[ET Net News Agency, 9 December 2020] J.P. Morgan assumed coverage of CNOOC (00883) with
an "overweight" rating and a target price of HK$9 (was HK$11.13).
Despite being one of the lowest-cost oil producers in Asia, CNOOC's share price is down
20% since June, underperforming the recent recovery in oil prices (Brent +19%). The
research house attributed this to investor concerns on geopolitical tensions (South China
Sea, Taiwan, US-China).
With President-elect Joe Biden set to take office on 20 January, JPM thinks risks are
largely priced in, and the company's recent share price weakness offers favorable
risk-reward. It sees potential for CNOOC to generate Rmb58bn net profit in a US$60/bbl oil
environment, and Rmb29bn in a US$45/bbl oil environment, which when applying 10x P/E,
implies a trading range of HK$7-13/share. (KL)