With China's Oil Demand Up, Watch A-Power Energy 8 comments
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According to a CNBC report, China’s oil demand edged up in October. A Reuter’s graph of China’s imported oil demand clearly indicates a 4.3% increase in October from one year ago. Oil demand recovery, along with the undergoing strong Chinese stock market recovery (see my previous article, “Chinese Stock Market Bottoms: What Should U.S. Investors Do?”), is a pretty certain signal that oil prices may have bottomed. However, this does not mean investors should go long oil, but rather taht renewable energy will definitely be triggered for more growth.
The 5th Round of China-U.S. Strategic Economic Dialogue ended on December 5, 2008, and the two parties agreed to further cooperate on energy and the environment. China's renewable energy market is an important topic in this dialogue.
There is another reason why investors should turn bullish on renewable energy companies which develop products in China, and that is the recent weakening Chinese RMB. The RMB has been rising over 20% against the dollar in the last two years, and analysts predict the Chinese RMB will depreciate in the next 6 -12 months to boost exports. In the last 3 trading days, USD/RMB has depreciated from 6.83 to 6.88. If this trend continues, renewable energy companies such as A-Power Energy Generation (APWR) will benefit from the forex exchange rate and become more competitive.
Beside APWR, in my previous article I mentioned GE, STP, AMSC and YGE. Among other names are LDK Solar (LDK) and Renesola (SOL); however these are under pressure as silicon wafer prices will continue to drop in 2009. AMSC is a US company, but it has local production in China, and this company has significant market share of wind turbines.
APWR appears to be extremely undervalued here. Recently the company posted strong Q3 and reaffirmed 2008 and 2009 earnings. CEO Mr. Lu said in the conference that he expected “strong market demand for efficient power production throughout China and Southeast Asia; we do not expect that our business will be negatively impacted by the global economic slowdown.”
The following are highlights of the recent conference:
- Revenue Q3 was $85.4 million, up 120% from $38.9 million for the same period of the prior year.
- Comprehensive income for Q3 2008 increased to $11.3 million, up 144% from $4.6 million for the same period of the prior year.
- In the third quarter of 2008, we secured a new distributed generation contract in China's Jilin province worth approximately $195 million.
- The company signed a binding MOU with National Power Supply Company, a subsidiary of Advance Agro Pacific, for what is expected to become its largest distributed power generation contract to-date - a $300 million contract to develop a 600 MW distributed power system in Thailand's Chachoengsao province.
- A-Power will have an annual capacity to produce over 1,800 MW of wind turbines, and is expected to become one of the leading wind turbine producers in China.
Disclosure: Author is long STP, AMSC, and GE.
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This article has 8 comments:
www.oiltradersblog.blo...
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Energy
Fri 05 Dec 2008 20:55
China proposes bumping up consumption tax on gasoline, diesel
Shanghai. December 5. INTERFAX-CHINA - China's central government has released a draft policy to raise the consumption tax on gasoline and diesel as of Jan. 1, 2009, as part of the country's plan to reform its fuel pricing system, state media reported on Dec. 5.
Under the proposal, the government would raise the consumption tax on gasoline from RMB 0.20 ($0.029) to RMB 1 ($0.15) per liter, and the tax on diesel from RMB 0.10 ($0.015) to RMB 0.80 ($0.12) per liter, Xinhua news agency reported.
The government would also stop collecting six kinds of transportation fees, including the fee for highway maintenance.
In addition, the government would cap the retail prices of gasoline and diesel, instead of allowing fuel prices to float within a range, the report said. Under the current system, gas stations are allowed to set retail prices within 8 percent of a benchmark decided by the government.
Three Chinese ministries and the National Development and Reform Commission (NDRC) will collect comments on the draft proposal from the public from Dec. 5 to Dec. 12.
this company has over $1B backlog booked, it is only 100M market cap. cash $59M, this is a typical stock that have been beaten down by the market recently and forgotten by investor for the moment, it will pick up quickly with media coverage.
china is choking on its inventories after the massive olympic and price-cut build ups...they have over 30 days of consumption for gasoline (double 2006's level) and 20 days of diesel consumption on hand (4x 2006 levels).
Folks, its a big mistake to extrapolate unsustainable trends. China's hoarding/stockpiling throughout the first half of the year was one of those trends. Those are the anomolies rather than some "new world order" which every oil long and opec member would want you to believe.
quote*Government statistics show that 67,000 factories of various sizes were shuttered in China in the first half of the year, said Cao Jianhai, an industrial economics researcher at the Chinese Academy of Social Sciences. By year's end, he said, more than 100,000 plants will have closed.*end quote!
www.latimes.com/busine...
People in America are getting so tight with a George Washington tat their breath smells like sh!! and they squeak when they walk....they looking at buying American made in orfer to keep George home working for the American consumer not like tat company tat has the star in the name...they support the nice people of China and China export.....
People in America need to realize jus what got America in this shape..."cheap" yes so-call cheap items from a foreign land. quote*Wal-Mart firmly believes in local procurement. We recognize that by purchasing quality products, we can generate more job opportunities, support local manufacturing and boost economic development. Over 95% of the merchandise in our stores in China is sourced locally. We have established partnerships with nearly 20,000 suppliers in China. *end quote! Now! if there be 182 country's making items for the world to buy and they have only 5% of the pie in China...duh! This company makes the nice people of China support their currency(yuan) by keeping it in their country working for the people there.... but with the "yuan" going up in value and the US dollar going down...all the foreign items that the American consumer buys thinking it is cheap has went up in price. People...its all about the currency and to keep a currency strong you got to keep it floating around the country you live in so it can work for you. For the past 12 years all them US dollars are being shipped overseas to a foreign bank and with the American worker not making anything for the foreigner to buy the "we the people" have to turn to the "second" largest employer in America(Uncle Sam) to sell "we the people" debt in order to get all them dollars back! 50 years ago a foreigner would had given their left nut for a US dollar or a Hershey's chocolate bar and today the same foreigner has got Uncle Sam and the American consumer by both all the while Hershey is moving the chocolate factory to Mexico. Wake up! America and think "MADE IN AMERICA."