Oil gi­ant ex­plores Hong Kong IPO

In­vestors push SOE to mon­e­tize in­vest­ment in ‘crown jewel’ re­tail gas sta­tion net­work

China Daily (Hong Kong) - - BUSINESS - By BLOOMBERG

China Pe­tro­leum & Chem­i­cal Corp, the world’s big­gest oil re­finer, is re­viv­ing a long-mooted ini­tial pub­lic of­fer­ing of its re­tail busi­ness that could raise as much as $10 bil­lion, peo­ple fa­mil­iar with the mat­ter said.

The main­land’s Sta­te­owned oil com­pany, known as Sinopec, has asked banks to sub­mit pro­pos­als by this month for roles to man­age a potential Hong Kong listing next year, ac­cord­ing to the peo­ple, who asked not to be iden­ti­fied as the in­for­ma­tion is pri­vate. Sinopec shares jumped 4.3 per­cent to HK$5.86 (75 cents) at 10:55 am on Wed­nes­day in Hong Kong, headed for the big­gest gain since April.

Sinopec’s re­tail op­er­a­tions in­clude more than 30,500 fuel sta­tions un­der its own brand as well as a net­work of con­ve­nience stores. It pro­posed a listing of the re­tail busi­ness in 2014, when it sold a 29.99 per­cent stake for 107 bil­lion yuan ($15.5 bil­lion) to a group of in­vestors in­clud­ing China Life In­sur­ance Co and bil­lion­aire Guo Guangchang’s Fo­sun In­ter­na­tional Ltd.

“Low crude prices and a shaky stock mar­ket in Hong Kong this year were the rea­sons Sinopec hasn’t tried ag­gres­sively to list,” Anna Yu, a Hong Kong-based an­a­lyst at China Mer­chants Se­cu­ri­ties (HK) Co, said on Wed­nes­day. “It looks more rea­son­able now for them to try next year if oil prices rise and the ap­petite for IPOs re­cov­ers as many ex­pect.”

‘High ex­pec­ta­tions’

The oil re­finer’s chair­man, Fu Chengyu, re­tired from Sinopec in May last year and was re­placed by Wang Yupu, who had been deputy head of the Chi­nese Academy of En­gi­neer­ing. No fi­nal de­ci­sions have been made, and Sinopec may also de­cide against float­ing the busi­ness if mar­ket con­di­tions are un­fa­vor­able, the peo­ple said.

A Beijing-based spokesman for Sinopec de­clined to comment.

The com­pany’s re­tail gaso­line sales gained 9.8 per­cent last year to 58 mil­lion met­ric tons, ac­cord­ing to its an­nual re­port. Its non-fuel trans­ac­tions jumped 45 per­cent to 24.8 bil­lion yuan, as it in­creased co­op­er­a­tion with in­ter­net com­pa­nies.

“Sinopec has high ex­pec­ta­tions for the unit, as gas sta­tions, by any stan­dard, are the crown jew­els of all Sinopec’s as­sets,” China Mer­chants’s Yu said. “It gen­er­ates steady cash flow and is lit­tle af­fected by oil-price fluc­tu­a­tion.”

Growth tar­gets

The re­tail busi­ness isn’t be­ing prop­erly val­ued within Sinopec, and some of the unit’s out­side share­hold­ers may be push­ing for a listing to mon­e­tize their in­vest­ments, ac­cord­ing to Neil Bev­eridge, a se­nior an­a­lyst at San­ford C. Bern­stein & Co in Hong Kong.

“The real profit driver in those net­works is non-fuel re­tail,” Bev­eridge said on Wed­nes­day. “Spin­ning off these busi­nesses is a bet­ter way of en­hanc­ing the value of these as­sets.”

Chi­nese en­ergy giants have sold parts of their ex­ten­sive pipe­line as­sets to cut costs and meet govern­ment-set growth tar­gets as lower oil prices hurt earn­ings.

CHEN HAO / FOR CHINA DAILY

Work­ers change the bill­board at a Sinopec gas sta­tion in Fuzhou, Fu­jian prov­ince.

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