3 Asian Energy Companies to Consider as US Ends Sanctions Exemptions on Iranian Crude
- By Sydnee Gatewood
In an attempt to further cripple Iran's crude oil exports, the Trump administration announced on Monday it will not be extending sanctions waivers to countries that import the country's barrels.
This decision means that any country that purchases the commodity from Iran after May 1 could face potential U.S. sanctions, which are designed to deprive the Middle Eastern country's leadership of oil revenue.
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The intrinsic value of XKRX:012700
According to CNBC reporter Tom DiChristopher, the administration issued exemptions to a handful of countries when it reinstated sanctions on Iran's energy industry last November, allowing them to purchase limited quantities. In an already tightening market, the waivers lowered the amount of oil the country could release to the market from 2.5 million barrels per day last year to 1.4 million barrels per day. The new policy could wipe out much of that supply.
Following the announcement, oil prices rose to nearly six-month highs. Late Tuesday morning, Brent crude futures were up by 65 cents, or nearly 1%, at $74.69 per barrel. West Texas Intermediate crude increased by 88 cents, or 1.3%, to $66.43 a barrel.
As a result, investors may want to consider looking for potential value opportunities among other Asian companies in the oil and gas industry that are trading below Peter Lynch value.
Lynch, a renowned investor, developed this method in order to simplify his research process. With the belief good, stable companies eventually trade at 15 times their annual earnings, he set the standard at a price-earnings ratio of 15. Stocks trading below this level are often good investments since their share prices are likely to appreciate over time, creating value for shareholders. In addition, the GuruFocus All-in-One screener looked for companies that have business predictability ranks of at least two out of five stars and have grown revenue by at least 6% per year over the past decade.
The oil and gas companies that met these criteria as of April 23 were The Leadcorp Inc. (XKRX:012700), Delek Drilling LP (XTAE:DEDR) and China Aviation Oil (Singapore) Corp. Ltd. (G92.SI).
Leadcorp
The South Korean oil and gas refiner and marketer has a market cap of 155.55 billion won ($135.9 million); its shares closed at 5,950 won on Monday with a price-earnings ratio of 4.95, a price-book ratio of 0.47 and a price-sales ratio of 0.72.
The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued.
As a result of issuing approximately 290.7 billion won in new long-term debt over the last three years, GuruFocus rated Leadcorp's financial strength 3 out of 10. In addition, the Altman Z-Score of 1.27 warns the company is at risk of going bankrupt.
The company's profitability and growth scored a 5 out of 10 rating. While its margins have declined over the past five years and its returns underperform competitors, Leadcorp is supported by consistent earnings and revenue growth, a moderate Piotroski F-Score of 5, which indicates operations are stable, and a business predictability rank of 2.5 out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 7.3% per year.
No gurus are currently invested in the stock.
Delek Drilling
The oil and gas producer, which is headquartered in Israel, has a market cap of 12.85 billion shekels ($3.56 billion); its shares closed at 10.95 shekels on Monday with a price-earnings ratio of 4.28, a price-book ratio of 4.21 and a price-sales ratio of 16.37.
According to the Peter Lynch chart, the stock is undervalued.
Delek's financial strength was rated 4 out of 10 by GuruFocus. As a result of issuing $1.5 billion in new long-term debt over the last three years, it has insufficient interest coverage. In addition, the Altman Z-Score of 1.41 warns the company is in danger of going bankrupt.
The company's profitability and growth fared much better, scoring a 7 out of 10 rating. In addition to operating margin expansion, Delek is supported by strong returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 4. Its 3.5-star business predictability rank is on watch, however, as a result of a decline in revenue per share over the last 12 months. GuruFocus says companies with this rank typically see their stocks gain an average of 9.3% per year.
No gurus currently have positions in the stock.
China Aviation Oil
The Singapore-based midstream company, which supplies and distributes jet fuel and other petroleum products to airports in the Asia Pacific region, has a market cap of 1.24 billion Singapore dollars ($913.3 million); its shares closed at S$1.44 on Monday with a price-earnings ratio of 9.60, a price-book ratio of 1.18 and a price-sales ratio of 0.04.
Based on the Peter Lynch chart, the stock appears to be undervalued.
Driven by no long-term debt and adequate interest coverage, China Aviation's financial strength was rated 8 out of 10 by GuruFocus. In addition, the robust Altman Z-Score of 13.45 suggests the company is in good fiscal standing.
The company's profitability and growth scored a 7 out of 10 rating. In addition to operating margin expansion, China Aviation is supported by a high Piotroski F-Score of 7, which indicates business conditions are healthy, and predictable earnings and revenue growth. It also has a 2.5-star business predictability rank.
The Matthews Asia Small Companies Fund (Trades, Portfolio) holds 0.30% of China Aviation Oil's outstanding shares.
Disclosure: No positions.
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This article first appeared on GuruFocus.
Warning! GuruFocus has detected 6 Warning Signs with XKRX:012700. Click here to check it out.
The intrinsic value of XKRX:012700
