Discounted cash flow valuation of star petroleum refining public company limited.

Abstract

This thematic paper demonstrates how to value the stock price of Star Petroleum Refining Public Company Limited (SPRC) base on discounted cash flow valuation model (FCFF) which represents the concept that the stock price of the firm should reflect its fundamental value in term of cash flow, growth and risk. Considering with the growth opportunity from country demand and new regulation from The International Maritime Organization (IMO) will enhance SPRC’s performance because SPRC has high portion of product which match IMO’s requirement. The year ended 2019 target price of SPRC shall approximately equal to THB 15.90 with 31% from its closing price of THB 12.1 on November 30, 2018. Therefore, the valuation is indicative to “BUY”. In addition, The Company positions itself as high dividend stock and attractive dividend yields with more than 50% of payout ratio. Its dividend yield for 2017 is 7.1% which is higher than an average of SETHD. In conclusion, although the result of valuation shows the company intrinsic value, this method still has some limitations. Therefore, the value must be looked carefully. Besides, the study can only provide a guidance regarding intrinsic valuation for investors and interested person in energy companies.