SPC: Good Dividend Play
Singapore Petroleum Corporation just delivered another good set of earnings. Its been a very fruitful dividend stock for me.
Some Ratio Stats:
- ROIC is 14%. This is slightly weaker than what i previously recorded. Probably due to the way i account for debt. I used to account only long term debt but now i factor in short term borrowings as well since they are essentially borrowing.
- Operating Margin is almost the same. Oil price rise and fall but the margin remains. I have to read in detail to give an assessment into this. A thing to note about refining margins is that a sky high oil price may not entirely benefit SPC. They work when oil price is at its optimum.
- At $6.10, current performance is 92% of its market capitalization. this is based on WACC of 10%. If u value its cashflow growth at 3%, its return premium is 131% of its market cap.
- Cash holding as a % of market cap is growing from 9% to 15%. This is something positive.
- Operating CF Yield if using enterprise value is 9%, if using market cap is 10.77%. If based on current price of $6.10 and a total distribution of $0.60. thats a yield give out for the year of 9%. Thats really paying out all its cashflow as dividends. We will need to determine if this is the right approach for the company. If they do not need that cash for capital expenditure and can finance internally without borrowing, then this is a good business structure to be in.
- Mkt cap to book ratio of 1.74 times
Overall, I am getting a yield of 13% on this investment this year. This goes to show that:
- The business is important
- The company operation is important
- The cashflow is important
- Valuation / Getting the right price is important.
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