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Sinopec to sell 30% of fuel business
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Sinopec Corp plans to divest up to 30 percent of its fuel marketing business to the private sector in a multibillion-dollar restructuring that could help unlock “enormous hidden value.” Its shares surged.
The proposed sale, announced by Asia’s top refiner late on Wednesday, comes as China accelerates the reform of its state-owned enterprise sector. A key Party plenum in November called for the private sector to play a bigger role in a more mixed-ownership economy.
Sinopec’s marketing arm runs over 30,000 filling stations across the country as well as oil pipelines and storage tanks. The government is likely to back the sale to “social and private capital” as it encourages the opening up of the downstream segment to non-SOE investment, analysts said.
As Sinopec didn’t give a timetable, asset value or other details, it’s difficult to assess the impact of any sale on its business, HSBC analysts said. Barclays estimated 30 percent could fetch over US$20 billion.
The marketing business and upstream exploration and production segment are the key profit centers for Sinopec.
Sanford C. Bernstein analyst Neil Beveridge said the marketing business should appeal to private capital given good growth and stable and high margins, and the divestment should enable Sinopec to unlock the enormous hidden value within the company.
As an integrated oil company, Sinopec is trading at forward price/earnings of about seven times in 2014, under half the valuation level of US fuel marketing firms such as CST Brands and TravelCenters, he said.
Sinopec shares jumped 9.42 percent in Hong Kong and 10 percent in Shanghai yesterday.
The sale also may help revalue Sinopec’s pump stations, half of which sit on land it owns, after land prices have risen sharply over the past decade, JPMorgan said in a note.
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