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Two Chinese Companies Tapping Into Natural Gas Demand

It seems CLP from its recent bitching and threats of increased tariffs does not know where to look to get its gas supply from – maybe someone should tell them ?


The combination of China’s voracious energy needs and a global surplus of natural gas makes a compelling story for at least two Hong Kong-listed companies.

Enn Energy Holdings and Towngas, two companies that distribute natural gas in mainland China, are potential leaders in Hong Kong, seen as a gateway for foreigners to do business in the world’s biggest emerging market.

At first glance, it’s hard to get excited about companies that hook up homes and factories to natural gas distribution pipelines.

But many analysts say natural gas has a great future in China. It’s a clean-burning fuel, which is a big plus in a country where the big cities sit under clouds of awful air pollution. Reliance on coal and oil have taken a huge toll on the environment.

Supply also plays well for natural gas. The biggest suppliers for China are found in far more stable countries than those for oil.

The top five natural gas exporters in 2010, says the CIA World Factbook, were Russia, Norway, Qatar, the EU and Canada.

The U.S. stood in seventh place, but may rise as fracking adds to supply at a breakneck pace.

Several new gas-liquefaction plants are under construction in the U.S. and Canada to supply gas abroad, especially to China.

These plants will enable China to tap into the U.S. supply glut, which has pushed prices to $2.622 per million British thermal unit. The latest Asian spot gas price, as reported by energy reporting service Platts, is $17.90 per million Btu.

Towngas China distributes piped gas in mainland China. It also builds gas pipelines and operates municipal gas pipelines.

The stock had been building a tight flat base, but Tuesday’s 3% loss pushed the stock below its 10-week average.

The stock shows a nice 1.4 up-down volume ratio, but a poor D+ Accumulation-Distribution Rating. Remember, the Hang Seng, like the Nasdaq and S&P 500, is in a correction.

The company, which reports twice yearly, showed EPS gains of 40% and 48% in the past two halves. Sales climbed 58% and 36% in those reports.

Enn Energy Holdings also operates in the mainland, running gas pipelines and distributing piped and bottled gas.

Enn Energy improved its EPS 25% and 36% in the past two halves, sales by 49% and 34%.

Enn’s Accumulation-Distribution Rating is a solid B, and its RS line is hitting new highs. Enn has built a 12%-deep flat base with a buy point of 29.40.

The oil & gas transport/pipeline group ranks 14th out of Hong Kong’s 142 industries. It’s been one of that market’s leaders the past four weeks.

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