Transcript 幻灯片 1 - China Natural Gas

NASDAQ Global Market: CHNG
China Natural Gas Inc.
October 13, 2009
Safe Harbor Statement
This presentation contains "forward-looking statements" within the meaning
of the “safe-harbor” provisions of the Private Securities Litigation Reform Act
of 1995. Such statements involve known and unknown risks, uncertainties
and other factors that could cause the actual results of the Company to differ
materially from the results expressed or implied by such statements,
including changes from anticipated levels of sales, future national or regional
economic and competitive conditions, changes in relationships with
customers, access to capital, difficulties in developing and marketing new
products, marketing existing products, customer acceptance of existing and
new products, and other factors disclosed in the Company’s Annual Report
on Form 10K for the year ended Dec. 31, 2008 and all of the Company’s
subsequent Quarterly Reports on Form 10Q, especially in the “Risk Factors”
sections of these reports. Accordingly, although the Company believes that
the expectations reflected in such forward-looking statements are reasonable,
there can be no assurance that such expectations will prove to be correct.
The Company has no obligation to update the forward-looking information
contained in this presentation.
2
Company Overview
Business
China’s Leading Provider of Natural Gas Services
Headquarter
Xi’an, China
Capital Market
Timetable
• Established in January 2000
• Listed in OTC BB in December 2005
• Upgraded to NASDAQ Global Market in June 2009
Capital
Structure
NASDAQ: CHNG
Price (09/25/09): $11.96
Shares Outstanding.: 21.2 million
Three Month Avg. Trading Vol.: 139k
Market Cap: $253.4 million
Financials
Fiscal Year
Revenue
Net Income
2009 E
$78-83 million
$17.5-18.5 million
2008 A
$68 million
15.2 million
3
Investment Highlights
Large & Growing Market Opportunity for Natural Gas
Strong Government Support For Clean Energy Industry
High Brand Recognition and Market Leadership
Strategic Cooperation with CNPC for CNG Expansion
Large LNG Project Augments Long-Term Growth
Proven Management Team – Achieved Revenue CAGR ’06-’08 of 53%
China Natural Gas is Uniquely Positioned to Capitalize on China’s
Expanding Natural Gas Market
4
Introducing CHNG
CHNG Overview
• A leading provider of compressed natural gas (CNG) for vehicular fuel and pipeline
natural gas (PNG) for industrial, commercial and residential use
• 35 fueling stations for taxis and buses in Shaanxi (23 stations) and Henan (12 stations)
• Almost 150 million Nm3 sold in FY2008
• CNG suppliers include PetroChina Changqing and Shaanxi Natural Gas Co. among others
Xi’an City, Shaanxi Province
• Population: 8.3 million(1)
• Number of Vehicles: 940,000(2)
• GDP CAGR 17.4% from 2003 to
2008 (national average of 17.2%)
Henan Province
• Zhengzhou, Kaifeng, Xuchang
• Higher retail pricing
• Higher potential as car conversion
rate increases
(1) Xi’an Municipal Government as at December 31, 2007
(2) Xi’an Vehicle Management Bureau statistics as of December 31, 2008
5
Growing Footprint in the Natural Gas Industry Supply Chain
Retailing of CNG
Processing
Tank Truck Fleet
CNG Fueling Stations
Distribution of
CNG
CNG
CNG
Residential, commercial, industrial
consumers
Exploration /
Production
Transmission
PNG
Liquefaction/
Processing of
LNG
Distribution/
Delivery of
LNG
LNG
CHNG’s existing core businesses
Utility/Power
Plants/Industrial customers
LNG
CHNG’s core businesses under development (LNG plant currently under construction,
expected to commence production by January 2010)
6
Improving Delivery Infrastructure Will Drive Gas Usage Rate
Phase 1 of West East
Pipeline constructed in
2004
Phase 2
Phase 2 will be
completed in 2011
Three pillars of PRC’s gas
supply are onshore
(Northwest), imported (LNG)
and piped (gas from Russia)
Phase 1
Xi’An
Xi’an is the central hub for China’s gas delivery
from key Northwest region
7
High Growth Through Sustainable Competitive Advantages
Operating History
2005
2006
2007
2008
2009
2009E
First CNG
fueling station
business in
Xi'an
LNG project
launched
Construction of
LNG
processing and
distribution
plant started
$40MM debt
financing with
Abax Lotus
completed
NASDAQ
Global Market
Listed
Construction of
LNG Project
expected to be
completed before
end of 2009
$4.9
1
$18.8
11
$35.4
24
$67.7
35
39.3MM nm3
83.7MM nm3
147.7 MM nm3
Total Revenues ($MM)
CNG Fueling Stations
CNG Sold Through Fueling Stations
Dominant Supply Position and Operations
• Strong Government Relations
• Supply Contracts with PetroChina and Shaanxi Natural Gas
• Perfect Safety Record
• Strategic Location near Natural Gas Supply Pipeline
• Successful Track Record of Organic and Acquisition Growth
8
Increasing Diversification of Revenue Sources
2009
2010
Vehicle
Conversion
Liquefied Natural Gas
Piped Natural
Gas
CNG Refueling
Stations
Vehicle
Conversion
CNG Refueling Stations
Piped Natural Gas
LNG production will commence in January 2010
9
Business Segments
CNG Fueling Stations
Piped Natural Gas
LNG
10
Comprehensive Filling Station Network Drives Volume
Key Locations
• Taxis refill 3-4 times a day; buses 1-2
times
• Our network must provide them with
accessible locations throughout the city
• Taxis take 2 minutes to refuel; buses take
6 minutes
Network Statistics
• Ownership of 23 stations in Shaanxi
Province
• 12 owned stores in Henan Province
• 35 stations in total
11
CNG Business Model: Strong Cash Flow Annuity
Fueling Stations / Sales Volume Analysis
Revenue and Gross Margin Analysis
60
140
120
16
100
15
12
11
10
8
80
60
40
5
50
2007
50.0%
48.6%
30
53,225
20
48.0%
46.0%
45.7%
26,736
10
44.0%
12,439
0
2006
52.0%
40
20
0
52.2%
Margin (%)
Revenue (millions)
Shaanxi
Henan
Sales Volume
Revenue (US$)
Gross Profit
3
20
160
23
Volume (000s m )
Number of Fueling Stations
25
54.0%
0
2008
42.0%
2006
12
2007
2008
Self Built and Acquired Stations Both Attractive
USD '000
Shaanxi Province
Henan Province
Self-built* Acquired (1)
Self-built* Acquired (1)
Filling Station
Tankers (2); Locomotive (1)
$1,300
$400
$2,000
$400
$1,300
$400
$2,000
$400
Total Investment
$1,700
$2,400
$1,700
$2,400
Annual sale volume ('000 m3)
Average sale price net of VAT ($/m3)
4,889
0.34
4,889
0.34
4,037
0.41
4,037
0.41
Annual revenue
$1,673
$1,673
$1,675
$1,675
Gross margin (%)
52.5%
52.5%
54.1%
54.1%
751
751
793
793
44.9%
44.9%
47.3%
47.3%
2.26
3.19
2.14
3.03
EBITDA
EBITDA (%)
Cash Payback period (years) (2)
Historical cash payback between 2 and 3 years
(1)
Based on negotiated prices to date
(2)
Defined as EBITDA/Initial Capital Investment + Gas Inventory
13
New Joint Venture with CNPC
中石油昆仑
CNPC Kunlun Limited
Scope
Co-development of CNG fueling stations along West
East Pipeline
Initial Investment /
Ownership
CHNG invests $3.6m for 49% stake
CNPC invests $3.7m for 51% stake
CHNG has 2 of 5 board seats and CEO appointee rights
CHNG Role
PetroChina Role
Day to day operation of fueling stations
5 planned in 4Q’09
Gas supply
14
Vehicle Conversion Businesses
Vehicle Conversion Service
• 4 CNG conversion workshops in
Xi’an
• Target customers: taxis, public
transportation vehicles and fleet
vehicles
Daily Savings
Other Benefits
Daily taxi fuel cost (based on
250 miles per day)
$20.8
• Significantly reduced harmful
emissions (87% less NO2; 70% less
CO; 25% less CO2)
50% savings
• Longer service life – up two to three
years over gasoline or diesel engines
Gasoline
$10.3
CNG
• Reduced maintenance requirements
* Data source: Honda
Motor Company
40 to 60 day payback period for taxi conversion
15
Business Segments
CNG Fueling Stations
Piped Natural Gas
LNG
16
Piped Natural Gas Businesses
Piped Natural Gas
• 120 km high pressure natural gas pipeline
• Franchise monopoly rights for 40 years
• 103,000 residential and industrial users (growing 10% annually)
• 8 service areas
• Gas provided by Shaanxi NG (SOE)
• Regulated pricing
17
Business Segments
CNG Fueling Stations
Piped Natural Gas
LNG
18
Our 150MM m3 Gas Liquefaction Project in Yulin, Shaanxi
Liquefaction/Processing
Upstream supply
sourced from
Petro China
•
•
•
•
Distribution/Delivery
Net Capacity is 150 million normal m3
100% already committed
EPC contractor is Chemtex
Customer reach up to 1,600 km radius (Guangdong,
Guangxi, Fujian)
We are the only licensed supplier in Shaanxi Province
19
LNG Project: Attractive Economics
• $45MM total cost; $32MM invested to date
• PetroChina supplying natural gas at their well head price
• 150MM m3 per annum commitment
• Strong government assistance for utility infrastructure
• Highly automated plant will save labor costs
• Retail price USD 0.48 per m3 includes transportation up to 1,600 km
• Additional savings by using own transport tankers
We project to recover our $45 million total investment in less
than 3 years from commencement of production
20
LNG Project on Track
Yulin, Shaanxi
LNG Project Completion Blueprint
• Center of the Ordos Basin
• 1 km from PetroChina Changqing
natural gas purification factory
• 25 acres of land for phase 2 and 3
expansion
• 320 billion cubic meters reserves
• Expected to be the major
transport hub
Purchase
Contract for
Equipment
2Q’07
Commence
Construction
Commercial
Operation
4Q’09 1Q’10
1Q’08 2Q’08
Secure
Financing to
Fund Plant
Trial Testing
21
4Q’10
Purchase
Transport
Tankers
Liquefied Natural Gas (LNG) Target Customers
Key Target Customers
Key Target Geographic Markets
• Natural gas power plants
• City gas companies covering industrial,
commercial and residential end users
• LNG fueling stations in cities and ocean ports
• The industrialized and urbanized eastern and
southern coasts of China
East China
South China
Strategic Customers
Customer/Industry
Contracted Volume
Gas fired power plant
70MM Nm3
Municipal gas distributor
50MM Nm3
Municipal gas distributor
Municipal gas distributor
20MM Nm3
20MM Nm3
160MM Nm3
22
Explicit Policy Support for Natural Gas
Central Government
• 11th 5-Year Plan: Reemphasized natural gas usage at expense of coal
• 2007 Energy Law: Provided legal infrastructure for natural gas market
Key PRC Mandates
National Development and Reform Commission
Increase the use
of natural gas
Reduce
consumption
of coal
Market
oriented
price
mechanism
• Energy blueprint (2007)
• New policy submitted in May 2009 further
supports natural gas development
• CNG/Gasoline hybrid vehicles a top priority
Provinces and Cities
Subsidies and
beneficial tax
policies
• Demand driven support via conversion
subsidies for cabs and buses
• 1999 Clean Auto program implemented in 12
key cities
23
Robust Growth Since Broad Introduction 10 Years Ago
Natural Gas Consumption in China by Sector(1)
Volume in billions m3
80
Electricity Plants
70
Heat Plants
Energy Sector
60
50
40
Industry Sector
T ransport Sector
Residential
Commercial, Public Services
Feedstack Use in Industry
30
20
10
0
2000
2001
2002
2004
2003
2005
2006
2007
Industry and residential sectors both demonstrate high demand
(1)IEA,
Natural Gas in China, Market Evolution and Strategy (June 2009)
24
Addressable Market Still Very Large
Annual Consumption
Total Reserve
Billion Cubic Meters
Billion Cubic Meters
750
7000
653
5,978
6000
5000
500
4000
3000
2,266
250
2000
70
1000
0
0
U.S.
U.S.
China
China
China Natural Gas vs. Total Energy Usage
U.S. Natural Gas vs. Total Energy Usage
O thers
97%
O thers
76%
N atural Gas
24%
N atural Gas
3%
Available supply, government motivated by environmental concerns
Source: US Energy Information Association, 2007; PRC Statistical Year Book, 2007
25
Competition By Business Line
CNG filling
stations
Piped
Natural
Gas
LNG
Xi’an City: Xi’an Municipal NG (15 stations), another 35
privately owned (We dominate 1/3 Market)
He’nan: Zhengzhou NG (8 stations)
Xi’an City: Shaanxi Qinhua (JV with HK Town Gas – 0384.HK)
790,000 customers
Xinjiang Guanghui (600256.SH): 450MM m3 facility, FY08 sales
of 306MM m3
Xinao Gas (2688.HK): 270MM m3 in two facilities (Shanxi and
Ningxia), Operations began in 2009
26
Comparable Peer Valuation
Sales(1)
Ticker
CHNG
Company Name
Share Price
Market Cap
(9/28/09)
EPS(1)
P/E(1)
2008A
2009E(2)
2008A
2009E(3)
2008A
2009E
China Natural Gas Inc
11.99
254.0
67.7
80.5
1.04
0.85
11.5x
14.1x
135 HK
Cnpc Hong Kong Ltd
0.75
3,365.8
5,208.3
5,254.0
0.09
0.03
8.4x
22.2x
SNEN
Sinoenergy Corp
1.31
20.9
40.9
n/a
1.02
n/a
1.3x
n/a
600256 CH
Xinjiang Guanghui
Industry
2.26
2,125.0
1,985.6
2,692.7
0.07
0.09
30.9x
25.3x
CLNE
Clean Energy Fuels Corp
14.80
883.5
129.5
134.0
(0.90)
(0.15)
n/a
n/a
2688 HK
Xinao Gas Holdings Ltd
1.97
2,065.0
8,265.5
10,050.0
0.09
0.11
21.9x
17.4x
3928 HK
Zhengzhou Gas Co Ltd
2.09
260.3
1,028.8
1,196.0
0.17
0.22
11.9x
9.5x
1083 HK
Towngas China Co Ltd
0.35
676.9
4,409.2
3,166.9
0.01
0.02
26.1x
21.6x
Avg (ex CHNG) :
16.8x
19.2x
Median (ex CHNG) :
16.9x
21.6x
Peers
Figures in millions except per share data. Conversion rates: US$1.00 = CNY6.83 = HKD7.75
(1)
(2)
(3)
Source: Bloomberg; Company guidance;
2009 estimated revenue is the middle point of our guidance: $78 M - $83 M;
The 2009 estimated EPS is the middle point of our net income guidance, $17.5 M - $18.5 M divided by the latest share count, 21.2M;
27
Growth Strategies
Expand
Compressor
Station’s
Production
Capacity
Increase Market
Share in
Existing Markets
Ensure
Adequate
Supply of
Natural Gas
Expand
Geographical
Coverage
Pursue
Strategic CNG
Acquisitions /
Cooperation
Diversify into
LNG business
28
Robust Revenue Growth
Consolidated Revenues
(USD in millions)
70
$67.7
65
7.4
60
4.6
55
50
45
$39.3
40
$35.4
35
5.8
$30.9
7.1
30
55.7
25
20
$18.8
15
5.1
30.7
28.3
25.1
10
5
2.8
3.5
2.3
13
0
2006
Natural Gas
2007
2008
Gasoline
1H2008
1H2009
Construction/Installation and Other
29
Consistent Financial Margins
49.1%
50.7%
48.3%
44.5%
32.7
25.8%
22.4%
20.5%
17.4
15.2
Gross Profit
Source: Audited Financials
20.5%
13.8
9.1
2007
19.9
6.3
8.1
2008
1H2008
1H2009
Net Income
Gross Margin
Net Margin
30
Solid Balance Sheet
Summary Balance Sheet
As of December 31
(USD In millions)
As of June 30
2007
2008
2009
$13.3
$5.9
$9.7
Accounts Receivable
0.3
0.9
1.0
Current Assets
15.7
9.6
14.0
Total Assets
53.3
118.3
131.3
Total Current Liabilities
2.1
4.6
7.2
Long Term Liabilities
0.0
42.0
45.5
Shareholder's Equity
$51.2
$71.6
$78.6
Long Term Liabilities/Equity
0.0%
58.7%
57.8%
Cash
31
Strong Working Capital Position
Compress Natural Gas (CNG)
• CHNG prepays suppliers 15-30 days in advance
• Buses prepay CHNG 1 month in advance
• Taxis pay CHNG with cash
Liquefied Natural Gas (LNG)
• CHNG prepays suppliers 1 month in advance
• Customers pay CHNG 15-30 days in advance
Pipeline Natural Gas (PNG)
• CHNG prepays suppliers 15-30 days in advance
• Customers pay CHNG with cash
Consolidated DSOs
• FY2007 – 4.5
• FY2008 – 3.2
• 1H2009 – 4.3
Cash Flow from Ops
Capital Expenditures
• FY2007 – $10.5MM
• FY2008 – $20.9MM
• 1H2009 – $14.4MM
• FY2007 – $14.7MM
• FY2008 – $62.2MM
• 1H2009 – $10.4MM
32
Experienced and Proven Management Team
Name
Qinan Ji
Chairman
and CEO
Jing Chen
CFO
Bin Wang
Chief Engineer
Experience
•Acquired CHNG in 2003
•Over 20 years experience in the energy business
•Bachelor of Economic Management from Northwestern
University (Shaanxi)
•Joined CHNG in May 2009
•20 years in accounting and finance
•Prior CFO to China Valves Technology (CVVT.OB) and
Origin Agritech (SEED)
•CPA, Ph.D. and MBA
•Joined former company in 2001
•More than 10 years in energy project engineering
•Responsible for maintenance, safety and new construction
•Bachelor in Engineering from Nanchang Hangkong
Industry College
33
Summary
Large & Growing Market Opportunity for Natural Gas
Strong Government Support For Clean Energy Industry
High Brand Recognition and Market Leadership
Strategic Cooperation with CNPC for CNG Expansion
Large LNG Project Augments Long-Term Growth
Proven Management Team – Achieved Revenue CAGR ’06-’08 of 53%
China Natural Gas is Uniquely Positioned to Capitalize on China’s
Expanding Natural Gas Market
34
Contact Info
Company – China Natural Gas, Inc.
Investor Relations – ICR, Inc
Ms. Veronica Chen – CFO
19th Fl Building B, Van Metropolis Tang Yan Rd
Hi-Tech Zone | Xi’an, Shaanxi, China
Tel: (86) 29-8832 7391
Email: [email protected]
Mr. Michael Tieu
11th Fl, North Tower, Kerry Centre, 1 Guanghua Rd
Chaoyang District, Beijing, China 100020
Tel: (86) 10 6599 7960
Email: [email protected]
US Contact:
Tel: (212) 401 1233, (917) 885 2981
Email: [email protected]
China Contact:
Tel: (86) 29-8845 4353, (86)1399 287 9998
Legal Counsel – The Crone Law Group
Auditor – Moore Stephens Wurth Frazer
and Torbet LLP
Mr. Mark E. Crone
101 Montgomery St. Suite 1950
San Francisco, CA 94104
Tel: (415) 955 8900
Email: [email protected]
Ms. Susan Woo
135 South State College Blvd, Suite 300
Brea, CA 92821
Tel: (714) 990 1040
Email: [email protected]
35