China Tracker - Details for Longwei Petroleum (LPH)


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 Longwei Petroleum
 Analyst Coverage
2011-07-08Rodman & RenshawReiterationOutperform$6.00
 

We continue to view Longwei's valuation as compelling and reiterate our Market Outperform rating and a $6 price target based on the shares attaining a relatively conservative P/E level of 8x our FY12 fully diluted EPS estimate of $0.75. The stock is currently trading at 2.5x our FY11 fully diluted EPS estimate of $0.62 and 2.0x our FY12 fully diluted EPS estimate of $0.75 and at 1.2x and 1.0x FY11 and FY12 EV/EBITDA multiples compared to respective oil & gas distributors peer group P/E multiples of 18.2x and 13.7x and EV/EBITDA multiples of 10.2x and 9.1x.

2011-06-16Rodman & RenshawInitiationOutperform$6.00
 

We are initiating coverage of Longwei Petroleum Investment Holding Ltd. (LPH) with a Market Outperform/Speculative Risk rating and a price target of $6 based on the shares attaining a P/E level of 8x our FY12 fully diluted EPS estimate of $0.75. Longwei is a licensed wholesale distributor of gasoline, diesel and other petroleum products with a mature operating infrastructure, the largest storage capacity among privately owned distributors in Shanxi, on-premises railway access and established supplier-client relationships with large mining operations, industrial companies and retail gas stations in the Shanxi province in China. In our opinion, the company presents an exceptional opportunity for value investors looking to get exposure to China's booming fuel market. We recommend investors purchase the shares at current levels based on: (1) attractive valuation (2) straight-forward business model (3) strong growth potential fueled by the demand for petroleum products and potential strategic acquisitions.

We forecast revenues and adjusted net income (excluding non-cash items) of $500.0 million and $70.0 million or $0.62 per fully diluted share for FY11 (ending June 30, 2011) and $627.2 million and $85.0 million or $0.75 per fully diluted share for FY12, in line with management guidance of, respectively, $500.0 million and $70 million in FY11 and $625 million and $85 million in FY12. There is a potential upside to our forecasts from the announced but yet uncompleted acquisition of Haujie Petroleum Co., Ltd. that could add $300 million the company's top line and $40 million to the bottom line in FY12 if closed before the current fiscal year end.

At 2.1x and 1.8x times our FY11 and FY12 fully diluted adjusted EPS estimates, relative to the oil & gas distributors peer group averages of 18x and 14x, respectively, we consider Longwei valuation compelling even in the currently depressed market for U.S.-listed Chinese companies. We believe Longwei presents an attractive investment opportunity for value players with a long-term time horizon. We are assigning LPH a price target of $6 based on the shares attaining a relatively conservative P/E level of 8x our FY12 fully diluted EPS estimate of $0.75, implying a FY12 EV/EBITDA multiple of 5x.

2010-07-29Red ChipReiterationStrong Buy$6.50
 

We remain positive on LPH due to the expected 4QFY10 and FY11 growth in the revenue from the Gujiao facility and consequently have raised our earnings estimates for 4QFY10 and FY11. Maintaining our forward P/E multiple of 10x we derive a target price of $6.50, an upside of 195%.

2010-04-09Red ChipReiterationStrong Buy$6.50
2009-12-03Red ChipReiterationStrong Buy$5.00
LPH
Oil & Gas
SCORE
-3
READ: Score Cards Explained
SAFETY/RISK SCORE
MODERATE RISK
DETAILS: Safety/Risk Model for LPH
Current Price:  n/a
F10k Day (2008-11-28): -100.00%$2.00
2009 Close: -100.00%$2.70
2010 Close: -100.00%$2.59
2011 Close: -100.00%$1.30
High (2012-10-18): -100.00%$2.19
Low (2012-06-01): -100.00%$0.99
Exchange:
Market Capitalization: n/a
Total Shares: 101.77 mill
Float: n/a
Avg Volume: 265.60 k
Short Interest: 340.10 k
Short Ratio: 2.72%1.3 d
Last Quarter: 2012-06-30
Revenue (MRQ): 136.36 mill
Net Income (MRQ): 15.20 mill
Op. Cash Flow (MRQ): 6.11 mill
all financial data provided without warranty