About a year ago UOB Kay Hian said that China Oilfield Services (COSL), the first listed integrated oilfield services company in China, should benefit from integration after restructuring. The company was created after seven operating units held by CNOOC were combined. It had an expanding asset base with 12 drilling rigs and more than 60 vessels. COSL would provide one-stop services to clients through all phases - exploration, appraisal, development and production - of offshore oil and gas projects. The broker forecast an 18 per cent compound annual growth rate in net profit from 2002 to 2004 from a combination of volume and margin expansion. COSL was trading at 17 times current earnings and 4.3 times enterprise value to earnings before interest, tax depreciation and amortis-ation (EV/ebitda). Applying a 20 per cent discount to the current EV/ebitda of global peers to allow for lower technology and country risk, the broker set a price target of HK$2.40 on the stock, an upside of 30 per cent. It was trading at $1.86 about a year ago. In March COSL announced a 31.46 per cent rise in net profit to 465.9 million yuan for 2003. Its drilling operation, which contributed 41.9 per cent of total turnover of 3.06 billion yuan last year, saw turnover rise 21 per cent to 1.28 billion yuan. The counter closed at 2.275 on Friday.
