Relatives valuation of star petroleum refining public company limited.

Abstract

This thematic paper demonstrates how to value the stock price Star Petroleum Refining Public Company Limited (SPRC); the concept of multiple valuation models is applied to find the intrinsic value of SPRC. In this paper, Price to Earnings (P/E) Ratio, Price to Book Value (PBV) Ratio, and Enterprise Value to Earnings before Interest, Taxes, Depreciation and Amortization (EV/EBITDA) Ratio are used to find the value of SPRC. All multiples are calculated by using trailing ratios from Thomson Reuters and are in comparison with domestic refineries, namely IRPC, ESSO, Bangchak and Thaioil. SPRC is only one pure refinery in Thailand located in Rayong province. The refinery is a complex cracking refinery with a capacity of 165,000 barrels per day, representing 13% of the total capacity in Thailand. The interesting point is that at first glance, SPRC may be perceived as low value company because the company neither has integration into downstream nor expands into other related businesses like other refineries. However, based on the valuation result, “BUY” is recommended for SPRC. Even each individual result from different valuation methods including Discounted Cash Flow Method indicates that the company is still worth to trade at premium.