Clean Energy China Stock Pick - CHNG
Based in the city of
network to the government-owned high-pressure pipeline serving the province. In 2007, CHNG plans to construct its own liquid natural gas plant, which will allow the company to expand the geographic market it serves. CHNG came public in the
each), while at the same time providing gas to filling stations owned by its competitors.
CHNG is focusing on expanding its retail CNG filling stations network because this business offers higher gross profit margins (approximately 39 percent) compared to the gross profit margin of the residential natural gas business (approximately 18 percent). As of the end of 2006, CHNG owned 23 filling stations (including six still under construction, all of which dispense CNG), with plans to have a total of 30 stations in operation by the end of 2007. Due to the fact that wholesale and retail CNG prices (and, therefore, gross profit margins) are set by the Chinese government, the key to increasing revenues and profits in the CNG business will be continuing expansion
of gas volume sold via increasing the size of the company's retail and/or wholesale distribution networks. CHNG is also working on expanding its facilities to include processing liquefied natural gas (LNG), which can be transported via trucks (rather than pipelines), allowing the company to increase the geographic size of its market. Management expects construction of the LNG plant will require $19 million in additional capital once the plant is approved by provincial and city government regulators.
As of August 2006, CHNG has 23.9 million shares outstanding. The company’s chairman owns approximately 25 percent of CHNG’s common shares; CHNG’s CEO owns nine percent. Approximately six percent of CHNG’s shares are held by institutions. For the quarter ending, September 30, 2006, CHNG received 80 percent of its revenues from the sale of natural
gas, of which 93 percent was sales to competitors’ CNG filling stations and seven percent was to household and wholesale consumers. The remaining 20 percent of revenues were related to CHNG’s construction of natural gas pipelines. (In
equity of $23.4 million.
OTC—BB : CHNG
Sector: Natural Gas Distributor