Can Green Dragon Gas maintain its position as one of the largest Chinese companies trading on Aim? Management has spent more than a decade assembling a vertically integrated business, which produces coal bed methane, and sells it via specialist distribution centres and retail forecourts.
China has the world’s third largest coal bed methane reserves. The Chinese government is rather keen on developing it as a complementary power source, and it now offers a $250 incentive towards the cost of vehicle conversion.
With the help of acquisitions, Green Dragon has been drilling wells on six blocks covering over 7,566 sq km in inner China. In some cases, Green Dragon plans to extract methane prior to the commencement of coal mining projects by other companies. It has equity stakes in three distribution centres that have long-term gas supply contracts via an east-west pipeline, and it has also opened four compressed natural gas retail outlets, and hopes to open another 46 to bring it in line with early targets.
Gas sales only started late in the first half of 2008, but broker Evolution Securities believes that full-year turnover could be $14.5m and that this could double in 2009. On its adjusted figures, Evolution forecasts a profit of $2.4m this year, against a 2007 loss of $2.7m and a $17.9m profit next year. Adjusted earnings in 2009 are forecast to be 12.9¢.
GREEN DRAGON GAS (GDG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 837.5¢ | MARKET VALUE: | $886.9m | |
| TOUCH: | 800-875¢ | 12-MONTH HIGH: | 950¢ | LOW: 625¢ |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| Half-year to 30 June | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2007 | – | -1.6 | -1.6 | nil |
| 2008 | 2.4 | -13.0 | -13.4 | nil |
Aim: Coal. £1= $1.771 | ||||
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