Singapore Petroleum Company Financial Analysis
Contents
INTRODUCTION 2
Industry Analysis 2
FINANCIAL RATIOS ANALYSIS 3
MARKET BETA 5
Analysis of SPC’s beta 5
Comparison to peers’ beta 5
STOCK PERFORMANCE ANALYSIS 6
Unsystematic Risk 7
Industry level 7
Firm level 7
COST OF EQUITY 8
COST OF DEBT 9
Analysis between competitors 9
IMPACT OF CORPORATE EVENT 10
Reason to such a huge reaction 11
Potential effect on SPC’s future performance 11
INTERESTING FACTS 11
Beyond the conventional CSR efforts 11
INTRODUCTION
Singapore Petroleum Company (SPC) is a Singapore-based oil company. Its principal activities consist of refining services, exploration and production. SPC’s core earnings driver is its refining business, making up 98% of its sales revenue. It provides oil products primarily to the Singapore market. It is also the dominant jet oil supplier in Changi Airport. Exploration and Production (E&P) forms a mere 2% of its entire business. In order to increase their regional footprint, they acquired Bohai Bay Blocks, China, Oyong and Kakap Blocks in Indonesia in 2007. SPC’s corporate strategy is to expand its E&P business by further investing in oil and gas producing assets, while developing the existing acreages. This would enhance shareholder value and ensure long term growth.
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Source: Company Data Source: Company Data
Industry Analysis
The oil refining industry poses high barriers to entry and exit due to the high capital investment required. Thus, this industry is oligopolistic in nature and is dominated by only a few large players. In fact, much of the energy industry is ruled by large, vertically integrated oil companies. These companies look after all factors of production, refining and marketing.[1]
The refined oil products market is boundless: companies can set up refineries and sales outlets in other countries to increase their distribution network. As Singapore’s only home grown oil refiner, SPC faces little competition in the domestic market.
INTRODUCTION 2
Industry Analysis 2
FINANCIAL RATIOS ANALYSIS 3
MARKET BETA 5
Analysis of SPC’s beta 5
Comparison to peers’ beta 5
STOCK PERFORMANCE ANALYSIS 6
Unsystematic Risk 7
Industry level 7
Firm level 7
COST OF EQUITY 8
COST OF DEBT 9
Analysis between competitors 9
IMPACT OF CORPORATE EVENT 10
Reason to such a huge reaction 11
Potential effect on SPC’s future performance 11
INTERESTING FACTS 11
Beyond the conventional CSR efforts 11
INTRODUCTION
Singapore Petroleum Company (SPC) is a Singapore-based oil company. Its principal activities consist of refining services, exploration and production. SPC’s core earnings driver is its refining business, making up 98% of its sales revenue. It provides oil products primarily to the Singapore market. It is also the dominant jet oil supplier in Changi Airport. Exploration and Production (E&P) forms a mere 2% of its entire business. In order to increase their regional footprint, they acquired Bohai Bay Blocks, China, Oyong and Kakap Blocks in Indonesia in 2007. SPC’s corporate strategy is to expand its E&P business by further investing in oil and gas producing assets, while developing the existing acreages. This would enhance shareholder value and ensure long term growth.
[pic] [pic]
Source: Company Data Source: Company Data
Industry Analysis
The oil refining industry poses high barriers to entry and exit due to the high capital investment required. Thus, this industry is oligopolistic in nature and is dominated by only a few large players. In fact, much of the energy industry is ruled by large, vertically integrated oil companies. These companies look after all factors of production, refining and marketing.[1]
The refined oil products market is boundless: companies can set up refineries and sales outlets in other countries to increase their distribution network. As Singapore’s only home grown oil refiner, SPC faces little competition in the domestic market.