Saudi Aramco or Saudi Arabian Oil Company, the worlds largest petroleum producer is about to stage an Initial Public Offering.
Initially, Saudi Aramco was striving for a 2 trillion USD valuation, but the Saudi government has tempered its expectations to about 1.7 trillion USD currently.
So what is the intrinsic value of Saudi Aramco? My estimate is that Saudi Aramco is worth about 1.6 trillion USD. Why? Saudi Aramco made a 111 bln. USD profit on 355.9 billion USD of revenue in 2018. Global oil majors like Exxon Mobil and Chevron trade on 20 and 17 times Price to Earnings ratio. So if we apply a Price/Earnings ratio of 15 to Saudi Aramco this would give approximately a 1.6 trln. USD value.
Here it must not be forgotten that Saudi Aramco is essentially a bet on the price of oil. Personally, I think that due to geopolitical soft conflicts the price of oil is bound to rise, no matter the increasing supply from mainly shale oil producers. So, actually, a 1.6 trillion USD valuation for Saudi Aramco may even prove conservative in the next 3-5 years. Yes, I know there is the political risk in Saudi Arabia, but the political risk did not prevent the worlds most profitable company Saudi Aramco to earn 111 billion USD in 2018 alone.
Disclaimer:
The blogposts and comments on this blog and posts on social
networks(Twitter, LinkedIn etc.) are not investment recommendation,
are provided solely for informational purposes, and do not constitute an
offer or solicitation to buy or sell any securities. The opinions
expressed in the blogpost and posts on social networks(Twitter, LinkedIn etc.) are the author's and they in no way express the opinion or official position of the company where I am working currently!
Petar
Vladimirov Posledovich is not liable for any investment losses incurred
by reading and interpreting blogposts on this blog and posts on social
networks.
Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!
Respectfully yours,
Petar Posledovich
No comments:
Post a Comment