Sino Gas Presents a Compelling Value Play
Sino Gas International Holdings, Inc. [[SGAS.OB]], a natural gas distributor to residential and industrial customers in China, may not be the most popular energy stock in the market trading on the OTC-BB, but its growing client base and network of natural gas distribution systems are helping it achieve rapid growth in both its top and bottom line results.
Demand for natural gas continues to be strong in China as the government pushes for clean energy usage. Currently, natural gas accounts for only about 3% of China’s total energy consumption, but many experts forecast that number to rise to 10% by 2020 amid strong governmental support for new clean energy policies.
Over the past several years, Sino Gas has strategically and geographically positioned itself in the Chinese market for natural gas. The company has heavily invested and build a solid foundation and networks to bring its business to the next level, with 37 gas distribution networks in different parts of China, including 27 with concession rights.
During the second quarter, Sino Gas reported revenues that jumped 43.2% to $7.33 million with a sharp increase in the number of households serviced. The sales helped generate $2.81 million in cash from operations over the six month period. Meanwhile, the company’s net income swung from a loss of $537,000 to a profit of $421,000 due to higher sales and lower expenses.
Despite this rapid growth, Sino Gas continues to trade at an earnings multiple of less than 10 times earnings. Investors typically value companies by comparing earnings to growth in what is known as the price-earnings to growth ratio, with any ratio below 1.0 being considered undervalued. In Sino Gas’ case, the company trades with at a conservative ratio of just 0.28.
In the end, Sino Gas represents a compelling value play for OTC investors looking for exposure to the Chinese markets. The country’s clean energy policies should ensure continued growth in the industry, while the company’s growing network and client base should ensure continued secure revenue and profitability growth going forward.
CONTACT: Daniel Minton, Managing Director, 406-862-5400, daniel@accelerize.com