Is PetroChina a Good Buy Right Now?

PetroChina (SEHK: 0857) is one of the largest oil and gas producers and distributors in China.

The recent collapse in oil prices has put tremendous pressure on the company. Year to date, PetroChina’s stock price has fallen by more than 30% to HK$2.78.

This has attracted bargain hunters who want to know whether the stock is a good buy at its current price.

I’m going to attempt to answer this question by comparing PetroChina’s current valuation with the market’s valuation.

To do this, I will use the iShares MSCI Hong Kong Index Fund (NYSEARCA: EWH) as a proxy for the market.

The iShares MSCI Hong Kong ETF is an exchange-traded fund that tracks the MSCI Hong Kong Index, a market-cap-weighted index made up of a diverse selection of small-, large- and mid-cap stocks primarily traded on the Hong Kong Stock Exchange.

Valuation

The two valuation metrics I will focus on are the price-to-book (PB) ratio and price-to-earnings (PE) ratio.

PetroChina currently has a PB ratio of 0.4, which is lower than that of the iShares MSCI Hong Kong ETF’s PB ratio of 1.2. Similarly, its PE ratio of 8.5 times is lower than the ETF’s PE ratio is 12.9.

Overall, we can conclude that PetroChina is trading at a discount to the market average.

Dividend

Investors should also consider that PetroChina has paid a dividend for more than a decade.

In 2019, the company paid a dividend per share (DPS) of HKD0.0898, and PetroChina may announce a final dividend when it reports its full-year result. For reference, it paid out a total DPS of HK$0.2089 in 2018.

If the company can sustain its 2018 dividend, investors are getting a dividend yield of about 7.5% at the current share price.

Foolish conclusion

In sum, PetroChina is trading at an appealing valuation right now. Moreover, investors are rewarded with good dividend in the short term as they wait for its valuation to improve over the long run.

分享給你的朋友