Disclaimer

Disclaimer:-Please note that all such analysis is provided by way of information only. All of the information was and should be taken as having been prepared for the purpose of reference only and that none were made with regard to any specific investment objective, financial situation or the needs of any particular person who may receive the analysis. Any recommendation or advice that may be expressed in or inferred from such analysis therefore does not take into account and may not be suitable for your investment objective.

Saturday, June 7, 2008

Sky Petrol Research Report

by DMG & Partners (3 June)

Revenue for the 1Q2008 increased 92% y-o-y from $5.1m to $9.7m mainly due to the two added business segments of extraction and drilling Services. NPAT, however, only increased by 10% y-o-y for the period.

This boiled down to lower gross profit margins (which cannot be directly compared to 1Q2007 due to change in business segments) and higher finance costs from the convertible bonds with US-based Apollo Management.

Gross margins for 1Q2008 fell 15.9 ppt from 61.9% to 46%. In light of Sky China Petrol's difficulties faced towards expanding the number of oil wells it can work on, coupled with normalising margins and our assumptions of subsiding oil prices, we have lowered out revenue estimates by 10.5% from $53.5m to $47.9m, and EPS estimates by 39.1% from 7.8 cents to 4.8 cents in FY2008.

This lowers our 12-month target price to a PER multiple of 9 times.

-Research Report by DMG & Partners(3 June)
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