Good cash flow generation. OPS cash is 2x of net profit. CAPEX is ~0.5x of OP cash indicating good free cash flow generation. Dividend payment is sustainable as it is close to or lower than FCF.
Payout ratio based on net profit is > 50% and dividend payout is consistently growing.
A good trend is company's debt level has been gradually decreasing with company consistently pay down debt resulting in lower finance expense and free up more cash for returning to shareholders.
Yield is ~7% based on listing in HKEX.
Business covers the whole supply chain from upstream exploration to refining to pet-chem, sales and distribution.
Oil and gas exploration is losing money while other segments are making money
1Q 2019, E&P swing to positive. Other sectors remain positive growth while refining business register negative growth with lower refining margin as experienced globally. One good thing is they also manage the cost well with lower operating cost. Overall still making money.
They register negative operating cash flow and increase debt to finance CAPEX. Balance sheet is still sound. However, if this continues, it will be a red flag.
New accounting standards applied also. Appears to be one-time for some of the costs.
In short, company appears to be defensive still.
State-own company with >70% shares
Dividend pay out history:
Assuming $5 payout per year, the yield will be close to 8-9% which is attractive.
The numbers are quite good indicating low valuation based on historical P/E, dividend, P/B, P/cash ratios as well as DCM and earning power valuation models.
Main reason for price correction is due to trade war concerns with USA. Things may get nasty.
Worst case scenario, chinese companies maybe sanctioned and listing in USA maybe affected. vs potential price rerating when the situation improves.
The assumption that company will continue to pay does not depend on company performance only. Need to consider political factors as well.
Share price may test 2014 low point at $40 indicating a ~30% drawdown. Be prepare to endure the volatility should we enter a position soon.
| 2019-05-31 | $3.4697 | |
| 2018-09-05 | $2.0821 | |
| 2018-05-24 | $5.6345 | |
| 2017-09-18 | $1.3313 | |
| 2017-07-14 | $2.2222 |
https://www.dividend.com/dividend-stocks/basic-materials/independent-oil-and-gas/snp-china-petroleum-and-chemical-corp/
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