By Andrew Hobbs

CHINA-based petroleum distributor Premiere Eastern is considering an acquisition of service stations in the outer suburbs of Chinese cities as it plans to launch its retail division.

Speaking at an investor luncheon in Perth in April, company deputy chairman David Wheeler said the company was aiming to take advantage of demand from China’s burgeoning middle class.

“In China the vast majority of the so-called petrol stations or kiosks are close to the centre of the cities, and they are on expensive leases – all the land is privately owned,” he said.

“What we’ve done is focus our attention on the outer regions… anyone who is familiar with China will know that all the cities are based around a ring-road system, so the further out you get, the closer you get to the larger arterial road systems.”

The company was negotiating with a business that had five sites, including a branded flagship site which he said had been operating for about a year.

“To develop a site from scratch based on about 25,000 litres a day or more is going to cost somewhere between $3 million and $5 million, depending on how you spec it,” Mr Wheeler said.

“What that does is it gives us an accelerated opportunity to take our growth strategy maybe two years ahead of where we predicted it in our prospectus.”

The plans are among a series of options the group is considering to grow revenue as a supply chain manager of refined petroleum and other petrochemicals.

Based in China’s Guangdong Province the company distributes petrochemical products including sourcing, storage, shipping, sales and marketing and after-sales services throughout the nation’s south.

The company had aimed to raise up to $15 million in its initial public offer on the Australian Securities Exchange, making its debut in February having raised $3.5 million.

Aside from developing the service stations, Premiere had also planned to use the money to improve its economies of scale by expanding the range of petrochemical products it distributed.

Mr Wheeler told the luncheon he was keen to use equity for future fund raisings, but added that debt markets posed an attractive opportunity for the group.

“I suspect that the company will be forecasting a capital requirement in the order of A$50 million and I suspect half of that, or maybe slightly more, will come from our own cash reserves and the balance will come from a mixture of equity in a transaction and debt,” he said.

Premiere owns a petroleum storage facility located in Longkou City, in China’s Shandong Province, with a total petroleum storage capacity of 13,500 cubic metres, which it can use to ship petroleum to customers across southern China.