20230402-招银国际-联合能源集团-00467.HK-A_mixed_bag__volume_growth_is_still_the_key_6页_1mb

UEG (467 HK) Company Update Summary

Core Content Overview

UEG (467 HK) reported a $30%$ YoY increase in net profit in 2022, reaching HK$2.6bn. Excluding impairment losses and depreciation, the core net profit was HK$3.43bn, aligning closely with the forecast of HK$3.5bn. The company generated HK$7.8bn in operating cash flow, a $83%$ increase YoY, which is 3 times the net profit. The firm has not proposed dividends, instead prioritizing capital expenditures (US$0.99–1.05bn in 2023E) to boost production and repay debts in the context of rising interest rates.

Main Points and Key Information

2022 Performance Highlights

• Revenue: Increased by $55%$ YoY to US$2.5bn, driven by a $44%$ rise in realized oil & gas prices and a $7.7%$ increase in sales volume.
• Net Revenue: Grew $45%$ YoY to HK$10.7bn after stripping out government royalties and levies.
• Production: Achieved an average daily working interest production of 100k boed, up $7.7%$ YoY.
• Iraq Block 9: Continued to be the fastest-growing asset, with a $33%$ YoY increase in production to 34.7k boed.
• Asset Performance: Pakistan and Egypt saw production declines of $2.6%$ and $1.6%$ YoY, respectively, while Iraq Siba showed a slight increase.

Cost and Depreciation

• Lifting Cost: Reduced by ~$2%$ YoY to US$4.1/boe, due to a $9%$ drop in unit costs in the Middle East & North Africa (MENA) region, offsetting a $5%$ increase in Pakistan.
• Depreciation: Rose $41%$ YoY to HK$4bn, impacting net profit.

Financial Health

• Balance Sheet: Improved significantly, with the net debt to equity ratio dropping to 1.4% from 10% in 2021.
• Operating Cash Flow: Generated HK$7.8bn, sufficient to cover investment spending and repay HK$1.2bn in bank loans.
• Earnings Forecast: Trimmed by 9.8% and 11.6% for 2023E and 2024E, respectively, due to lower volume, oil & gas prices, and higher depreciation.
• Target Price: Revised down to HK$1.60 from HK$1.77, with a P/E ratio of 10x.

Earnings and Revenue Trends

Key Ratios and Metrics

Investment Recommendation

• Rating: BUY (Maintain)
• Target Price: HK$1.60 (Down from HK$1.77)
• Upside/Downside: 72%

Risk Factors

1. Further decline in crude and gas prices.
2. Risk of impairment loss in Pakistan assets.
3. Higher-than-expected capital expenditures.

Analyst Information

• Analyst: Wayne Fung, CFA
• Contact: (852) 3900 0826, waynefung@cmbi.com.hk

Stock Data

Shareholding Structure

Share Performance

Financial Summary

Income Statement Highlights

• Operating Profit: Increased from FY21A to FY25E, with FY23E at HK$4,523mn.
• Net Profit: Rose to HK$4,853mn in FY25E, up from HK$2,001mn in FY21A.

Cash Flow Summary

• Operating Cash Flow: Increased significantly, reaching HK$10,955mn in FY25E.
• Capex: Expected to be US$7.6bn in FY23E, decreasing in subsequent years.

Balance Sheet Highlights

• Total Assets: Grew from HK$25,032mn in FY21A to HK$40,400mn in FY25E.
• Current Liabilities: Increased from HK$5,093mn to HK$9,621mn.
• Total Equity: Rose from HK$14,240mn to HK$27,636mn.

CMBIGM Ratings

• BUY: Potential return of over $15%$ over next 12 months.
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.

Important Disclosures

• This report is not investment advice and should not be relied upon for making investment decisions.
• CMBIGM is not liable for any losses or damages arising from the use of the information.
• The report is intended solely for the use of the intended recipients and may not be reproduced or distributed without prior written consent.