2012
Lewis Pang
(852) 2235 7847
Trading data
52-Week Range (HK$)
3 Mth Avg Daily Vol (m)
No of Shares (m)
Market Cap (HK$m)
Major Shareholders (%)
Auditors
Result Due
0.79/2.32
11.8
2,105
4,850
Luo Lin (32.76%)
PWC
FY12: March Company description
Founded in 2002, Anton Oilfield Services is
primarily engaged in providing high end services
to oil and gas fields, and is one of the leading non
government owned services providers in China.
Price chart
Benefit from “gasification”, but positives are priced in
Rating Neutral Initial
Target Price HK$ 2.40
Current price
HK$ 2.28 Upside +5%
Leading high end oil and gas fields service provider
Anton has established a strong position in China in its key service areas, which included: 1. the largest multistage fracturing services
provider for horizontal gas wells with >50% share, 2. one of the top players in directional drilling market with >15% share, 3. exclusive
tubular helium testing services supplier. Besides, Anton is also the leader in coiled tubing acidizing services in the Iraqi market.
Investment from Schlumberger confirmed Anton’s capability
Schlumberger (SLB US), the largest global oilfield services provider, acquired 20% shares of Anton from 2 PE firms and became the 2
nd
largest shareholder in July 12. We believe it demonstrated that Anton’s technical capability and market position is highly
appreciated by global giant.
Rapid growth fueled by enormous gas demand >70% of Anton’s domestic sales is attributed to gas-fields. Natural
gas demand in China is expected to growth at a >20% CAGR for the next few years, which lead to a rising gas shortage. To ensure
energy security, we believe China oil majors would put more emphasis on natural gas E&P, especially for some complex gas
fields. For instance, production of tight gas, a type of unconventional gas, is expected to record a CAGR of 18% during 2011-15.
Shale gas – an area with explosive growth potential Shale gas was proven to be an economical energy source in US,
which experienced a 48% production CAGR during 2006-10. China’s development of shale gas is started in 2011, with Anton
being the multistage fracturing services provider for the 1st shale gas
well in China. According to the 12th Five-Year-Plan for Shale gas
issued by NDRC, annual production of shale gas is targeted to reach 6.5 bcm in 2015 and 60-100 bcm in 2020.
Wait for a better entry point, initiate with NEUTRAL
We find Anton a quality player in the high end onshore oil and gas fields service industry. However, Anton is already trading at 12X
FY13E PER, in-line with the average level of the well-established global peers. We initiate coverage on Anton with NEUTRAL, with a
target price of HK$2.40, based on 13X FY13E PER. We believe market is too enthusiastic toward shale gas development in China,
but it is not expected to bring meaningful contribution to Anton in the next 2-3 years. We advise investors to wait for a better entry point.
RMB million FY10A FY11A FY12E FY13E FY14E
Revenue 951 1259 1,978 2,639 3,446
Operating profit 145 175 341 472 619
Net Profit 117 77 226 317 420
Consensus NP N/A N/A 212 284 375
EPS (RMB) 0.056 0.037 0.106 0.149 0.198
P/E (x) 33.5 51.2 17.6 12.5 9.4
ROE (%) 7.1 4.4 11.7 14.1 15.9
ROA (%) 5.3 3.1 7.5 8.8 9.7
Sources: Bloomberg, CIRL estimates
Anton Oilfield Services | 3337.HK
China Puti
China Puti
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Leading high end oil and gas fields service provider
Focusing on the high end onshore services market
Oil and gas services industry is a highly segregated industry with lots of players focusing
on various areas. In China, the regular services market, which is commonly being
regarded as the low end market, is dominated by the affiliates of the 3 oil majors, i.e.
PetroChina (857 HK), CNOOC (883 HK) and Sinopec (386 HK). The affiliates of the 3
Chinese NOC capture >80% of the oil and gas services industry.
On the other hand, Anton is focusing on the high end onshore services market. In
comparison to low end services which is generally provided to conventional vertical
wells, high end services is applied to complex oil and gas wells including horizontal
wells, deep zone wells and low permeability wells. Since the primary target of the oil
majors is to secure energy resources all over the world, developing the capability in high
end oil and gas services is not their first priority. Major competitors in the high end
market include global peers such as Schlumberger, Halliburton and Baker Hughes.
Anton’s managements have a deep understanding of China market
Mr. Luo, chairman of Anton, has worked as senior management of the subsidiary of
Sinopec before establishing Anton in 2002. Leveraged on his expertise in China market
and the established relationship with the NOC, Anton has graudally established a strong
position in some of the key high end service areas.
Leading position in key service areas
In China, Anton is 1. the largest multistage fracturing services provider for horizontal gas
wells with >50% share, 2. one of the top players in directional drilling market with >15%
share, and 3. the exclusive tubular helium testing services supplier. In overseas market,
Anton is 4. the leader in coiled tubing acidizing services in Iraq. These 4 areas
contributed 47% of Anton’s sales in 1H12.
Exhibit 1: Anton has established a leading position in its key service areas
Source: Anton, CIRL
Services area Brief descriptionRevenue contribution
in 1H12
Multistage Fracturing
A technique to break down the rock layers
through pressurized fluid to release oil and gas
for extraction
Largest services provider for horizontal
gas wells with >50% market share in
China
18%
Directional Drilling
A practice to drill along the pre-set path to
enhance the oil and gas recovery rate by
reaching the best position
One of the top players with >15%
market share in China10%
Tubular Helium Testing
A test for tubing threaded connector by using
helium and nitrogen to prevent pipe strings from
gas leaking
Exclusive services supplier in China 7%
Coiled tubing
An operation which inserts continuous small-
sized coiled tubing into the wells to carry out
various development jobs
Leader in coiled tubing acidizing
services in the Iraqi market13%
Market position
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Exhibit 2: Multistage fracturing Exhibit 3: Directional Drilling
Break down the rock underground to release resources
Drill alone a pre-set path
3
Exhibit 4: Tubular Helium Testing Exhibit 5: Coiled tubing
A test to prevent gas leakage of tubular connection
Insert a small tubing into the well for various operations
Source: Internet sources, CIRL 5
Constantly introducing the right technology into China
Although the global peers are generally more advanced technologically, Anton should
be more well-informed about the development plan and geographic features of various
major oil and gas fields in China, which allowed Anton to introduce the right technology
to China at the right time. For instance, seeing the fast growing trend of natural gas E&P,
Anton acted as the first mover to introduce tubular helium testing services into China in
2008. This segment soon became one of Anton’s key services, with revenue recorded a
CAGR of 80% during 2009-11.
New drilling fluid services segment start to contribute in 2012
Going forward, the new drilling fluid services segment could become another growth
driver of Anton. Anton has started to develop its drilling fluid services segment since
early 2012. Drilling fluid is used to improve drilling efficiency by maintaining a stable
environment and removing the dirt. In July 12, Anton won the tender for the provision of
drilling fluid services to 8-10 wells in Tarim Basin of Xinjiang, of which most of the jobs
are expected to be completed by the end of 2012. The tender would bring RMB70-90
million revenue to Anton.
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Investment from Schlumberger confirmed Anton’s capability
Schlumberger acquired 20% equity interest of Anton in July 2012
Schlumberger (SLB US), the largest global oilfield services provider with a market cap of
~US$100bn, acquired 20% shares of Anton from 2 PE investors and became the 2nd
largest shareholder of Anton in July 2012. According to Anton, while Schlumberger
would act as a non-operating minority investor and would not send representative to
Anton’s board, the two companies should have more cooperation opportunity going
forward.
Anton has established cooperative relationship with Schlumberger since 2010
Anton and Schlumberger entered into a strategic cooperation agreement in July 2010,
and have collaborated in the area of drilling fluids and well-cementing technology. After
2 years of collaboration, Schlumberger expressed interest to build a stronger
partnership with Anton, therefore Anton introduced the 2 PE investors to Schlumberger,
and Schlumberger acquired a total of 20% shares of Anton from them.
A vote of confidence from winner in the industry
With the largest market cap as well as a better than peers growth in revenue and
earnings, we see Schlumberger a winner in the oil and gas services industry.
Schlumberger is also one of the key players of China’s high end oil services market. The
investment from Schlumberger confirmed Anton’s technical capability and market
position, in our opinion. We believe the alliance could bring positive impact to Anton’s
technological know-how and brand image, especially in overseas market.
Exhibit 6: Schlumberger outperformed other global peers in recent years
Source: Bloomberg, CIRL
Market Cap
(USD bn) Revenue Earnings
Schlumberger SLB US 97.7 15.5% 6.1%
Barker Hughes BHI US 20.8 17.0% -6.4%
Halliburton HAL US 32.8 13.9% 3.9%
Noble Corp NE US 9.4 5.1% -12.7%
Weatherford WFT US 9.8 14.6% -21.8%
Nabors Industry NBR US 4.5 5.2% -24.9%
Core Labs CLB US 5.9 9.5% 17.4%
10.9% -7.4%
2006-2011 CAGRCompany Stock Code
Average of peers:
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Rapid growth fueled by enormous gas demand
Fast growing gas demand in China
>70% of Anton’s domestic sales is attributed to natural gas fields. Due to PRC
government’s strategy to replace oil usage by gas, natural gas consumption in China
grew by a CAGR of 18% during 2006-11. EIA expected that gas consumption in China
would further increase by 2-fold and reach 260 billion cubic meters in 2015, raising
natural gas contribution to energy consumption from ~4.5% in 2011 to 7-8%.
Exhibit 7: Natural gas consumption is expected to double in 2015 from 2011 level
Source: EIA, CIRL
PetroChina and Sinopec plan for a 13% CAGR in gas production during 2011-15
The rapid growing demand has turned China into a net importer of natural gas. In 2011,
>20% of gas consumption in China is fulfilled by import. To ensure energy security,
PetroChina and Sinopec, the two NOCs which accounted for >85% of domestic natural
gas production in 2011, plan to increase their production volume by a CAGR of 13%
during 2011-15. Even under this progressive expansion plan, China gas import
dependence is expected to reach ~30% in 2015.
High end services is required to boost domestic production
We believe most of the low hanging fruit has been picked. To further ramp up production
capacity, the two onshore oil majors need to put more emphasis on the complex fields.
For instance, >12% of PetroChina and Sinopec’s wells are horizontal wells in 2011, up
from ~5% in 2006. Given that the proportion of horizontal wells is >50% in US, we
expect horizontal wells to continue gaining importance in China.
In comparison to traditional vertical wells, horizontal wells are more efficient in extracting
low permeable reserves or reserves located in complicated landscape. Since
development of horizontal wells is more challenging, oil majors need help from high end
service specialists such as Anton.
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Exhibit 8: Horizontal wells are gaining importance in China’s onshore oil and gas fields
Source: PetroChina, Sinopec, CIRL
Unconventional gas including tight gas will take a more important role
The need to raise production will also put unconventional gas into a more important
position. Tight gas is currently the most well-developed type of unconventional gas in
China. It contributed 25% of China natural gas production in 2011, and is expected to
record a CAGR of 18% during 2011-15. Since tight gas is trapped in impermeable
sandstone or limestone formations, multistage fracturing and directional drilling services,
two key service areas of Anton, are required to effectively extract these resources.
Exhibit 9: Production of tight gas is expected to grow by a CAGR of 18% during 2011-15
Source: RIPED of PetroChina, EIA
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Shale gas - an area with explosive growth potential
Shale gas is another potential energy sources
In addition to tight gas, China is now exploring the feasibility of extracting shale gas.
Shale gas is another type of unconventional gas which is trapped in shale deposits.
Shale is generally divided into thin parallel layers and would not disintegrate in water,
making shale gas difficult to extract.
Shale gas was proven to be an economical energy source in U.S.
U.S. is the first country that put shale gas into large scale production. According to
“Annual Energy Outlook 2011” published by EIA, “the combination of horizontal drilling
and hydraulic fracturing technologies has made it possible to produce shale gas
economically, leading to an average annual growth rate of 48 percent over the
2006-2010 period”.
With the rapid ramp up in production volume, contribution of shale gas to total natural
gas production in U.S. increased from <1% in 2000 to 23% in 2010, and would further
go up to >40% in 2035 according to EIA estimation. The development of shale gas
brings two favorable changes to US energy structure: a lower energy dependence level
and an increase proportion of clear energy usage.
Exhibit 10: Shale gas accounted for ~23% of US natural gas production in 2010
US natural gas production by source (TCF)
Source: “Annual Energy Outlook 2011”, EIA
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Shale gas could bring lower energy dependence and more clear energy usage
Thanks to the development of shale gas, U.S. gas import dependence is declined from
15-16% in mid-2000s to 8% in 2011. Besides, proportion of natural gas usage climbed
up from 22-23% to 25.5% in 2011, while usage of petroleum and coal, the two
high-pollution energy sources, is declined from 62-63% to 56%. Encouraged by U.S.’s
experience, China, Canada and some of the EU countries are now actively exploring the
prospect of extracting shale gas.
Exhibit 11: U.S. gas import dependence is declining with the help of shale gas
Source: EIA
Exhibit 12: Natural gas usage in U.S. is on an uptrend
Source: EIA
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China has the largest amount of recoverable shale gas reserves
According to the initial estimation done by EIA, China has the largest amount of
recoverable shale gas reserves among the 15 countries under assessment. This
assessment suggests that China has 36 trillion cubic meters of recoverable shale gas
reserves, significantly higher the 3 tcf proved recoverable conventional gas reserves.
Exhibit 13: China estimated to have 36 trillion cubic meters shale gas reserves
Source: EIA
Anton is the services provider of the 1st
shale gas wells in China
Development of the first two shale gas wells in China has successful completed in 2011,
with Anton acted as the multistage fracturing services provider of one of the wells. We
believe it is a strong evidence of Anton’s technical capability, and we expect Anton to be
heavily involved in the potential shale gas evolution going forward.
PRC targets to achieve 60-100 bcm shale gas production in 2020
According to the 12th Five-Year-Plan for Shale gas issued by NDRC, annual production
of shale gas is targeted to reach 6.5 bcm in 2015 and 60-100 bcm in 2020. As a
comparison, the total domestic natural gas production is 185 bcm in 2011.
We are aware that it is still early day for shale gas development in China, and concerns
such as 1) lack of detailed exploration results, 2) technological and environmental
feasibility and 3) limited gas pipeline coverage in China make it hard to predict the future
of shale gas. However, we are still cautiously positive on the prospect of shale gas in
China, and it could fuel explosive growth for Anton.
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Follows the overseas expansion of Chinese oil majors
Expanding abroad with the Chinese oil majors
Due to energy security concerns, Chinese oil majors have undertaken extensive
investments overseas, especially in the Middle East and Central Asian countries. In
view of this, Anton adopted a follow-up strategy to expand into overseas market by
providing services to the overseas oil and gas fields invested by the Chinese oil majors,
such as the oilfields of PetroChina in Iraq.
Increasing contribution from overseas market
Enjoying a cost advantage and a closer relationship with the Chinese NOC, Anton
recorded substantial growth in overseas market, and contributed 24.5% of Anton’s sales
in 1H12, and has entered into countries including Iraq, Kazakhstan and Turkmenistan.
Exhibit 14: Overseas market contributed >20% of Anton sales in FY11 and 1H12
Source: EIA
Chinese oil majors will continue to stress on overseas expansion
Overseas oil and gas effective production volume of the three oil majors has increased
from 25mn tons in 2005 to 86mn tons in 2011, representing a CAGR of 23%. According
to the expansion plan of the Chinese oil majors, it is expected that their overseas
production volume would continue to grow at a CAGR of >20% during 2011-15. We
believe it would create more opportunities for Anton. Besides, after establishing a closer
relationship with Schlumberger, Anton should now be able to gain more trust from other
overseas oil and gas companies and expand its customer base.
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Financial analyst and valuation
3Q12 operation remains intact, we project 32% revenue CAGR during FY12-14E
Anton’s revenue is increased by 53% yoy to RMB804mn in 1H12.Since Anton has
completed 671 jobs in 3Q12 versus 912 jobs in 1H12, and Q4 is generally the peak
season of oil and gas services industry, we expect a revenue of RMB1.98bn in FY12.
We also project a CAGR of 32% in top-line during FY12-14E, supported by 1. a
13%CAGRof China’s gas production volume while gas wells contribute >70% of Anton’s
domestic sales, 2. an uptrend in per unit gas production cost due to higher complexity
involved, and 3. the progressive expansion plan of Chinese oil majors in overseas
market which target to achieve >20% CAGR in volume during the next few years.
Improvement in operating margin
Anton’s operating margin is improved from 13.9% in FY11 to 21.6% in 1H12. We believe
it is mainly attributed to 1. A stronger pricing power as Anton has established a strong
brand name in high end services market and 2. A better economies of scale. To be
conservative, we project an OPM of 17.2%/17.9%/18.0% during FY12-14E, which is
broadly in line with the average level of the international peers.
We expect a profit of RMB226mn in FY12E, and a CAGR of 36% during FY12-14E
We expect a net profit of RMB226mn in FY12E, surged by 192% yoy. Anton’s net profit
in FY11 is dragged by the operating loss and provision brought by the joint venture–
Northern Heavy Anton, which amounted to RMB46mn in total and is not likely to recur in
FY12E.Besides, with a strong growth momentum in top-line and a slight improvement in
margin, we project a CAGR of 37% of during FY12-14E.
Wait for a better entry point, initiate with NEUTRAL
We find Anton a quality player in the high end onshore oil and gas field service industry.
However, Anton is already trading at 12X FY13E PER, in-line with the average level of
the well-established global peers. In comparison to other international peers, we agree
that Anton is in a better position to capture the fast developing natural gas market in
China. While on the other hand, Anton has a weaker financial strength and shorter track
record, and hence could be more vulnerable in front of economic downturn.
We initiate coverage on Anton with NEUTRAL, with a target price of HK$2.40, based on
13X FY13E PER, a 10% discount to Schlumberger, the largest oil and gas services
provider in the world. We believe the recent strong performance of Anton is partially due
to market’s enthusiasm to shale gas development in China. However, while we agree
that shale gas could have a bright future in China in long term, it is only in an exploring
stage at this moment and is not expected to bring meaningful contribution to Anton
during the next 2-3 years. We advise investors to wait for a better entry point.
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Exhibit 15: Peers comparison
Source: Bloomberg, CIRL
Ticker Mkt cap Price P/E(x) P/B(x)
(HKD mn) (HKD) FY11A FY12E FY13E FY11A FY12E FY13E
Global peers
Schlumberger SLB US 761,090 573.53 19.9 17.5 14.9 3.2 2.8 2.5
Baker Hughes BHI US 152,452 346.83 11.2 12.8 11.5 1.2 1.1 1.0
Halliburton HAL US 251,521 271.11 11.3 11.7 11.2 2.4 2.1 1.8
Weatherford WFT US 79,389 94.55 34.7 12.3 9.0 1.0 0.9 0.8
Average 19.3 13.6 11.7 1.9 1.7 1.5
China Oilfield 2883 HK 81,479 14.08 13.0 11.0 9.7 1.8 1.6 1.4
SPT Energy 1251 HK 2,857 2.14 9.9 8.9 7.1 2.7 2.2 1.9
Honghua 196 HK 5,835 1.81 28.8 9.6 7.9 1.2 1.1 1.0
Hilong 1623 HK 3,294 2.07 8.2 8.0 6.7 1.4 1.2 1.0
Chu Kong Pipe 1938 HK 3,226 3.19 11.5 8.8 6.8 1.2 1.0 0.9
Shengli Oil & Gas 1080 HK 1,761 0.71 15.6 23.7 15.1 0.7 0.7 0.7
Anhui Tianda 839 HK 1,421 1.41 16.7 23.1 11.5 0.5 0.5 0.5
Average 14.8 13.3 9.2 1.4 1.2 1.0
Offshore Oil 600583 CH 26,652 6.85 113.8 39.2 24.1 2.3 2.2 2.1
Jereh Oilfield Service 002353 CH 26,127 56.89 51.1 32.7 23.5 8.2 6.3 5.2
HBP 002554 CH 4,795 15.79 41.8 31.5 24.8 3.3 3.2 2.9
Gi Technologies 300309 CH 5,156 23.73 32.0 29.8 21.9 10.4 N/A N/A
Tong Oil Tools 300164 CH 3,396 21.44 36.0 26.5 20.9 2.4 2.3 2.1
LandOcean Energy 300157 CH 5,002 27.09 48.9 29.6 21.2 2.4 N/A N/A
Sino Geophysical 300191 CH 3,323 20.77 33.5 36.8 28.6 2.5 2.4 2.3
Sichuan Renzhi 002629 CH 2,834 24.77 25.7 24.8 19.5 3.3 N/A N/A
Kingdream Pub 000852 CH 8,608 21.50 68.6 65.1 53.2 6.6 6.1 5.4
SK Equipment 002278 CH 4,054 15.50 41.5 39.1 33.3 2.8 2.7 2.6
Average 51.0 32.3 23.6 4.5 3.3 2.9
Anton 3337 HK 4,850 2.28 51.2 17.6 12.5 2.3 2.1 1.8
Energy equipement and services - H share
Energy equipement and services - A share
Page 13 of 15
Exhibit 16: Financial statement
Source: Bloomberg, CIRL
Income statement Cash flow
Year to Dec (RMB mn) FY10A FY11A FY12E FY13E FY14E Year to Dec (RMB mn) FY10A FY11A FY12E FY13E FY14E
Revenue 951 1,259 1,978 2,639 3,446 Pre-tax profit 142 113 315 442 586
Gross profit (reported) 432 551 940 1,260 1,654 Taxes paid (10) (28) (46) (74) (99)
EBITDA 196 232 418 574 745 Depreciation 51 59 77 103 126
Depreciation (51) (59) (77) (103) (126) Associates 0 46 0 0 0
EBIT 145 173 341 472 619 CFO bef. WC change 183 189 346 470 612
Net interest income (exp.) (3) (16) (26) (30) (33) Change in working cap (133) (5) (148) (119) (187)
Associates (0) (14) 0 0 0 Cashflow from operation 50 184 198 352 425
Exceptionals/others 1 (30) 0 0 0 CAPEX (173) (202) (405) (330) (360)
Profit before tax 142 113 315 442 586 Free cash flow (122) (18) (207) 22 65
Tax expenses (16) (21) (58) (82) (109) Dividends (18) (39) (36) (79) (111)
Minority interest (9) (14) (31) (43) (57) Balance sheet adj. 1 60 (30) 36 41
Net profit 117 77 226 317 420 Shares issued 0 0 0 0 0
Dividends (39) (36) (79) (111) (147) Others 0 0 0 0 0
EPS (RMB) 0.056 0.036 0.106 0.149 0.198 Net cash flow (139) 3 (273) (21) (5)
Net cash (debt) start 294 154 158 (115) (136)
Balance sheet Net cash (debt) at year-end 154 158 (115) (136) (141)
Year to Dec (RMB mn) FY10A FY11A FY12E FY13E FY14E
Cash & equiv 339 478 300 350 400 Ratios
Trade receivables 672 671 831 1,055 1,309 Year to Dec FY10A FY11A FY12E FY13E FY14E
Other receivables 70 121 218 211 276 Growth rate (%)
Inventories 265 271 367 474 598 Revenue 37.8 32.4 57.2 33.4 30.6
Other current assets 0 0 0 0 0 EBITDA 186.5 18.4 80.5 37.3 29.7
Fixed assets 445 570 839 1,086 1,340 EBIT 329.2 19.2 97.5 38.4 31.2
Intangible assets 346 365 423 403 384 Net profit 264.3 (33.7) 191.8 40.4 32.6
Investment, associates etc 53 22 20 20 20 Fully diluted EPS 264.1 (34.5) 191.3 40.4 32.6
Total assets 2,191 2,498 2,998 3,600 4,327 Margins (%)
Gross margin (reported) 45.5 43.8 47.5 47.8 48.0
Account payables 218 258 395 538 717 EBITDA 20.6 18.4 21.1 21.8 21.6
Other payables 113 135 203 268 347 EBIT 15.2 13.7 17.2 17.9 18.0
Short-term debt 185 320 116 187 242 Net margin 12.3 6.1 11.4 12.0 12.2
Other current liabs 22 29 38 46 55 Other ratios
Long-term debts 0 0 299 299 299 ROE (%) 7.1 4.4 11.7 14.1 15.9
Deferred tax and others 2 1 3 3 3 ROA (%) 5.3 3.1 7.5 8.8 9.7
Other long-term liabs 0 15 18 20 22 Net gearing (%) N/A N/A 6.0 6.1 5.4
Total liabilities 540 758 1,071 1,360 1,684 Interest coverage (x) 53.7 10.7 13.0 15.8 18.7
Receivables days 258.0 194.5 153.3 146.0 138.7
Share capital 197 198 199 199 199 Payables days 153.7 133.0 138.7 142.4 146.0
Reserves 1,417 1,468 1,622 1,892 2,238 Inventory days 186.8 140.0 129.0 125.4 121.7
Shareholders' equity 1,614 1,666 1,821 2,091 2,436 Effective tax rate (%) 11.5 18.5 18.5 18.5 18.5
Minorities 37 74 106 149 206
Total equity 1,651 1,740 1,927 2,240 2,642
Net cash (debt) 154 158 (115) (136) (141)
Page 14 of 15
Risk factors
Decline in energy price
A sharp decline in energy price would hurt the E&P spending of oil companies. For
instance, the weak performance of global oil price during 2H08 has led to a >10%
decline of PetroChina and Sinopec’s E&P spending in 2009.
Unfavorable policy on natural gas development in China
Growth prospect of Anton is highly correlated with the expansion pace of gas production
in China. If policy of China becomes less supportive to natural gas production, Chinese
oil majors may reduce investment on natural gas segment.
Intensified competition
Anton’s competitors are mainly large scale players such as well-established global
companies as well as the affiliates of the Chinese oil majors. Although Anton has
established a strong position in some service areas, a more intensified competition
could hurt Anton’s market share and profitability.
Lengthened cash flow cycle
Although receivable days of Anton is improved in 1H12, bargaining power of Anton
could be weak in comparison to its major customers, PetroChina and Sinopec. Any
delay of their payment could put pressure Anton’s cash flow.
Page 15 of 15
Rating Policy
Rating Definition
Stock Rating Buy Outperform HSI by 15%
Neutral Between -15% ~ 15% of the HSI
Sell Underperform HSI by -15%
Sector Rating Accumulate Outperform HSI by 10%
Neutral Between -10% ~ 10% of the HSI
Reduce Underperform HSI by -10%
Analysts List
Antony Cheng Research Director (852) 2235 7127 [email protected]
Hayman Chiu Senior Research Analyst (852) 2235 7677 [email protected]
Kenneth Li Senior Research Analyst (852) 2235 7619 [email protected]
Lewis Pang Research Analyst (852) 2235 7847 [email protected]
Susanna Chui Research Analyst (852) 2235 7131 [email protected]
Analyst Certification
I, Lewis Pang hereby certify that all of the views expressed in this report accurately reflect my personal views about the
subject company or companies and its or their securities. I also certify that no part of my compensation was / were, is /
are or will be directly or indirectly, related to the specific recommendations or views expressed in this report / note.
Disclaimer
This report has been prepared by the Cinda International Research Limited. Although the information and opinions
contained in this report have been compiled or arrived at from sources believed to be reliable, Cinda International
cannot and does not warrant the accuracy or completeness of any such information and analysis. The report should not
be regarded by recipients as a substitute for the exercise of their own judgment. Recipients should understand and
comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers
prior to any investment decision. The report may contain some forward-looking estimates and forecasts derived from
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