This Is Money Reporter
We round up the Sunday newspaper share tips. This week, Midas says China-based gas producer Green Dragon is a buy, and the Sunday Times tips property companies.
MAIL ON SUNDAY
Oil prices have been tumbling and the latest data from China suggests the country is growing at its slowest pace for 25 years.
But the company is expected to produce soaring sales and profits over the next few years and the stock, now 205p, should rise in sync.
Green Dragon is the brainchild of Randeep Grewal, an engineer turned entrepreneur, who has spent the past three decades in the oil and gas industry.
Grewal went to China in 1992, when the country was just opening its doors to foreign investment. After several years of negotiation with the Chinese, he acquired the rights to explore two million acres of land – roughly the size of Devon and Cornwall combined.
Today, the company has drilled almost 2,000 wells and by the end of 2015 its rate of production was equivalent to 12 billion cu ft of gas a year – enough to power 2.3 million Chinese homes.
So far, only 15 per cent of Green Dragon’s wells are connected to China’s gas pipes, but construction is ongoing and the company is expected to produce about 50 billion cu ft of gas a year by 2018.
Green Dragon joined AIM in 2006 and moved to the main market last summer. Some large shareholders have criticised Grewal’s dominant role, as he is chairman and chief executive and owns 55 per cent of the shares. But all this may change over the coming year or so.
Midas verdict: Green Dragon shares were more than 800p in 2011, but the row with Chinese energy companies hit the stock hard and ever since that was resolved the shares have suffered from the falling oil price. This is unjustified.
Gas prices have been relatively stable recently, even as oil has plummeted, and Chinese gas prices are further protected by a government determined to wean its people off coal. Green Dragon is an obvious beneficiary of this strategy and the shares should begin to rebound this year. As the biggest shareholder, Grewal is also incentivised to make the business work. Buy.
Read the full Midas column
The bosses of British Land, Great Portland Estates and Kennedy Wilson Europe shared a podium at an evening event in the British Museum this month. Between them they represent a fair swathe of the property industry.
Apart from “how long will the cycle run?”, the question most pelted at the panellists was: “What can you do to stop your shares trading at a discount?” The answer — to paraphrase crudely — was: “Not very much.”
Despite a run of steady results and decent demand from tenants, shares in property companies have dived below the value of their underlying assets in recent months.
The reasons seem to lie with China and Opec rather than any absence of media companies wanting to rent space in Fitzrovia.
Turmoil prompted by muddling in Beijing and cheap oil has dragged the FTSE 100 down by more than 5% since the start of the year. Listed property tends to move with the market — and stocks such as Land Securities and British Land are very “liquid”, meaning they are easy to buy and sell.
The danger would be if the stock market slump started to affect real businesses.
In the short term, expect property bosses to face questions about share buybacks. While they are unlikely to oblige just yet — one said it would be a “stupid” time to use cash that way — their shares certainly look cheap.
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