PetroChina shares fall 7.7 percent
SHANGHAI, China (AP) — A day after its debut in Shanghai, Chinese oil and gas giant PetroChina Co.’s shares fell 7.7 percent in early trading to 40.58 yuan ($5.53) apiece.
PetroChina became the first company with a $1 trillion market capitalization when its 4 billion shares nearly tripled in value Monday over their initial public offering price. The IPO raised 66.8 billion yuan ($8.94 billion) — a record for a mainland exchange.
The buying frenzy was brief, though, and limited to Shanghai.
Overnight on Wall Street, PetroChina’s New York-listed shares fell $32.96, or 13 percent, to close at $222.10. In Hong Kong, where the company is also traded, share values at HK$17.54 are down 11 percent since Friday’s close.
Based on those values, and Tuesday’s share price in Shanghai of 40.58 yuan, the company’s market capitalization would be about $930 billion.
That’s still by far the world’s largest: No. 2 Exxon Mobil Corp. is valued at $488 billion.
However, even that reduced figure may not represent the true value of PetroChina, some analysts warn.
The Shanghai shares, which represent only 2.18 percent of the company’s total outstanding shares, are meant for domestic investors and are generally off-limits to would-be foreign buyers. Chinese investors likewise have limited access to overseas-traded shares, crimping the leeway for arbitrage between the markets.
PetroChina’s state-owned parent company, China National Petroleum Corp., holds about 86 percent of the company’s total outstanding shares, which are not traded.
In a research note Monday, Bear Stearns downgraded the shares to underperform, noting they were trading at a 51 percent premium to the investment bank’s new year-end 2008 fair value and target price.
PetroChina shares have risen 45.6 percent over the past month alone, Bear Stearns said. Time to take profit.
Based on Wall Street consensus forecasts, PetroChina was trading at a 72 percent premium to Exxon Mobil based on a 2008 price-to-earnings valuation. From an operational perspective, we see little reason for this disparity, Bear Stearns said.
When measured by earnings, Exxon remains a much larger company. Its $9.41 billion in third-quarter net profit, while down 10 percent from a year earlier, nearly matched PetroChina’s net profit of 81.8 billion yuan ($10.8 billion) for the entire first half of the year.
Exxon’s oil and gas reserves — a gauge of future profit potential — stood at 22.7 billion barrels by the end of 2006, compared with PetroChina’s 20.5 billion barrels.
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