Time once again to have a quick look at a teaser pick from Nicholas Vardy for his Global Bull Market Alert — a small Chinese oil company that he thinks is under the radar and primed for takeoff. So who is it?
Well, for Vardy’s full answer you’ll need to pony up for a subscription which is “on sale” for $995. But for the low, low price of $0 we can take a look at the clues and identify his stock for you.
So how about those clues, then? Here’s an excerpt from the ad, with most of the clues included so you can play along at home …
“This opportunity is coming from a small, privately-owned Chinese company that operates oil producing wells located in one of central Asia’s most lucrative fields. Since the end of last year, the company’s been establishing itself as a seriously aggressive contender in its very profitable sector. Specifically…
“Management recently diversified the company when it acquired an oilfield services entity …. This will singlehandedly boost revenue estimates for this year by a whopping 50%!
“The company’s net margin of 28% compares with 8.9% for Chevron, 6.5% for Exxon Mobil, 4.3% for Royal Dutch Shell, and 4.1% for ConocoPhillips, making it one of the most efficient oil companies in the world.
“It has a 20-year agreement to sell its oil to the largest gas and oil producer and distributer in China….
“… Since December alone, it’s secured two new contracts totaling 55 new wells in a region of central Asia noted for proven reserves.
“… recently announcing plans to consolidate 36 smaller companies in its industry while increasing the size and scope of its own drilling services.
“With very little debt and more than $33 million in cash on its balance sheet, this company’s positioned itself to be an active player throughout the remainder of 2010.
“But best of all for investors, the company is a bargain right now. It’s extremely undervalued versus its peers and it trades at roughly half the industry average for price-to-earnings ratio (12 vs. 21). It’s equally cheap, based on measures like price to sales, price to cash flow and enterprise value to EBITDA.”
So who is this little private company? (That’s private as in non-government, not private as in “not publicly traded”)
Well, tossing all those clues in the Thinkolator the answer we get seems spot-on:
China North East Petroleum (NEP)
This firm calls itself “the first Chinese non-state-owned oil company trading on the NYSE Amex,” which as far as I know is true — they got their listing on the NYSE back in June, which helped drive the shares up to around $6, and then mergers and improving results and more attention gave them another leg up as Winter began, getting the stock up over $10 for a brief while. The shares currently change hands for about $8.30.
And yes, it is significantly cheaper than most of the big western oil companies, with a PE of about 11 at th