NEW YORK (TheStreet) -- PetroChina Co. (PTR - Get Report) is rethinking a plan to auction off its multi-billion dollar natural gas pipeline unit, and could instead sell it to an affiliate, sources told Reuters.
Selling PetroChina Eastern Pipelines Co. to the affiliate, 50% owned by PetroChina, would enable China's largest energy producer to maintain control over the national gas grid as well as raise cash to fund oil and gas exploration, according to Reuters.
However, dropping the auction would pose a setback to the government's plans to open up the state-dominated energy sector to domestic private investors to improve competition and rein in corruption, Reuters said.
TheStreet Ratings team rates PETROCHINA CO LTD as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate PETROCHINA CO LTD (PTR) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, good cash flow from operations, increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has increased to $3,307.54 million or 20.18% when compared to the same quarter last year. In addition, PETROCHINA CO LTD has also modestly surpassed the industry average cash flow growth rate of 17.02%.
- The current debt-to-equity ratio, 0.47, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.21 is very weak and demonstrates a lack of ability to pay short-term obligations.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.4%. Since the same quarter one year prior, revenues slightly dropped by 2.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: PTR Ratings Report