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As Of Filer Filing For·On·As Docs:Size Issuer Agent 12/23/05 Petrochina Co Ltd SC 13E3/A 8:1.9M Jilin Chemical Industrial Co Ltd RR DONN… FundSuiteArc/FA |
Document/Exhibit Description Pages Size 1: SC 13E3/A Petrochina Sc 13E-3/A HTML 106K 2: EX-99.(C).1 EX-99.(C).1 Update on Potential Acquisition of HTML 170K the Minority Interests in Jilin Chemical 3: EX-99.(C).2 EX-99.(C).2 Project 517 - Preliminary Transaction HTML 19K & Valuation Considerations, Dated May 23, 2005 4: EX-99.(C).3 EX-99.(C).3 Project Chunhui, Dated June 23, 2005 HTML 285K 5: EX-99.(C).4 EX-99.(C).4 Data Book - Interim Update of Trading HTML 142K & Premium Information, Dated August 3, 2005 6: EX-99.(C).5 EX-99.(C).5 Updated Executive Timetable and Data HTML 225K Book, Dated October 14, 2005 7: EX-99.(C).6 EX-99.(C).6 Data Book, Dated October 25, 2005 HTML 88K 8: EX-99.(C).7 EX-99.(C).7 Data Book, Dated October 26, 2005 HTML 108K
Page | (sequential) | | | (alphabetic) | Top | |
---|---|---|---|---|---|
1 | 1st Page - Filing Submission | ||||
" | Executive Summary | ||||
" | Overview of Y's Operations | ||||
" | Dcf Valuation Overview | ||||
" | Comparable Traded Peer Group Analysis | ||||
" | Precedent Transactions Analysis |
exv99wxcyw3 |
EXECUTIVE SUMMARY | ||
OVERVIEW OF Y’S OPERATIONS | ||
DCF VALUATION OVERVIEW | ||
A. Key Assumptions | ||
B. Valuation Output | ||
COMPARABLE TRADED PEER GROUP ANALYSIS | ||
PRECEDENT TRANSACTIONS ANALYSIS |
1
„ | Citigroup is pleased to present to X our draft preliminary valuation analysis for Y | |
„ | Due to the limited information and forecasts available in the public domain, we have had to rely on publicly available information to derive our preliminary valuation. We have provided details of the specific assumptions and the source of these assumptions in the following sections | |
„ | We would look to refine our valuation analysis when additional, non-public information is made available from X, in its position as a majority shareholder. Our valuation will only be complete, and we will only be in a position to make a strong recommendation, once we have access to non-public information | |
„ | Our analysis is based on three valuation methodologies: |
• | Discounted free cash flow analysis — computation of net present value based on the projected free cash flows | ||
• | Comparable company analysis — implied valuation based on the trading multiples of comparable oil refining / chemical companies in China and the rest of Asia | ||
• | Precedent transaction analysis — implied valuation based on comparable transactions in the oil refining / chemical sector |
2
„ | Among the three approaches, discounted cash flow is our focus as it takes the company’s growth potential into account. However, due to lack of specific pricing information, operating information and cost forecasts and future capex plan, the valuation still needs to be refined | |
„ | We have used projections based upon past performance. However, these assumptions will not suffice if specific issues, such as capex plans, that are not in the public domain and will have an effect on value are excluded | |
„ | The implied valuation from the precedent transaction analysis is the highest due to the control premium bedded into the takeout valuation | |
„ | The implied valuation from the comparable company analysis is the lowest due to the suppressed multiples of the Chinese companies, relative to their international peers as well as the lack of a control premium |
Preliminary Equity Valuation Ranges |
Average 12,833 to 15,477 Discounted Cash Flow 14,547 16,535 Analysis Comparable Company 9,916 12,119 Analysis Precedent Transaction 14,035 17,775 Analysis 8,000 12,000 16,000 20,000 |
Equity Value (RMB in millions) |
Equity Value per Share (1) |
6.00 |
4.99 5.00 4.00 4.14 3.50 |
3.00 2.47 1.93 2.00 2.05 1.00 |
A shares (RMB) H shares (HK$) |
DCF Current SP |
Note: (1) | The equity value per share for A and H shares is proportionating the DCF equity valuation range by the respective current share price multiplied by the respective number of shares. | |
(2) | Current share price as of Jun 21, 2005 |
3
Overview of Citigroup’s Valuation Model Structure |
Annual Designed Rated Capacity |
Annual Throughput |
Sales Volume Utilization Rate |
Yield Profile Sales |
Price |
Raw |
Materials Gross Profit Volume Raw |
Materials EBIT |
Cost |
Operating |
Price FCF |
Costs |
Wages and Total Cost Tax Salaries of Sales Expenses, D&A, Capex, |
Increase in Terminal |
NPV WC Value Other Cost of Sales |
WACC |
4
Y |
Petroleum Products Petrochem& Organic Chemical Chemical Fertilizers Synthetic Rubber (42% of 2004 Sales) (40% of 2004 Sales) (2% of 2004 Sales) (6% of 2004 Sales) |
___The petroleum products ___Petrochemical and organic ___The chemical fertilizers and ___Synthetic rubber products segment produces gasoline, chemical products segment inorganic chemicals segment primarily produces diesel oil, solvent oil and primarily produces segment principally styrene-butadiene-rubber lubricants. ethanol, acetic acid and produces ammonium acetic anhydride nitrate, urea, ammonium |
___Certain products produced are used as raw materials in chloride,sulphuricacid and the production of slag petrochemicals |
Revenue EBITDA Segmental Assets |
(Total Asset Value) |
19,000 18,080 17,000 15,000 13,550 12,907 13,000 11,000 9,176 8,596 9,000 7,972 8,205 7,700 7,000 6,180 5,000 |
(RMB in millions) 325 3,317 2,653 2,503 |
3,000 1,794 1,084 1,058 1,844 783 1,133 228 991 664 532 617 756 1,000 123 165 176 397 75 375 848 562 (1,000) 2002 2003 2004 2002 2003 2004 2002 2003 2004 (112) (51) (3,000) (136) |
Petroleum Products Petrochem & Organic Chemical Synthetic Rubber Chemical Fertilizers |
5
Revenue |
35,000 31,857 70% millions) 30,000 60% 57% 54% 25,000 20,653 50% 20,000 40% Sales in(RMB 13,138 Growth 15,000 30% 10,000 20% 5,000 10% Sales 5% — 0% 2002 2003 2004 |
Sales Sales Growth |
Gross Profit |
3,500 12% 3,036 3,000 10% in(RMB 10% 2,500 8% millions) 7% 2,000 Gross |
1,527 6% 1,500 Margin |
5% |
4% 1,000 619 |
Gross Profit 500 2% — 0% 2002 20032004 Gross Profit Gross Margin |
EBITDA |
4,000 3,740 14% millions) |
3,500 12% 12% 3,000 10% EBITDA |
9% 2,500 in(RMB 1,927 8% 2,000 6% Margin |
1,500 5%4% EBITDA 1,000602 500 2% — 0% 2002 20032004 EBITDA EBITDA Margin |
Net Income |
3,000 2,545 10% millions) |
2,500 8% 8% 2,0006% 4% 1,500 2% 2% Net 1,000 428 0% Margin 500 -2% —4% (500) 2002 2003 2004 -6% |
Net Profit (RMB in (1,000) -8% -8% (1,500) (1,023) -10% |
Net (Loss) / Profit Net Margin |
6
Total Debt |
10,000 9,280 8,000 millions) 6,510 6,000 |
3,982 (RMB in 4,000 2,000 |
2002 2003 2004 |
Net Debt |
10,000 9,250 |
8,000 millions) 6,474 6,000 |
3,967 (RMB in 4,000 2,000 |
2002 2003 2004 |
Total Debt to Equity |
500% 442% |
400% 300% 259% 200% 100% 79% 0% 2002 2003 2004 |
Net Debt to Equity |
500% 440% 400% 300% 258% 200% 100% 78% 0% 2002 2003 2004 |
7
„ | Our discount rate approach for Y’s corporate Weighted Average Cost of Capital (“WACC”) has been formulated in conjunction with Citigroup’s Financial Strategy Group (“FSG”) |
Equity Market Risk Premium |
5.5 | % | 6.5 | % | 7.5 | % | ||||||
Cost of Equity |
||||||||||||
U.S. Risk Free Rate (30 Year U.S. Treasury) |
4.4 | % | 4.4 | % | 4.4 | % | ||||||
Equity Market Risk Premium |
5.5 | % | 6.5 | % | 7.5 | % | ||||||
Equity Beta |
1.07 | 1.07 | 1.07 | |||||||||
Sovereign Risk Premium |
0.7 | % | 0.7 | % | 0.7 | % | ||||||
Cost of Equity |
10.9 | % | 12.0 | % | 13.1 | % | ||||||
Cost of Debt |
||||||||||||
U.S. Risk Free Rate (10 Year U.S. Treasury) |
4.1 | % | 4.1 | % | 4.1 | % | ||||||
Sovereign Risk Premium |
0.7 | % | 0.7 | % | 0.7 | % | ||||||
Credit Risk Premium |
1.0 | % | 1.0 | % | 1.0 | % | ||||||
Cost of Debt (Pretax) |
5.8 | % | 5.8 | % | 5.8 | % | ||||||
Effective Marginal Tax Rate |
33 | % | 33 | % | 33 | % | ||||||
Cost of Debt (Aftertax) |
3.9 | % | 3.9 | % | 3.9 | % | ||||||
Target Debt/Capitalization |
19 | % | 19 | % | 19 | % | ||||||
WACC |
9.6 | % | 10.5 | % | 11.3 | % | ||||||
„ | Equity Risk Premium: |
• | Based on FSG’s estimate of 5.5% to 7.5% for emerging market equity risk premium |
„ | Equity Beta: |
• | Based on Asian peer universe of weekly observations over the last five years from Bloomberg |
„ | Country Risk Premium: |
• | Derived by FSG | ||
• | Based on the spread of yield of China 10 year USD-currency treasury bond (pre-inflation differential) over the 10-year US Treasury |
„ | Debt / Capitalization: |
• | Derived using current market leverage of its Chinese peers |
8
„ | As stated in the Company’s annual report, it does not plan to make any material investments for expansion in 2005 | |
„ | Original capacity was assumed to remain flat across the forecast period at 2004 levels (5.3 million tons, which is equivalent to 106.48 mboe per day) |
„ | The name plate capacity of Y has effectively been increased above annual designed rated capacity due to technical upgrades, renovations or expansions of the facilities | |
„ | However, this has not been reflected in the stated capacity | |
„ | Due to the technical upgrades, we have assumed the forecast utilization rate would remain at 2004 levels (121%) |
9
„ | Yield profile was assumed to remain constant throughout the forecast period using the 2004 product profile as supplied in the annual report. This is because we have no information relating to the future capex program that would change the yield profile going forward | |
„ | The percentages below show sales volume for each product in 2004 as a percentage of 2004 actual throughput |
„ | Capex plan: costs and impact on future yield profile | |
„ | Forecast yield profile is not available |
10
„ | We obtained Y’s crude oil price from 2001 to 2004 from its annual report and compared against the historical CMAI Dubai crude oil pricing | |
„ | Since we do not know the quality level or type of the crude feedstock being used by Y, it is challenging to project the future crude oil price | |
„ | We have assumed that Dubai crude would be the appropriate benchmark crude due to the geographic location of Y and the high supply rate of Dubai crude to the region | |
„ | We have also assumed the forecast crude feedstocks costs for Y would be in line with the CMAI Dubai crude oil prices | |
„ | From 2008 onwards, we have assumed US$30 per barrel for Dubai long-term crude oil prices |
„ | We could only extract crude oil prices which included value-added tax of 17% from Y’s annual report |
• | We would look to gain additional information with respect to the exact impact of VAT, i.e. whether the costs are fully passed on to the end customers or if there is any residual cost effects on Y |
„ | We do not know the quality of the crude feedstock Y has been using and therefore have had to estimate the appropriate crude quality | |
„ | The historical premium to the international crude oil price is highly irregular and we would seek to understand the reasons behind these irregularities |
11
„ | The prices shown below are weighted average ex-works price which includes value-added tax of 17% | |
„ | The chart illustrates our methodology with respect to forecast crude prices |
• | We have assumed the feedstocks prices, excluding VAT, equal the CMAI Dubai price estimates from 2007 onwards | ||
• | We would look to refine these assumptions once we have a better understanding of the crude feedstock blends required |
Suggested Oil Price for Project Chunhui |
58 53 48 43 |
44 43 |
42 |
38 43 38 37 |
(US$ per Barrel) 36 35 35 35 35 35 35 35 |
33 29 32 29 |
30 30 30 30 30 30 30 30 28 29 |
25 26 23 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Price paid by Y CMAI pricing |
12
„ | Using the information supplied in the Company’s annual report, we could extract the feedstock volume for two types of raw materials only: crude oil and naphtha | |
„ | Due to lack of forecast data, we have assumed raw material volumes will be maintained at 2004 levels |
• | Crude oil: 6.42 million tons | ||
• | Naphtha: 0.55 million tons |
„ | We used the naphtha price forecasts provided by CMAI as of June 2005 for the forecast period from 2005 to 2009, and price forecasts provided by Nexant for the forecast period from 2010 onwards as that was the only long-term price forecast available to us |
Naphtha Price Forecast |
500 |
450 452 |
400 406 389 |
367 350 |
327 |
313 |
(US$ per Ton) 300 293 294 295 285 290 292 250 237 200 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 |
„ | We need additional information to determine what percentage of other costs of sales is attributable to feedstock costs and also what these feedstocks are | |
„ | Due to the lack of feedstock information, we have assumed the “other costs of sales” to be a percentage of raw materials costs |
13
„ | CMAI forecast pricing assumptions dated as of June 2005 were used as the pricing assumption for the forecast period from 2005 to 2009 and CMAI forecasts as of October 2004 were used for the long-term forecast period from 2010 onwards | |
„ | We computed the net price for each product in 2004 based on public information disclosed in the annual report | |
„ | For ethylene, propylene, xylene, styrene, mixed xylene, and gasoline, we compared the price charged by the company with the price from CMAI. We maintained the same premium / discount and projected this premium adjusted price going forward (2005 to 2014) | |
„ | Where product prices were not available via CMAI, we used the following assumptions to provide an indicative price that reflects the forecast cyclical nature of the refining and petrochemicals product prices |
„ | We assumed the relative year-on-year pricing differences for each product would be equal to the average year-on-year price fluctuations of ethylene and propylene |
• | Ethylene and propylene prices are cyclical, therefore tracking these prices provides a good estimate of the cyclical margins |
„ | We applied the same relative year-on-year pricing differences methodology based on the year-on-year price change of gasoline prices as supplied by CMAI |
„ | We assumed constant pricing in 2004 due to its small contribution to Y’s operating profit and the non-cyclical nature of the industry |
14
1,800 350 |
1,500 300 250 1,200 200 900 150 per Ton) |
600 |
100 |
Product Pricing (US$ per ton) 300 50 CMAI Crude Oil Price (US$ |
- -2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Styrene - butadiene rubber Styrene Ethylene Propylene Diesel oil Gasoline Residue Inorganic chemical products and others CMAI crude oil price |
4 | We would need price projections for each product in order to perform a more detailed valuation analysis |
15
Projected Fiscal Years Ending December 31 | ||||||||||||||||||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | ||||||||||||||||||||||||||||||||||
CMAI Crude Oil Price |
261 | 313 | 275 | 235 | 219 | 219 | 219 | 219 | 219 | 219 | 219 | |||||||||||||||||||||||||||||||||
Petrochemical and Organic Chemical Products |
||||||||||||||||||||||||||||||||||||||||||||
Ethylene |
963 | 856 | 803 | 698 | 593 | 525 | 516 | 550 | 576 | 595 | 595 | |||||||||||||||||||||||||||||||||
Propylene |
715 | 778 | 727 | 661 | 518 | 456 | 447 | 412 | 430 | 439 | 439 | |||||||||||||||||||||||||||||||||
Styrene |
1,072 | 1,024 | 941 | 814 | 715 | 677 | 665 | 660 | 690 | 709 | 709 | |||||||||||||||||||||||||||||||||
Aniline |
2,071 | 2,047 | 1,917 | 1,704 | 1,392 | 1,229 | 1,207 | 1,198 | 1,253 | 1,286 | 1,286 | |||||||||||||||||||||||||||||||||
O-oxlene |
703 | 695 | 651 | 579 | 473 | 417 | 410 | 407 | 426 | 437 | 437 | |||||||||||||||||||||||||||||||||
Octanol |
885 | 874 | 819 | 728 | 595 | 525 | 516 | 512 | 535 | 549 | 549 | |||||||||||||||||||||||||||||||||
Alcohol ether |
1,200 | 1,186 | 1,111 | 987 | 807 | 712 | 699 | 694 | 726 | 745 | 745 | |||||||||||||||||||||||||||||||||
Butyl acrylate |
1,741 | 1,720 | 1,611 | 1,432 | 1,170 | 1,033 | 1,015 | 1,007 | 1,054 | 1,081 | 1,081 | |||||||||||||||||||||||||||||||||
Acetic anhydride |
710 | 702 | 657 | 584 | 477 | 421 | 414 | 411 | 430 | 441 | 441 | |||||||||||||||||||||||||||||||||
Acetic acid |
553 | 546 | 512 | 455 | 372 | 328 | 322 | 320 | 335 | 343 | 343 | |||||||||||||||||||||||||||||||||
Ethanol |
314 | 310 | 290 | 258 | 211 | 186 | 183 | 181 | 190 | 195 | 195 | |||||||||||||||||||||||||||||||||
Xylene |
613 | 612 | 618 | 539 | 469 | 438 | 410 | 389 | 397 | 405 | 405 | |||||||||||||||||||||||||||||||||
Other |
607 | 600 | 562 | 500 | 408 | 360 | 354 | 351 | 368 | 377 | 377 | |||||||||||||||||||||||||||||||||
Average |
822 | 798 | 747 | 660 | 546 | 485 | 477 | 477 | 499 | 513 | 513 | |||||||||||||||||||||||||||||||||
Synthetic Rubber |
||||||||||||||||||||||||||||||||||||||||||||
Styrene — butadiene rubber |
1,702 | 1,681 | 1,575 | 1,400 | 1,144 | 1,010 | 992 | 984 | 1,030 | 1,057 | 1,057 | |||||||||||||||||||||||||||||||||
Other |
1,443 | 1,426 | 1,336 | 1,187 | 970 | 856 | 841 | 835 | 873 | 896 | 896 | |||||||||||||||||||||||||||||||||
Average |
1,648 | 1,629 | 1,526 | 1,356 | 1,108 | 978 | 961 | 954 | 998 | 1,024 | 1,024 | |||||||||||||||||||||||||||||||||
Product Pricing Assumptions (from CMAI) |
||||||||||||||||||||||||||||||||||||||||||||
Ethylene |
918 | 815 | 765 | 665 | 565 | 500 | 492 | 524 | 549 | 567 | 567 | |||||||||||||||||||||||||||||||||
Propylene |
820 | 892 | 833 | 757 | 594 | 523 | 513 | 472 | 493 | 503 | 503 | |||||||||||||||||||||||||||||||||
Styrene |
1,087 | 1,038 | 954 | 825 | 725 | 686 | 674 | 669 | 700 | 718 | 718 | |||||||||||||||||||||||||||||||||
Mixed Xylene |
602 | 600 | 607 | 528 | 460 | 430 | 402 | 382 | 389 | 398 | 398 | |||||||||||||||||||||||||||||||||
Y’s Pricing as % of CMAI Pricing |
||||||||||||||||||||||||||||||||||||||||||||
Ethylene |
5 | % | 5 | % | 5 | % | 5 | % | 5 | % | 5 | % | 5 | % | 5 | % | 5 | % | 5 | % | 5 | % | ||||||||||||||||||||||
Propylene |
-13 | % | -13 | % | -13 | % | -13 | % | -13 | % | -13 | % | -13 | % | -13 | % | -13 | % | -13 | % | -13 | % | ||||||||||||||||||||||
Styrene |
-1 | % | -1 | % | -1 | % | -1 | % | -1 | % | -1 | % | -1 | % | -1 | % | -1 | % | -1 | % | -1 | % | ||||||||||||||||||||||
Mixed Xylene |
2 | % | 2 | % | 2 | % | 2 | % | 2 | % | 2 | % | 2 | % | 2 | % | 2 | % | 2 | % | 2 | % | ||||||||||||||||||||||
Average Reduction of Ethylene and Propylene |
-1 | % | -6 | % | -11 | % | -18 | % | -12 | % | -2 | % | -1 | % | 5 | % | 3 | % | 0 | % |
16
Projected Fiscal Years Ending December 31 | ||||||||||||||||||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | ||||||||||||||||||||||||||||||||||
CMAI Crude Oil Price |
261 | 313 | 275 | 235 | 219 | 219 | 219 | 219 | 219 | 219 | 219 | |||||||||||||||||||||||||||||||||
Petroleum Products |
||||||||||||||||||||||||||||||||||||||||||||
Diesel oil |
328 | 390 | 338 | 314 | 279 | 268 | 298 | 280 | 287 | 293 | 293 | |||||||||||||||||||||||||||||||||
Gasoline |
304 | 362 | 314 | 291 | 259 | 249 | 277 | 260 | 266 | 272 | 272 | |||||||||||||||||||||||||||||||||
Residue |
201 | 239 | 207 | 192 | 171 | 164 | 183 | 172 | 176 | 180 | 180 | |||||||||||||||||||||||||||||||||
Catalytic diesel oil |
309 | 368 | 319 | 296 | 263 | 252 | 281 | 264 | 270 | 276 | 276 | |||||||||||||||||||||||||||||||||
Solvent oil |
382 | 454 | 394 | 365 | 325 | 312 | 347 | 326 | 334 | 341 | 341 | |||||||||||||||||||||||||||||||||
Other |
297 | 353 | 307 | 284 | 253 | 243 | 270 | 254 | 260 | 266 | 266 | |||||||||||||||||||||||||||||||||
Average |
295 | 351 | 305 | 283 | 251 | 241 | 269 | 253 | 258 | 264 | 264 | |||||||||||||||||||||||||||||||||
Product Pricing Assumptions (from CMAI) |
||||||||||||||||||||||||||||||||||||||||||||
Gasoline — Unleaded 95 RON |
346 | 412 | 357 | 331 | 295 | 283 | 315 | 296 | 302 | 309 | 309 | |||||||||||||||||||||||||||||||||
Y’s Pricing as % of CMAI Pricing |
||||||||||||||||||||||||||||||||||||||||||||
Gasoline — Unleaded 95 RON |
-12 | % | -12 | % | -12 | % | -12 | % | -12 | % | -12 | % | -12 | % | -12 | % | -12 | % | -12 | % | -12 | % | ||||||||||||||||||||||
Year-on-year reduction of gasoline |
19 | % | -13 | % | -7 | % | -11 | % | -4 | % | 11 | % | -6 | % | 2 | % | 2 | % | 0 | % |
Projected Fiscal Years Ending December 31 | ||||||||||||||||||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | ||||||||||||||||||||||||||||||||||
Chemical Fertilizers and Inorganic Chemical Products |
||||||||||||||||||||||||||||||||||||||||||||
Inorganic chemical products and others |
145 | 145 | 145 | 145 | 145 | 145 | 145 | 145 | 145 | 145 | 145 | |||||||||||||||||||||||||||||||||
Nitrosamine |
157 | 157 | 157 | 157 | 157 | 157 | 157 | 157 | 157 | 157 | 157 | |||||||||||||||||||||||||||||||||
Average |
145 | 145 | 145 | 145 | 145 | 145 | 145 | 145 | 145 | 145 | 145 |
17
4 | Wages and Salaries were assumed to grow at 5% annually during the forecast period, this assumption is in line with long-term forecasts of China wage inflation |
4 | The valuation will change depending on Y’s ability / plans to reduce the workforce as well as any collective bargaining agreement terms in place |
Wages and Salaries |
1,400 30% (RMB 1,200 26% |
23% Annual Salaries 1,000 847 millions) 20% 769 807 20% 697 732 800 632 664 546 573 602 600 520 Growth 435 and in 344 10% |
400 Wages 200 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% — 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 |
Wages and Salaries % Growth |
4 | Other costs of sales are assumed to capture other raw material costs (such as salt and naphthalene) as well as any other associated sales costs |
4 | Since we cannot explain the sharp increase of costs in 2003, we assumed 54% of raw material costs as other costs of sales going forward, which is the average of 2002 and 2004 |
Other Cost of Sales |
14,000 100% 91% 90% 12,000 10,354 millions) 9,660 9,752 80% 10,000 8,883 8,808 8,163 8,129 8,129 8,129 8,129 8,129 8,129 70% 8,000 Costs As % of Raw 60% Material in 55% 54% 54% 54% 54% 54% 54% 54% 54% 54% 54% 6,000 52% 50% 4,330 |
Other Cost of Sales (RMB 4,000 40% |
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 |
Other Cost of Sales As % of Raw Material Costs |
4 | We have also assumed transportation costs to be RMB99.4 million per million tons (US$12 per ton) in 2005 and then increased this cost by China inflation rate on an annual basis |
18
4 | There are 4 items included in operating costs: (i) distribution costs, (ii) administrative expenses, (iii) retirement benefit cost and staff welfare, and (iv) other operating expenses |
4 | Other than retirement benefit cost and staff welfare being projected by a percentage of annual growth, the rest are projected based on the average of the cost as a % of sales from 2003 to 2004 with additional compounded inflation of costs due to the inflation differential between long-term U.S. and China inflation forecasts |
Retirement Benefit Cost and Staff Welfare |
700 19% 20% |
Cost 590 (RMB 600 537 |
Benefit 488 15% Annual Welfare millions) 500 444 403 367 400 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%10% 303 333 Growth Retirement 275 in 300 228 250 173 191 5% 200 and Staff 2% 100 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 |
Projected Fiscal Years Ending December 31 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(RMB in million) | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||||||||||||||||||||||||||||||
Distribution Costs |
35 | 29 | 25 | 38 | 35 | 32 | 29 | 27 | 29 | 29 | 30 | 31 | 31 | |||||||||||||||||||||||||||||||||||||||
As % of Sales |
0.3 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | ||||||||||||||||||||||||||
Inflation Differential |
0.2 | % | -0.2 | % | -0.3 | % | 0.1 | % | 0.2 | % | 0.2 | % | 0.2 | % | 0.2 | % | 0.2 | % | 0.2 | % | ||||||||||||||||||||||||||||||||
Administrative Expenses |
624 | 383 | 213 | 433 | 397 | 368 | 328 | 314 | 333 | 329 | 343 | 355 | 362 | |||||||||||||||||||||||||||||||||||||||
As % of Sales |
4.8 | % | 1.9 | % | 0.7 | % | 1.3 | % | 1.3 | % | 1.3 | % | 1.3 | % | 1.3 | % | 1.3 | % | 1.3 | % | 1.3 | % | 1.3 | % | 1.3 | % | ||||||||||||||||||||||||||
Inflation Differential |
0.2 | % | -0.2 | % | -0.3 | % | 0.1 | % | 0.2 | % | 0.2 | % | 0.2 | % | 0.2 | % | 0.2 | % | 0.2 | % | ||||||||||||||||||||||||||||||||
Other Operating Expenses / (Income) |
10 | 28 | (23 | ) | 11 | 10 | 10 | 9 | 8 | 9 | 9 | 9 | 9 | 9 | ||||||||||||||||||||||||||||||||||||||
As % of Sales |
0.1 | % | 0.1 | % | -0.1 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||||||||||||||||||||
Inflation Differential |
0.2 | % | -0.2 | % | -0.3 | % | 0.1 | % | 0.2 | % | 0.2 | % | 0.2 | % | 0.2 | % | 0.2 | % | 0.2 | % |
19
4 | Historically the growth rate for wages and salaries has been very high (over 20%) |
4 | Does Y have any plan to reduce workforce and what is the long-term sustainable growth rate? |
4 | Other costs of sales increased rapidly in 2003 and as a percentage of raw material costs were much higher than other fiscal years (91%) |
4 | These irregular trends makes it difficult to form long-term forecast assumptions |
4 | Retirement benefit costs and staff welfare costs increased significantly in 2004 (19%), which is difficult to justify / reconcile |
4 | Other operating costs such as distribution costs and administrative expenses as a percentage of sales were high in 2002 — showing an irregular trend compared to other fiscal years |
4 | We have no information regarding fixed costs |
20
4 | Other assumptions included in the DCF model: |
4 | 33% as the PRC corporate income tax rate |
4 | Terminal multiple of 4.0x as the average of FV/EBITDA multiple from comparable company analysis and the EBITDA in 2014 | |
4 | Additional assumptions and sources of information: |
4 | Historical data: Company’s annual report and SEC Filings | |
4 | Oil price and product price projections: based on price trends from CMAI | |
4 | Inflation rate based on European Intelligence Unit | |
4 | Beta based on comparable companies in Asia | |
4 | WACC based on Citigroup’s FSG and comparable companies in China and Asia |
4 | We have run two preliminary valuation scenarios in which (i) we assume 100% utilization rate, and (2) we assume 5% increase in crude costs whilst maintaining product costs at the previous assumptions |
21
4 | Comparing utilization rate and crude oil price, the latter has a larger impact on the DCF valuation due to a number of operating cost assumptions being based off revenue and the cost of sales which are directly tied to the utilization rate and fixed cost information is not available |
Equity Value (RMB in millions) 5% Increase in Crude Costs 6,668 7,799 100% Utilization Rate 14,536 16,610 Base Case 14,547 16,535 |
5,000 10,000 15,000 20,000 |
Equity Value (US$in millions) |
5% Increase in Crude Costs 805 942 100% Utilization Rate 1,756 2,006 Base Case 1,757 1,997 500 1,000 1,500 2,000 2,500 |
22
Projected Fiscal Years Ending December 31 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(RMB in million) | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||||||||||||||||||||||||||||||
Net Sales |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Petrochemical and Organic Chemical Products |
7,783 | 12,768 | 12,395 | 11,593 | 10,253 | 8,471 | 7,532 | 7,399 | 7,406 | 7,748 | 7,959 | 7,959 | ||||||||||||||||||||||||||||||||||||||||
Petroleum Products |
9,320 | 13,378 | 15,918 | 13,806 | 12,797 | 11,385 | 10,923 | 12,165 | 11,438 | 11,694 | 11,963 | 11,963 | ||||||||||||||||||||||||||||||||||||||||
Synthetic Rubber |
1,133 | 1,794 | 1,772 | 1,660 | 1,475 | 1,206 | 1,064 | 1,045 | 1,038 | 1,085 | 1,114 | 1,114 | ||||||||||||||||||||||||||||||||||||||||
Chemical Fertilizers and Inorganic Chemical Products |
165 | 664 | 664 | 664 | 664 | 664 | 664 | 664 | 664 | 664 | 664 | 664 | ||||||||||||||||||||||||||||||||||||||||
Other Products |
2,252 | 3,253 | 3,497 | 3,760 | 4,042 | 4,345 | 4,671 | 5,021 | 5,398 | 5,802 | 6,238 | 6,705 | ||||||||||||||||||||||||||||||||||||||||
Total Sales |
13,138 | 20,653 | 31,857 | 34,246 | 31,482 | 29,231 | 26,071 | 24,853 | 26,294 | 25,943 | 26,994 | 27,937 | 28,405 | |||||||||||||||||||||||||||||||||||||||
Gross Profit |
619 | 1,527 | 3,036 | 4,120 | 3,045 | 3,457 | 2,107 | 956 | 2,364 | 1,978 | 2,992 | 3,897 | 4,324 | |||||||||||||||||||||||||||||||||||||||
EBIT |
(506 | ) | 895 | 2,593 | 3,388 | 2,328 | 2,745 | 1,409 | 240 | 1,590 | 1,168 | 2,122 | 2,965 | 3,331 | ||||||||||||||||||||||||||||||||||||||
EBITDA |
602 | 1,927 | 3,740 | 4,538 | 3,483 | 3,902 | 2,498 | 1,300 | 2,654 | 2,236 | 2,938 | 3,087 | 3,458 | |||||||||||||||||||||||||||||||||||||||
EBT |
(1,028 | ) | 426 | 2,357 | 3,177 | 2,283 | 2,750 | 1,487 | 348 | 1,710 | 1,325 | 2,308 | 3,189 | 3,591 | ||||||||||||||||||||||||||||||||||||||
Net (Loss) / Profit |
(1,023 | ) | 428 | 2,545 | 2,139 | 1,533 | 1,842 | 996 | 233 | 1,146 | 888 | 1,546 | 2,137 | 2,406 | ||||||||||||||||||||||||||||||||||||||
Sales Growth |
57 | % | 54 | % | 7 | % | -8 | % | -7 | % | -11 | % | -5 | % | 6 | % | -1 | % | 4 | % | 3 | % | 2 | % | ||||||||||||||||||||||||||||
Gross Margin |
5 | % | 7 | % | 10 | % | 12 | % | 10 | % | 12 | % | 8 | % | 4 | % | 9 | % | 8 | % | 11 | % | 14 | % | 15 | % | ||||||||||||||||||||||||||
EBIT Margin |
-4 | % | 4 | % | 8 | % | 10 | % | 7 | % | 9 | % | 5 | % | 1 | % | 6 | % | 5 | % | 8 | % | 11 | % | 12 | % | ||||||||||||||||||||||||||
EBITDA Margin |
5 | % | 9 | % | 12 | % | 13 | % | 11 | % | 13 | % | 10 | % | 5 | % | 10 | % | 9 | % | 11 | % | 11 | % | 12 | % | ||||||||||||||||||||||||||
Net Margin |
-8 | % | 2 | % | 8 | % | 6 | % | 5 | % | 6 | % | 4 | % | 1 | % | 4 | % | 3 | % | 6 | % | 8 | % | 8 | % |
Projected Fiscal Years Ending December 31 | ||||||||||||||||||||||||||||||||||||||||||||||||
(RMB in million) | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | ||||||||||||||||||||||||||||||||||||
Current Assets |
||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents |
35 | 15 | 416 | 2,120 | 3,822 | 4,973 | 5,321 | 6,978 | 8,225 | 9,966 | 11,573 | 13,395 | ||||||||||||||||||||||||||||||||||||
Accounts Receivable |
185 | 265 | 296 | 272 | 252 | 225 | 215 | 227 | 224 | 233 | 241 | 245 | ||||||||||||||||||||||||||||||||||||
Inventories |
1,568 | 2,606 | 2,661 | 2,517 | 2,290 | 2,136 | 2,132 | 2,137 | 2,143 | 2,148 | 2,154 | 2,160 | ||||||||||||||||||||||||||||||||||||
Prepaid Expenses and Other Current Assets |
268 | 442 | 442 | 442 | 442 | 442 | 442 | 442 | 442 | 442 | 442 | 442 | ||||||||||||||||||||||||||||||||||||
Total Current Assets |
2,056 | 3,328 | 3,815 | 5,351 | 6,806 | 7,776 | 8,110 | 9,784 | 11,034 | 12,790 | 14,411 | 16,243 | ||||||||||||||||||||||||||||||||||||
Non-Current Assets |
10,610 | 10,266 | 9,226 | 8,171 | 7,108 | 6,102 | 5,122 | 4,143 | 3,158 | 2,428 | 2,396 | 2,360 | ||||||||||||||||||||||||||||||||||||
TOTAL ASSETS |
12,666 | 13,594 | 13,041 | 13,522 | 13,914 | 13,878 | 13,232 | 13,927 | 14,192 | 15,218 | 16,806 | 18,603 | ||||||||||||||||||||||||||||||||||||
Current Liabilities |
||||||||||||||||||||||||||||||||||||||||||||||||
Short-term Borrowings |
4,102 | 3,086 | 167 | 526 | 76 | 47 | 2 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Accounts Payable, Trade |
1,765 | 1,709 | 2,340 | 2,214 | 2,013 | 1,878 | 1,875 | 1,879 | 1,884 | 1,889 | 1,894 | 1,900 | ||||||||||||||||||||||||||||||||||||
Total Current Liabilities |
7,716 | 7,629 | 5,615 | 5,605 | 4,758 | 4,318 | 4,163 | 4,291 | 4,266 | 4,362 | 4,450 | 4,496 | ||||||||||||||||||||||||||||||||||||
Long-term Borrowings |
2,408 | 896 | 729 | 203 | 126 | 79 | 77 | 77 | 77 | 77 | 77 | 77 | ||||||||||||||||||||||||||||||||||||
Minority Interest |
31 | 14 | 4 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Total Shareholders’ Equity |
2,511 | 5,055 | 6,694 | 7,714 | 9,029 | 9,481 | 8,992 | 9,558 | 9,849 | 10,779 | 12,279 | 14,029 | ||||||||||||||||||||||||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUI |
12,666 | 13,594 | 13,041 | 13,522 | 13,914 | 13,878 | 13,232 | 13,927 | 14,192 | 15,218 | 16,806 | 18,603 |
23
WACC | ||||||||||||||||||||||||
(RMB in millions) | Terminal Multiple | |||||||||||||||||||||||
3.5x | 4.0x | 4.5x | 5.0x | 5.5x | ||||||||||||||||||||
8.5 | % | 15,616 | 16,165 | 16,715 | 17,264 | 17,814 | ||||||||||||||||||
9.0 | % | 16,883 | 17,514 | 18,146 | 18,777 | 19,409 | ||||||||||||||||||
9.5 | % | 17,821 | 18,514 | 19,208 | 19,902 | 20,595 | ||||||||||||||||||
10.0 | % | 18,321 | 19,048 | 19,775 | 20,502 | 21,230 | ||||||||||||||||||
10.5 | % | 18,321 | 19,048 | 19,775 | 20,502 | 21,230 | ||||||||||||||||||
11.0 | % | 17,821 | 18,514 | 19,208 | 19,902 | 20,595 | ||||||||||||||||||
11.5 | % | 16,883 | 17,514 | 18,146 | 18,777 | 19,409 | ||||||||||||||||||
12.0 | % | 15,616 | 16,165 | 16,715 | 17,264 | 17,814 | ||||||||||||||||||
12.5 | % | 14,153 | 14,610 | 15,068 | 15,525 | 15,983 | ||||||||||||||||||
13.0 | % | 12,621 | 12,987 | 13,353 | 13,719 | 14,085 |
WACC | ||||||||||||||||||||||||
(US$ in millions) | Terminal Multiple | |||||||||||||||||||||||
3.5x | 4.0x | 4.5x | 5.0x | 5.5x | ||||||||||||||||||||
8.5 | % | 1,886 | 1,952 | 2,019 | 2,085 | 2,151 | ||||||||||||||||||
9.0 | % | 2,039 | 2,115 | 2,192 | 2,268 | 2,344 | ||||||||||||||||||
9.5 | % | 2,152 | 2,236 | 2,320 | 2,404 | 2,487 | ||||||||||||||||||
10.0 | % | 2,213 | 2,300 | 2,388 | 2,476 | 2,564 | ||||||||||||||||||
10.5 | % | 2,213 | 2,300 | 2,388 | 2,476 | 2,564 | ||||||||||||||||||
11.0 | % | 2,152 | 2,236 | 2,320 | 2,404 | 2,487 | ||||||||||||||||||
11.5 | % | 2,039 | 2,115 | 2,192 | 2,268 | 2,344 | ||||||||||||||||||
12.0 | % | 1,886 | 1,952 | 2,019 | 2,085 | 2,151 | ||||||||||||||||||
12.5 | % | 1,709 | 1,765 | 1,820 | 1,875 | 1,930 | ||||||||||||||||||
13.0 | % | 1,524 | 1,569 | 1,613 | 1,657 | 1,701 |
WACC | ||||||||||||||||||||||||
(RMB in millions) | Terminal Multiple | |||||||||||||||||||||||
3.5x | 4.0x | 4.5x | 5.0x | 5.5x | ||||||||||||||||||||
8.0 | % | 11,649 | 12,198 | 12,747 | 13,297 | 13,846 | ||||||||||||||||||
8.5 | % | 12,915 | 13,547 | 14,178 | 14,810 | 15,441 | ||||||||||||||||||
9.0 | % | 13,853 | 14,547 | 15,241 | 15,934 | 16,628 | ||||||||||||||||||
9.5 | % | 14,353 | 15,081 | 15,808 | 16,535 | 17,262 | ||||||||||||||||||
10.0 | % | 14,353 | 15,081 | 15,808 | 16,535 | 17,262 | ||||||||||||||||||
10.5 | % | 13,853 | 14,547 | 15,241 | 15,934 | 16,628 | ||||||||||||||||||
11.0 | % | 12,915 | 13,547 | 14,178 | 14,810 | 15,441 | ||||||||||||||||||
11.5 | % | 11,649 | 12,198 | 12,747 | 13,297 | 13,846 | ||||||||||||||||||
12.0 | % | 10,185 | 10,643 | 11,100 | 11,558 | 12,016 | ||||||||||||||||||
12.5 | % | 8,654 | 9,020 | 9,386 | 9,751 | 10,117 |
WACC | ||||||||||||||||||||||||
(US$ in millions) | Terminal Multiple | |||||||||||||||||||||||
3.5x | 4.0x | 4.5x | 5.0x | 5.5x | ||||||||||||||||||||
8.5 | % | 1,407 | 1,473 | 1,539 | 1,606 | 1,672 | ||||||||||||||||||
9.0 | % | 1,560 | 1,636 | 1,712 | 1,788 | 1,865 | ||||||||||||||||||
9.5 | % | 1,673 | 1,757 | 1,840 | 1,924 | 2,008 | ||||||||||||||||||
10.0 | % | 1,733 | 1,821 | 1,909 | 1,997 | 2,085 | ||||||||||||||||||
10.5 | % | 1,733 | 1,821 | 1,909 | 1,997 | 2,085 | ||||||||||||||||||
11.0 | % | 1,673 | 1,757 | 1,840 | 1,924 | 2,008 | ||||||||||||||||||
11.5 | % | 1,560 | 1,636 | 1,712 | 1,788 | 1,865 | ||||||||||||||||||
12.0 | % | 1,407 | 1,473 | 1,539 | 1,606 | 1,672 | ||||||||||||||||||
12.5 | % | 1,230 | 1,285 | 1,340 | 1,396 | 1,451 | ||||||||||||||||||
13.0 | % | 1,045 | 1,089 | 1,133 | 1,178 | 1,222 |
24
Valuation Multiples | Share | Market | Price / EPS | Firm | Firm Value / EBITDA | |||||||||||||||||||||||
(Currency in Millions, Except Stock Price) | Price | Cap. | 2005E | 2006E | Value (a) | 2005E | 2006E | |||||||||||||||||||||
Y (A Share) |
RMB | 3.63 | RMB | 11,530 | 6.4 | x | 7.9 | x | RMB | 15,498 | 4.0 | x | 4.3 | x | ||||||||||||||
Chinese Cos — A share |
||||||||||||||||||||||||||||
Sinopec Shanghai Petrochemical Co Ltd |
RMB | 3.69 | RMB | 24,349 | 6.5 | x | 7.2 | x | RMB | 30,306 | 4.2 | x | 4.8 | x | ||||||||||||||
China Petroleum and Chemical
(Sinopec) |
3.53 | 299,199 | 7.3 | x | 7.4 | x | 481,373 | 4.6 | 4.8 | |||||||||||||||||||
Average | 6.9 | x | 7.3 | x | 4.4 | x | 4.8 | x | ||||||||||||||||||||
Premium / (Discount) of Y relative
to Peers |
-8 | % | 8 | % | -10 | % | -10 | % | ||||||||||||||||||||
Y (H Share) |
HK$ | 2.05 | HK$ | 10,830 | 3.8 | x | 4.7 | x | HK$ | 14,557 | 4.0 | x | 4.3 | x | ||||||||||||||
Chinese Cos — H share |
||||||||||||||||||||||||||||
Sinopec Shanghai Petrochemical Co Ltd |
HK$ | 2.63 | HK$ | 22,986 | 5.0 | x | 5.5 | x | HK$ | 28,575 | 4.2 | x | 4.8 | x | ||||||||||||||
Sinopec Zhenhai Refining & Chemical
Co |
7.25 | 18,297 | 6.4 | 5.8 | 16,914 | 3.4 | 3.0 | |||||||||||||||||||||
PetroChina |
5.75 | 993,407 | 7.1 | 7.8 | 1,020,875 | 4.6 | 4.8 | |||||||||||||||||||||
China Petroleum and Chemical
(Sinopec) |
2.95 | 280,754 | 5.8 | 5.9 | 451,874 | 4.7 | 4.6 | |||||||||||||||||||||
Average | 6.1 | x | 6.3 | x | 4.3 | x | 4.3 | x | ||||||||||||||||||||
Median | 6.1 | 5.9 | 4.4 | 4.7 | ||||||||||||||||||||||||
High | 7.1 | 7.8 | 4.7 | 4.8 | ||||||||||||||||||||||||
Low | 5.0 | 5.5 | 3.4 | 3.0 | ||||||||||||||||||||||||
Premium / (Discount) of Y relative
to Peers |
-37 | % | -19 | % | -10 | % | -8 | % | ||||||||||||||||||||
Other Asian Cos (US$ in millions,
except per share data) |
||||||||||||||||||||||||||||
Formosa Chemicals & Fibre Corp |
TW$ | 6.16 | $ | 9,713 | 7.6 | x | 8.3 | x | $ | 11,052 | 8.9 | x | 9.5 | x | ||||||||||||||
Formosa Petrochemicals Corp |
TW$ | 66.1 | 17,906 | 12.2 | 13.3 | 22,328 | 8.8 | 8.1 | ||||||||||||||||||||
National Petrochemical PCL |
THB | 124 | 905 | 9.9 | 9.1 | 938 | 5.7 | 5.7 | ||||||||||||||||||||
PTT Public Co Ltd |
THB | 222 | 14,971 | 9.2 | 9.1 | 18,173 | 8.1 | 7.5 | ||||||||||||||||||||
S Oil Corporation |
KRW | 82,300 | 9,299 | 11.2 | 12.0 | 9,627 | 7.3 | 7.8 | ||||||||||||||||||||
Showa Shell Sekiyu KK |
JPY | 1,135 | 3,975 | 14.2 | 14.4 | 4,993 | 8.2 | 8.3 | ||||||||||||||||||||
Singapore Petroleum Company |
SGD | 4.86 | 1,370 | 6.8 | 6.4 | 1,695 | 6.5 | 5.9 | ||||||||||||||||||||
TonenGeneral Sekiyu KK |
JPY | 1,230 | 6,776 | 16.8 | 17.5 | 7,431 | 8.5 | 8.9 | ||||||||||||||||||||
Average | 11.0 | x | 11.3 | x | 7.8 | x | 7.7 | x | ||||||||||||||||||||
Median | 10.5 | 10.5 | 8.2 | 7.9 | ||||||||||||||||||||||||
High | 16.8 | 17.5 | 8.9 | 9.5 | ||||||||||||||||||||||||
Low | 6.8 | 6.4 | 5.7 | 5.7 | ||||||||||||||||||||||||
Premium / (Discount) — of Y’s H
share relative to Peers |
-64 | % | -55 | % | -51 | % | -46 | % |
(a) | Firm Value equals market equity value plus straight debt, minority interest, less investments in unconsolidated affiliates and cash. | |
(b) | Market cap for all classes of shares, which is sum of H-shares’ share price multipled by number of H-shares outstanding and A-shares’ share price multipled by number of legal person shares and A-shares outstanding. Firm value based on net debt as of Dec 31, 2004 from Company’s annual report | |
(c) | Share price updated as of Jun 22, 2005. |
26
► | Using the comparable company analysis provided on the previous page, we have implied Y’s valuation from the FV/EBITDA and P/E perspective | ||
► | The forecast EBITDA and Net Income were taken from our Discounted Cash Flow model |
(RMB in millions) | Multiple Range | |||||||||||||||||||||||||||||||
FV/EBITDA | 4.5x | 5.5x | Net Debt | Equity Value | FV | |||||||||||||||||||||||||||
EBITDA |
||||||||||||||||||||||||||||||||
2005 |
3,792 | 17,064 | 20,856 | 3,967 | 8,259 | 16,888 | 12,227 | 20,856 | ||||||||||||||||||||||||
2006 |
2,717 | 12,227 | 14,944 |
Multiple Range | ||||||||||||||||||||||||||||||||
P/E | 6.5x | 7.5x | Net Debt | Equity Value | FV | |||||||||||||||||||||||||||
Net Income |
||||||||||||||||||||||||||||||||
2005 |
1,639 | 10,654 | 12,294 | 3,967 | 6,629 | 12,294 | 10,596 | 16,261 | ||||||||||||||||||||||||
2006 |
1,020 | 6,629 | 7,648 |
27
4 | The following table illustrated the petrochemical precedent transactions between 2000 and 2005-06-15 | |
4 | The implied Firm Value / EBITDA multiple enables us to determine the industry’s view of valuation for similar type transactions |
TOTAL | LTM | LTM | ||||||||||||||||||||||
TRANSACTION | OPERATING | OPERATING | ||||||||||||||||||||||
ANNOUNCED | DEAL CLOSE | VALUE | EBITDA | EBITDA | ||||||||||||||||||||
DATE | DATE | BUYERS | SELLERS | KEY ASSETS | US$MM | US$MM | MULTIPLE | |||||||||||||||||
5/29/2001 | NA | MOL Magyar Olaj- es Gazipari Rt |
TVK Rt | 49% of TVK Rt. | 190 | 28 | 6.9x | |||||||||||||||||
6/14/2001 | NA | CE Oil & Gas |
Borsodchem Rt | 84% stake in Borsodchem RT | 308 | 49 | 6.4x | |||||||||||||||||
7/25/2001 | 7/25/2001 | Odebrecht |
Government of Brazil | 58.41% stake in Petroquimica do Nordeste S.A. (Copene) | 318 | 103 | 3.1x | |||||||||||||||||
5/18/2002 | 6/4/2002 | Reliance Industries Ltd |
Indian Petrochemicals Co. | 46% of petrochemical producer IPCL | 913 | 125 | 7.3x | |||||||||||||||||
7/15/2002 | NA | China Electronics Corp |
PetroChina Company Ltd | 51.6% stake in Gansu Tristar Petrochemical Group Co. | 25 | 4 | 6.7x | |||||||||||||||||
12/29/2004 | NA | Sinopec |
Sinopec Beijing Yanhua | Merger by absorption of Yanhua’s 30% stake held by the public | 494 | 376 | 5.2x | |||||||||||||||||
High |
7.3x | |||||||||||||||||||||||
Low |
3.1x | |||||||||||||||||||||||
Median |
6.5x | |||||||||||||||||||||||
Average |
5.9x |
FV/EBITDA | 6.0x | 7.0x | Net Debt | Equity Value | ||||||||||||||||||||
2004 EBITDA |
3,740 | 22,470 | 26,210 | 3,967 | 18,502 | 22,242 |
28
4 | The following table illustrated the refining precedent transactions between 2000 and 2005-06-15 | |
4 | The implied Firm Value / EBITDA multiple enables us to determine the industry’s view of valuation for similar |
LTM | LTM | |||||||||||||||||||||
DEAL | TOTAL | OPERATING | OPERATING | |||||||||||||||||||
ANNOUNCE | CLOSE | TRANSACTION | EBITDA | EBITDA | ||||||||||||||||||
D DATE | DATE | BUYERS | SELLERS | KEY ASSETS | VALUE US$MM | US$MM | MULTIPLE | |||||||||||||||
7/5/2000 | 9/1/2000 |
Ultramar Diamond Shamrock Corp | Tosco Corp | Avon Refinery | 818 | 125 | 6.5x | |||||||||||||||
7/31/2000 | 7/16/2001 |
Tosco Corp | Irish National Petroleum Corp Ltd | Whitegate Refinery and Storage Assets at Bantry Bay | 100 | 45 | 2.2x | |||||||||||||||
2/12/2002 | 5/14/2002 |
Giant Industries Incorporated | BP plc | 61900 b/d Yorktown Va. refinery | 157 | 25 | 6.4x | |||||||||||||||
2/5/2002 | 5/17/2002 |
Tesoro Petroleum Corporation | Valero Energy Corporation | Golden Eagle Refinery and 70 service stations | 945 | 275 | 3.4x | |||||||||||||||
1/13/2004 | Apr 04 |
Zorlu Group and OAO Tatneft | Turkish Government | 65.76% stake of Turkiye Petrol Rafinerileri A.S. | 1,663 | 404 | 4.1x | |||||||||||||||
High |
6.5x | |||||||||||||||||||||
Low |
2.2x | |||||||||||||||||||||
Median |
4.1x | |||||||||||||||||||||
Average |
4.5x |
(RMB in millions) | Multiple Range | |||||||||||||||||||||||
FV/EBITDA | 3.6x | 4.6x | Net Debt | Equity Value | ||||||||||||||||||||
2004 EBITDA |
3,740 | 13,536 | 17,276 | 3,967 | 9,568 | 13,309 |
29
4 | You will not be required to accept any product or service offered by Citibank or any Citigroup affiliate as a condition to the extension of commercial loans or other products or services to you by Citibank or any of its subsidiaries, unless such a condition is permitted under an exception to the Anti-tying Rules. | |
4 | We will not vary the price or other terms of any Citibank product or service based on the condition that you purchase any particular product or service from Citibank or any Citigroup affiliate, unless we are authorized to do so under an exception to the Anti-tying Rules. | |
4 | We will not require you to provide property or services to Citibank or any affiliate of Citibank as a condition to the extension of a commercial loan to you by Citibank or any Citibank subsidiary, unless such a requirement is reasonably required to protect the safety and soundness of the loan. | |
4 | We will not require you to refrain from doing business with a competitor of Citigroup or any of its affiliates as a condition to receiving a commercial loan from Citibank or any of its subsidiaries, unless the requirement is reasonably designed to ensure the soundness of the loan. |
This ‘SC 13E3/A’ Filing | Date | Other Filings | ||
---|---|---|---|---|
Filed on: | 12/23/05 | SC 13E3/A, SC 14D9/A, SC TO-T/A | ||
6/23/05 | ||||
12/31/04 | 20-F, 20-F/A, 6-K | |||
List all Filings |