NewOcean Energy's LPG volumes took a 5.4% YoY dip

Transportation volumes declined as well.

New Ocean Energy’s LPG volumes fell 5.4% YoY, while, most critically, transportation volumes were down 2.7% YoY.

According to a research note from Maybank Kim Eng, this was brought about by the Guangzhou municipal government’s decision to switch 500 public buses from LPG to LNG ahead of schedule.

As a result, NOE and Sinopec will accelerate the conversion of six existing sites into LNG stations before the end of 2015 instead of 2016 as originally planned.

Here’s more from Maybank Kim Eng:

Marine bunkering and the refined product division were way ahead of our expectations.

Gross margin reached 3.3% vs our projection of 1% for 1H14.

We believe with the completion of storage tanks, bonded warehouse licence momentum should carry into 2H14.

NOE has already secured six JV partners for its auto LNG operations.

We believe this segment will allow NOE to deliver highly visible earnings and cash-flow growth beyond FY16F.

We project NOE to deliver 25.3% earnings CAGR in the next two years, and momentum should continue beyond FY16F.

With solid delivery, we believe NOE’s valuation will converge with its natural gas peers in China.

Our TP is based on 11.5x 12-month forward EPS, or 43.5% discount to its peers due to size and liquidity factors.