Sinopec slides as stake sold for less

Published Sep 16, 2014

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Aibing Guo Hong Kong

CHINA Petroleum & Chemical Corporation (Sinopec) fell the most in 19 months yesterday after it said it would sell a stake in its fuel retailing business for 107 billion yuan (R192bn), which was lower than analysts had estimated.

The shares of Asia’s top refiner fell 5.5 percent to HK$7.35 (R10.44), the lowest since February last year, by noon in Hong Kong. The benchmark Hang Seng index lost 0.8 percent.

Sinopec said the unit would sell a combined 29.99 percent stake to 25 investors including Fosun International, run by billionaire Guo Guangchang.

China Life would buy 10 billion yuan of shares, while gas supplier ENN Energy had committed 4 billion yuan, Sinopec said. A fund backed by Tencent Holdings, Asia’s biggest listed internet company, would invest 10 billion yuan.

The valuation at 14.3 times Sinopec’s 2013 price:earnings ratio was worse than the 18 times expected by analysts such as Thomas Wong at Credit Suisse. The investor mix was also heavily skewed towards financial investors, Wong said on Sunday.

The retail business was valued at about 7.2 times Sinopec’s estimated 2016 profit before interest, tax, depreciation and amortisation, James Hubbard, the head of Asia oil and gas research at Macquarie, said in a research note.

That was below Macquarie’s valuation of 10 times profit.

The deal comes amid a push by the Chinese government to restructure state-run firms and allow markets greater sway in resource allocation.

The Sinopec retail business runs the country’s biggest network of fuel stations, with 30 000 locations, as well as 23 000 convenience stores.

RRJ Capital, run by former Goldman Sachs partner Richard Ong, would purchase a 3.6 billion yuan stake in the unit, while white-goods maker Haier Electronics had agreed to invest 1.2 billion yuan. Hopu Investment Management, a private equity firm co-founded by Ong, and bad-loan manager China Cinda Asset Management were also among the investors, the filing showed.

Sinopec’s parent, China Petrochemical Corporation, agreed last week to sell Sinopec Oilfield Service. – Bloomberg

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