Date post: | 12-Jan-2015 |
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• HPL was incorporated in 2001 under the Companies Ordinance, 1984 primarily to take advantage of the petroleum sector deregulation and undertake a program for owning, leasing and renting oil storage facilities as well as importing petroleum products for its own account.
• In February 2005 HPL was granted a full marketing license by the Government of Pakistan and since then, HPL has been engaged in developing a retail network and storage facilities under the Hascol brand and by 31st December 2013 the Company had commissioned approximately 210 retail outlets across Pakistan and this number is expected to reach 291 by the end of 2016.
INTRODUCTION
Company Market Share(%) Listing Status No. of Retail Outlets Market Price*
Pakistan State Oil 63.12 Listed 3,760 PKR 420
Shell Pakistan Limited 9.91 Listed 798 PKR 284.50
Attock Petroleum Limited 9.10 Listed 362 PKR 549.10
Chevron Pakistan Limited 4.43 Branch Office 518 -
Total-Parco Pakistan Limited 3.80 Non Listed 260 -
Hascol Petroleum Limited 2.70 Under Listing 210 PKR 56.50**
Byco Petroleum Limited 1.70 Listed 219 PKR 11.22
Bakri Trading Co. Pakistan (Private) Limited
1.79 Pvt. Limited 47 -
Askari Oil Services (Private) Limited
0.14 Pvt. Limited 294 -
Overseas Oil Trading Co. (Private) Limited
0.11 Pvt. Limited 109 -
Zoom Petroleum (Private) Limited 0.05 Pvt. Limited 12 -
Admore Gas (Private) Limited 0.05 Pvt. Limited 442 -
Pearl Parco (Private) Limited 3.10 Pvt. Limited (Non OMC) 0 -
(Source: OCAC Oil Report July-Dec- 2013)*Price quoted as at April 23, 2014**Price determined through Dutch Auction Method
Market Share of Oil Marketing Companies
Description 2013 2012 2011
Fixed Assets 2,286 1,724 877
Current Assets 6,707 2,595 1,136
Equity (Including Revaluation) 1,444 1,065 460
Current Liabilities 7,630 3,067 1,686
Sales (in Thousand Liters) 619,923 341,738 259,910
Sales 57,441 29,775 19,584
Gross Margin 1,320 996 699
Operating Profit / (Loss) 548 393 257
Finance Cost 110 101 202
Profit Before Tax 438 292 43
Profit After Tax 392 218 82
Earnings per Share 5.97 3.33 1.94
Break-up Value per share (with Revaluation) 22.02 16.24 7.01
Break-up Value per share (w/oRevaluation) 16.55 10.20 6.71
Current Ratio 0.88:1 0.85:1 0.67:1
(Rs in millions)
Phenomenal Growth
FUTURE GAME PLAN
HPL has doubled its sales volume and profitability on year to year basis. During the last three years this growth has resulted in a market share from 1% to 2.6% up to October 2013 (Source OCAC Report), from 2014 and onwards within 02 years the company has a target to achieve a volumes of 1,000,000 MT with a market share of 5%. This growth will be achieved through:
1. Completion of its Machike Installation
2. Development of an Installation at Mehmood Kot
3. Depots at Sahiwal and Shershah
4. Increase in its retail outlets from 210 to 291 by the end of 2016
5. Development of Aircraft Refueling Station (JET-A1) at Karachi Airport. After PSO, HPL is the only OMC which has got a TSA from an International Operator to sell Jet A-1 to airlines.
6. Development of a Lubricants and Grease Plant by end of 2016.
FUTURE GAME PLAN
Description 2014 (E) 2015 (E) 2016 (E) 2017 (E) 2018 (E)
Sales - Gross 76,823,122 97,504,087 118,562,926 128,846,213 151,455,929
Sales - Net of Sales Tax 66,597,535 84,525,748 102,781,537 111,696,061 131,296,298
Cost of Sales (65,032,134) (82,566,407) (100,446,724) (109,148,115) (128,555,807)
Gross Profit 1,565,401 1,959,341 2,334,814 2,547,946 2,740,492
Selling & Distribution Expenses (621,784) (639,705) (705,548) (763,697) (797,313)
Administrative Expenses (229,706) (249,201) (275,858) (306,121) (340,398)
Operating Profit 713,910 1,070,435 1,353,407 1,478,128 1,602,781
Finance Cost (106,795) (101,692) (125,652) (154,395) (132,036)
Other Income 94,631 101,756 107,621 114,792 123,481
Profit Before Taxation 701,747 1,070,499 1,335,377 1,438,525 1,594,226
Taxation 89,053 113,027 137,438 149,358 175,568
Profit After Taxation 612,693 957,473 1,197,939 1,289,167 1,418,659
EPS 6.76 10.57 13.22 14.23 15.66
Profit & Loss Accounts
Amount in PKR '000
HASCOL PETROLEUM LIMITED
PROJECTED PROFIT & LOSS ACCOUNTS
GP Margin 2.35% 2.32% 2.27% 2.28% 2.09%
NP Margin 0.80% 0.98% 1.01% 1.00% 0.94%
Current Ratio 1.00 1.06 1.13 1.24 1.30
Breakup Value with Revlauation 28.19 38.73 51.93 66.14 81.77
Breakup Value w/o Revlauation 24.26 34.83 48.05 62.28 77.94
Risk Free Rate 11.50% 5 - Year PIB Rate
Market Risk Premium 6.00% Standard Convention by Consensus Analyst
Beta 1.07 Average OMC Beta (PSO & SHELL)
Cost of Equity 17.92% Ke = Rf + (Rm-Rf)Beta
Terminal Growth Rate 2.00% Sustainable Growth Rate
Tax Rate 35.00% Corporate Tax Rate
Cost of Debt 13.50% 1 - Year KIBOR + 3.00%
Debt to Equity 21.67% Debt to Equity Ratio
WACC 15.94% Weighted Average Cost of Capital
Weighted Average Cost of Capital
Terminal Value:
Terminal Growth Rate 2.00%
Terminal WACC 15.94%
Estimated Terminal Free Cash Flow (PKR) 626,296
Terminal Value (FY2018) (PKR) 4,493,335
Terminal Value (Current) (PKR) 2,145,032
DCF Valuation:
NPV of Forecasts (PKR) 1,615,652
NPV of Terminal Value (PKR) 2,145,032
Enterprise Value / Cashflow Generated 3,760,684
Less: Net Debt (Net Cash) (157,642)
Equity Value (PKR) 3,603,042
Total Valuation (PKR) 3,603,042
No of Shares 90,600,000
Per Share Equity Value (PKR) 39.77
• Feb 26, 2014: The financial advisor of Hascol Petroleum Ltd said that the company has applied for listing of its ordinary shares at all the three bourses of Pakistan.
• The present issue consists of 25 million ordinary shares (27.59 percent of the company’s post-issue paid-up capital), out of which 18.75 million ordinary shares will be offered through book building at a floor price of Rs20 per share to institutional investors and high net worth individuals. The remaining 6.25 million ordinary shares will be offered to the general public at a strike price, which will be defined during book building exercise.
DEFINITION
Book-Building is a mechanism of price determination through which indication of interest for investment in the shares offered by an issuer/ offeror is collected from Institutional Investors and HNWI and a book is built which gives a picture of demand for the shares at different price levels. The strike price is determined based on the price at which demand for the share at the end of book building period is sufficient to raise the minimum capital required.
PROCESS FLOW
ALLOCATION METHODOLOGY ( DUTCH AUCTION)
• A Dutch auction is a method for pricing shares (often in an initial public offering) whereby the price of the shares offered is lowered until there are enough bids to sell all shares
• The goal of a Dutch auction is to find the optimal price at which to sell a security.
HOW DUTCH AUCTION WORKS
Let's assume Company XYZ wants to sell 10 million shares using a Dutch auction. To participate in a Dutch auction, an investor typically opens an account with Company XYZ's underwriter (usually an investment bank), obtains a prospectus, and obtains an access code or bidder identification code (Dutch auctions often occur online).
During bidding, investors indicate how many shares they're willing to buy and the price they're willing to pay. The underwriter, who acts as the auctioneer, usually starts the auction by offering a prohibitively high price for the security (say, Rs. 40 per share in this case). It then lowers the price gradually to say, Rs. 36 per share, where two bids come in for 500,000 shares. The underwriter then lowers the price again, this time to Rs. 35, and attracts 4,000,000 shares worth of bids. After lowering the price to Rs. 34, the underwriter gets another 5,000,000 shares worth of bids; then the underwriter lowers the price to Rs. 33 and gets another 3,000,000 in bids before the auction ends.
Price Bids Shares Cum. SharesRs. 40 0 0 0Rs. 36 2 1,000,000 1,000,000Rs. 35 4 4,000,000 5,000,000Rs. 34 10 5,000,000 10,000,000Rs. 33 3 3,000,000 13,000,000
HOW DUTCH AUCTION WORKS
HOW DUTCH AUCTION WORKS
When the auction closes, the underwriters calculate the highest price at which all shares will be sold. Here, the underwriter wound up with bids for 13 million shares, but the highest bids adding up to 10 million shares are the winning bids in a Dutch auction. The underwriter will then set the price equal to the lowest winning price bid on those 10 million shares (in this case, Rs. 34), and all the winning bidders will pay that price. (Dutch auctions are largely handled by computer, and the bids are not compared until the auction time has expired.) Note that this Rs. 34 price applies to all bidders, even the ones that bid Rs. 36 or Rs. 35.
BOOK BUILDING• The book-building portion comprised 18.75
million ordinary shares, or 75% of the total issue size, at a floor price of Rs20 per share.
• Institutional investors and high net worth individuals submitted bids of 132.5 million ordinary shares as opposed to 18.7 million shares, which is 7 times higher.
• 1,191 bidders took part in the bidding.
• The Strike Price for General Public determined through Book Building Rs. 56.50.