China Growth Stocks

[veggix]

CHNG 4Q Results

Revenues increased 18% versus 18.40M to 21.67M in 4Q 2008 (this increase was due to the opening of more stations and the increase in the business of residential and commercial natural gas).

Sales of natural gas increased by 6% versus 15.25M to 16.10M in 4Q 2008.

Sales of gasoline increased by 69% to 1.94M versus 1.15M in 4Q 2008.

Revenues from services increased 81% to 3.63M versus 2M in 4Q 2008.

In 4Q revenue mix was as follows:
Sale of natural gas: 74%
Installation and services: 17%
Gasoline: 9%

Gross profit in 4Q grew 11% to 10.53M versus 9.49M for the same period last year due to increased revenues from natural gas marketing and revenue from the services(change of conventional vehicles to LPG vehicles)


Gross margin decreased to 49% versus 52% in 4Q 2008 due to rising prices of raw materials.

The net income was 5.68M versus 4.26M in 4Q of 2008 resulting in an EPS of 0.26 versus 0.30 in 4Q 2008.

The highlights for the results of FY 2009 are:

- 20% increase in revenues.
- The Gross profit increased 23% to 40.16M
- Net income of 20.21M or an EPS of 1.20 (Non-GAAP)

This gives a PER of 8.81 which is quite attractive. Xinao Gas Holdings Limited (PER 26), the China Oil and Gas Group Limited (PER 51) and Towngas China Company Limited (PER 29) have an average PER of 35.

For CHNG to have a PER of 17 (let's be conservative and consider half of the average PER of the competition) would have to trade at $ 21.

This estimate is very conservative because it doesn’t take into account some catalysts that will have an extreme importance in the future growth of the company:

- LNG facilities.

- Partnership with China National Petroleum Company (CNPC) to build service stations for natural gas.

-The natural gas consumption is growing at an average of 20% per year in China.


Today the company will hold a Conference Call before the market opens and we may have some indication about the CHNG prospects for 2010 and 2011.