The headline fall in revenues - excluding Fortune's share of joint ventures - reflected lower natural gas sales as the group undertook a rationalisation of its gas interests, including the sale of its stake in Beijing Fu Hua Dadi Gas. However, a 14 per cent rise in Bluesky's fuel sales helped to boost the unit's net profits by a third and lift Fortune Oil's operating profits by 11 per cent to £27.4m. During the year, Bluesky, in partnership with China National Aviation Fuels, secured a deal to the supply fuel needs of 15 new airports in China.
Despite the non-core gas sales, Fortune launched four new city gas projects, whilst reporting a 16 per cent rise in the number of its domestic gas customers in 2011. And since the year-end it has built a strategic 11 per cent stake in Hong Kong-listed China Gas Holdings - the largest national supplier.
Oriel Securities forecasts 2012 EPS of 1p (2011: 0.96p) although it's worth noting that 2011 EPS earnings were signifcantly ahead of the beroker's estimates.
|FORTUNE OIL (FTO)|
|ORD PRICE:||12.25p||MARKET VALUE:||£243m|
|TOUCH:||12-12.25p||12-MONTH HIGH:||14.75p||LOW: 9p|
|DIVIDEND YIELD:||1.5%||PE RATIO:||13|
|NET ASSET VALUE:||7p*||NET DEBT:||3%|
Fortune's operational strategy has been framed by China's 12th five-year plan, which commits the country to massive civil aviation expansion, in addition to doubling the use of natural gas as a proportion of China's energy mix. Beijing is also considering raising domestic gas prices by artificially linking them to crude oil. Priced on a modest 12 times forecast earnings, the shares are worth buying.
Last IC view: Fairly priced, 13.25p, 28 April 2011