Investors applaud Sinopec restructuring

China Petroleum & Chemical Corp (Sinopec) impressed the market just over a week ago with a plan to restructure its undervalued fuel marketing division and sell up to 30 per cent of the assets to private investors.

Investors cheered the move, which analysts said would "unlock hidden value" in the division that is the company's biggest profit contributor with a nationwide network of more than 30,000 fuel stations - the world's largest - selling two-thirds of the nation's motor fuel.

The division accounted for 37 per cent of Sinopec's earnings before interest and taxes during the past decade, according to a Barclays research report.

Sinopec's market valuation before the announcement, seven times its estimated profit this year compared to 12.5 times of sector leader ExxonMobil, did not adequately reflect the "hidden value" of the division, analysts said.

The poor profitability of its oil refining operation was the result of state fuel price controls designed to protect consumers, and weak oil production profits due to high costs.

Investors sent its share price up 9.4 per cent the day after the announcement, the biggest gain in almost five years. Following a small retreat, it shot up a further 9.6 per cent over two days after the mainland's China Business News last Wednesday quoted chairman Fu Chengyu as saying that further disclosures about Sinopec's restructuring would be made during the parliamentary meetings in Beijing this month.