PetroChina Co Ltd: Navigating Gas Pricing Reforms
PetroChina Co Ltd has been actively working on reducing its dependency on oil price volatility, striving for a robust gas demand outlook and improved unit profitability. Total returns year-to-date (YTD) have narrowed to 18%, reflecting a pullback after a peak in July 2024. Management is committed to decoupling earnings from oil price fluctuations, focusing on gas and new energy sectors.
In 3Q24, Exploration and Production (E&P) earnings saw a net improvement of CNY0.7 billion quarter-on-quarter (QoQ), despite a USD6 per barrel decline in oil prices. This was possible due to reduced exploration expenses and unconventional gas subsidies. The average selling price (ASP) for domestic gas increased by 4% QoQ and 2% year-on-year (YoY), thanks to the unification of residential and non-residential gas pricing since 2Q24.
ESG challenges remain, particularly in governance and labor management. However, improvements in gas pricing reforms promise a narrowing gas import loss. The fair value estimate for PetroChina has eased from HKD9.36 to HKD8.51, with an attractive dividend yield of about 8%. The recommendation remains a BUY.
Singapore Exchange Ltd: Riding the Wave of Derivatives Growth
Singapore Exchange Ltd (SGX) has been experiencing significant growth in its derivatives business, with the derivatives daily average volume (DAV) hitting a record high in October 2024. This surge, up 48% YoY, is driven by increased trading in equity index futures, FX futures, and commodity derivatives.
The securities daily value also grew by 36% YoY, reinforcing SGX’s robust market turnover. Retail investors recorded net inflows, reversing outflows observed in September 2024. SGX’s new product offerings, like daily leverage certificates linked to US stocks, further expand its suite of structured products.
SGX’s core earnings per share forecast for FY25 has been increased by 3.3%, alongside a fair value adjustment to SGD12.21. Despite a higher than average staff turnover, SGX maintains strong governance practices and is positioned for sustained growth. The recommendation is to HOLD.
Trip.com: Sustaining Travel Momentum and Growth
Trip.com continues to capitalize on strong travel demand, both domestically and internationally. In 3Q24, the company outperformed expectations with a 15.5% increase in net revenue, driven by resilient travel demand across all segments. The outbound travel sector, in particular, showed a robust recovery, with outbound hotel and air ticket bookings rebounding to 120% of pre-pandemic levels.
Trip.com’s international platform remains a key investment area, with significant growth potential in the upcoming quarter. Management anticipates revenue growth to accelerate in 4Q24, supported by solid demand and stabilizing prices. The company’s long-term growth strategy involves expanding market share and enhancing product offerings.
Trip.com has demonstrated strong cybersecurity measures and business ethics practices, although its corporate governance could improve. The company’s ESG rating was recently upgraded, reflecting better labor management practices. The recommendation for Trip.com is a resounding BUY.
