Liu Minghui has not disappointed the market since he was reinstated as managing director of China Gas in August. But after soaring 35 per cent in the past month, the company's shares had become unattractive, analysts said. Two months after Liu retook the helm, the firm, one of the mainland's largest gas distributors, signed a preliminary agreement with former hostile takeover bidder China Petroleum & Chemical (Sinopec) on potential joint ventures in liquefied petroleum gas (LPG) retailing and vehicle and vessel liquefied natural gas refuelling. Liu was previously removed from the board while being investigated for alleged embezzlement of the company's assets. However, Shenzhen police decided not to prosecute because of a lack of evidence. The deal with Sinopec came on the same day as the takeover bid by Sinopec and ENN Energy, a rival of China Gas, lapsed. Some analysts believe an LPG joint venture is unlikely, given that LPG distribution is an unattractive business, and wonder if the framework co-operation agreement is a face-saving exercise after the hostile bid collapsed. Others say the vehicle and vessel refuelling venture could be lucrative, as it is expected to be a high-growth business. China Gas reported last month a better-than-expected 116 per cent year-on-year jump in net profit to HK$808 million for the first half, triggering a rally in its shares. Less than three weeks after the interim results, the firm unveiled on Monday a US$400 million acquisition of the gas assets of a rival, London-listed Fortune Oil, controlled by Liu's Hong Kong businessman ally Daniel Chiu Tat-jung. Liu and Fortune have a joint venture that owns 18.4 per cent of China Gas. The assets to be acquired include piped-gas distribution projects in 11 cities, liquefied natural gas refuelling projects for buses and vessels in northeastern China and ports along the Yangtze River, and a project to produce gas trapped between coal seams in Shanxi province. UOB Kay Hian Securities analyst Shi Yan said the refuelling business had high growth potential and complemented China Gas and Sinopec's potential joint venture. UBS' head of global utilities research Stephen Oldfield said in a research note that the coal seams gas project's output ramp-up would provide a key near-term earnings growth driver for the Fortune assets being bought by China Gas. China Gas' shares underperformed those of its peers for almost two years amid prolonged infighting on the board, police investigations of its top managers, antagonistic shareholders' meetings and a drawn-out hostile takeover bid. They have now risen from HK$4.50 a month ago to close at HK$6.06 yesterday. "We think the planned co-operation with Sinopec on liquefied natural gas and this acquisition are both positive, but the share price has risen 49 per cent since the end of October, and we think it is fully valued," Oldfield said.