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Natural Resources
Building up the region
 How could the past two years not be good for the natural resources sector in Asia? With the region thirsting for more oil and growing fast, natural resources companies on our list all reported revenue growth in 2006 and most continued the trend up until press time in 2007.
In several markets around Asia, natural resources stocks are the crown jewel on their respective exchanges in terms of market capitalisation. In Thailand state-backed PTT stands out, so does India’s Oil & Natural Gas Corporation. And then there is China where PetroChina, China Petroleum and Chemical Corp, better known as Sinopec, and China National Offshore, or CNOOC, are all among the nation’s largest stocks and biggest money earners.
In April, Sinopec completed a long-awaited convertible bond issue at HK$11.7 billion ($1.5 billion), making it at the time the biggest CB by a Chinese issuer ever. According to Dealogic, it also ranked as the largest equity-linked issue in Asia ex-Japan in almost six years, behind a $2.66 billion issue by Hutchison Whampoa in January 2001 that was exchangeable into Vodafone shares. Such a large size is perhaps fitting for Asia’s largest oil refiner, especially since it hasn’t been back to the international capital markets since it listed in October 2000. Investors clearly saw good value and piled into the deal.
But the big news this year is the key natural resources sector A-share listings. In November, the country’s biggest oil and gas conglomerate, raised Rmb66.8 billion ($8.94 billion) from its initial public offering in Shanghai, making it China’s largest domestic IPO so far. PetroChina priced its 4 billion new renminbi-denominated shares at Rmb16.7 each, at the top end of the indicative price range. Those new shares account for a mere 2.18% of the state-owned firm’s enlarged share capital. That’s because more than 86% of the company’s shares outstanding are held by PetroChina’s parent company – part of the government’s policy of retaining state ownership of strategically vital industries such as energy.
Before PetroChina’s IPO, coal producer China Shenhua Energy’s IPO launch in Shanghai in September was the largest for a domestic exchange, raising Rmb66.58 billion, which at that time was then a record for a domestic IPO. One of the world’s biggest coal producers, Shenhua says it will use the proceeds to buy mines and expand output to meet growing demand – China uses coal to generate 78% of its power. Shenhua’s coal sales reached 171.1 million tonnes and the company produced 136.6 million tonnes of the fuel last year, second only to Peabody Energy, a US-based company.
What does this mean for investors? The benchmark Shanghai Composite Index has more than doubled in value this year. Local investors are drawn to the markets because they value the quality of the companies but they also get higher returns in the market than they can earn on bank savings. After all, shares of state companies like Shenhua and PetroChina saw at least double-digit gains in their first day of trading following IPOs.
While stocks are hot, the other main story in this sector is mergers and acquisitions. Consider Tata Steel. The Indian firm has offered £4.55 ($8.47) per share for the UK steel producer Corus, which values Corus at $10 billion – making it the largest outbound cross border acquisition by an Indian private sector company. Tata had been building up but not on this scale – in 2004 it acquired the steel businesses of NatSteel in Singapore, China, Malaysia, Thailand, Australia and the Philippines. At the time, Tata said the acquisition was intended to provide a “beachhead in key Asian markets”. The Corus acquisition makes it a truly global player.
Put simply, natural resources are a crucial element of Asia’s corporate landscape. They are also becoming major players on the world’s arena.
| Ranking by revenue |
| Country |
Company |
(million $) |
| CH |
Sinopec |
140,248.00 |
| CH |
PetroChina |
92,497.30 |
| IN |
Indian Oil Corp |
46,758.10 |
| TH |
PTT Public Company |
38,681.90 |
| IN |
Reliance Industries |
30,000.90 |
| SK |
POSCO |
28,451.89 |
| CH |
Baoshan Iron & Steel |
21,183.90 |
| IN |
Oil & Natural Gas Corporation |
14,355.60 |
| CH |
CNOOC |
11,941.40 |
| SK |
S-Oil |
16,026.00 |
| TH |
Thai Oil |
8,893.42 |
| CH |
China Shenhua Energy |
8,624.40 |
| TH |
Siam Cement |
8,226.39 |
| CH |
Angang Steel |
7,329.67 |
| IN |
Tata Steel |
6,391.21 |
| SK |
Hyundai Steel |
6,034.77 |
| CH |
Wuhan Steel |
5,546.92 |
| TW |
China Steel |
5,481.26 |
| IN |
GAIL (India) |
4,041.33 |
| TH |
PTT Exploration & Production |
2,922.63 |
| |
| Ranking by net profit |
| Country |
Company |
(million $) |
| CH |
PetroChina |
19,094.00 |
| CH |
Sinopec |
7,237.84 |
| CH |
CNOOC |
4,152.04 |
| IN |
Oil & Natural Gas Corporation |
3,965.25 |
| SK |
POSCO |
3,648.69 |
| TH |
PTT Public Company |
3,035.36 |
| IN |
Reliance Industries |
3,027.61 |
| CH |
China Shenhua Energy |
2,344.06 |
| IN |
Indian Oil Corp. |
1,994.28 |
| CH |
Baoshan Iron & Steel |
1,746.63 |
| TW |
China Steel |
1,208.15 |
| IN |
Tata Steel |
1,058.88 |
| CH |
Angang Steel |
952.39 |
| TH |
Siam Cement |
938.42 |
| TH |
PTT Exploration & Production |
893.68 |
| SK |
S-Oil |
835.17 |
| IN |
GAIL (India) |
645.2 |
| TH |
Thai Oil |
528.78 |
| CH |
Wuhan Steel |
523.18 |
| SK |
Hyundai Steel |
521.32 |
| |
| Ranking by revenue growth |
| Country |
Company |
|
| CH |
Angang Steel |
106.10% |
| IN |
Reliance Industries |
32.80% |
| TH |
PTT Exploration & Production |
31.80% |
| TH |
PTT Public Company |
31.10% |
| CH |
Sinopec |
30.70% |
| CH |
CNOOC |
28.10% |
| CH |
PetroChina |
24.80% |
| CH |
Baoshan Iron & Steel |
24.60% |
| IN |
Tata Steel |
24.50% |
| CH |
China Shenhua Energy |
23.00% |
| IN |
Indian Oil Corp |
21.00% |
| SK |
S-Oil |
19.00% |
| TH |
Siam Cement |
18.30% |
| IN |
Oil & Natural Gas Corporation |
18.20% |
| TH |
Thai Oil |
12.00% |
| IN |
GAIL (India) |
10.60% |
| SK |
Hyundai Steel |
8.50% |
| CH |
Wuhan Steel |
1.40% |
| SK |
POSCO |
-1.70% |
| TW |
China Steel |
-4.60% |
| |
| Ranking by ROE |
| Country |
Company |
|
| TH |
Siam Cement |
42.38% |
| TH |
PTT Public Company |
36.73% |
| TH |
PTT Exploration & Production |
35.01% |
| CH |
Angang Steel |
34.39% |
| CH |
CNOOC |
34.10% |
| IN |
Tata Steel |
33.55% |
| SK |
S-Oil |
30.24% |
| IN |
Oil & Natural Gas Corporation |
29.22% |
| CH |
China Shenhua Energy |
28.01% |
| CH |
PetroChina |
25.81% |
| TH |
Thai Oil |
25.18% |
| IN |
Indian Oil Corp. |
23.42% |
| IN |
GAIL (India) |
23.05% |
| CH |
Sinopec |
22.13% |
| IN |
Reliance Industries |
20.25% |
| TW |
China Steel |
19.61% |
| CH |
Wuhan Steel |
18.52% |
| CH |
Baoshan Iron & Steel |
16.63% |
| SK |
POSCO |
15.52% |
| SK |
Hyundai Steel |
14.45% |
| |
| Ranking by total points |
| Country |
Top natural resources company |
|
| TH |
PTT Public Company |
28 |
| CH |
Sinopec |
25 |
| CH |
PetroChina |
24 |
| CH |
CNOOC |
21 |
| CH |
Angang Steel |
17 |
| TH |
PTT Exploration & Production |
16 |
| IN |
Oil & Natural Gas Corporation |
13 |
| SK |
POSCO |
11 |
| TH |
Siam Cement |
10 |
| IN |
Indian Oil Corp |
10 |
| IN |
Reliance Industries |
9 |
| CH |
Baoshan Iron & Steel |
8 |
| IN |
Tata Steel |
7 |
| CH |
China Shenhua Energy |
6 |
| SK |
S-Oil |
5 |
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