(Shenzhen Daily)
Updated: 2007-03-16 19:10

Sinopec Corp, Asia's top refiner, will pay HK$4 billion ($512 million) in cash for China Resources Enterprise Ltd's Hong Kong petroleum distribution arm, strengthening the oil refiner's foothold in the city.

China Resources, which aims to become the largest consumer company in the country and runs a brewery business with SABMiller Plc, signed a framework agreement with Sinopec on Wednesday on the disposal of China Resources Petrochems Investments Ltd, it said yesterday.

"It will trigger a HK$2.4 billion one-off gain on the sale and we therefore raise (China Resources') 2007 expected earnings per share by 105 percent to HK$1.88," Goldman Sachs said in a note.

But the loss of the petroleum earnings should lead to some minor earnings per share dilution and Goldman cut its 2008 earnings estimate to HK$1.0 per share.

The deal would make Sinopec a dominant oil product distributor in Hong Kong and expand its foothold outside of its main home turf, although the Hong Kong market is small when compared with the mainland.

Sinopec is China's second-largest oil producer and the country's largest refined oil distributor, with more than 28,000 petroleum stations on the mainland but only seven in Hong Kong.

China Resources said the net asset value of the petroleum distribution arm would not be less than HK$1.6 billion and a sale and purchase agreement is expected to be signed in mid-April.

China Resources operates 20 gas and petroleum stations, oil trading, transport and storage businesses in Hong Kong.