Shell Refining Company

Annual report is one of my best source of investment idea. Want to share about my recent read on Shell Refining Company. As the name suggested, this is a refining company.

Number of shares outstanding: 300 mln
Market Capitalization : RM 3,060 mln
Latest price : RM 10.20 / share

The refining capacity has not been growing much. It will do very well when the crude oil is on the rising trend because they are sitting on stockholding gains. You can this below chart, they did very well in 2004, 2005, 2007 but wobbling when crude oil see-saw in 2006 and collapsing in 2008. I believe the profit will swell in 2009 as the crude oil price is rising from low of US $ 40/barrel to almost US $ 70/barrel.



You can see the relationship even clearer in the following chart.



The below table shows you important relationship between rising crude price oil and profitability.



Lastly, they have been very proud of themselves because consistently churning out above industry refining margin.



On the price action, nothing very exciting except one sharp rise in 2004 and have been consolidating for years. The stock price is as cool as cucumber though the crude oil price was shooting through the roof. This stock is not for speculative play but for those who are extremly patient and happy with 5-7% dividend yield. The other option is buy on break-out from RM 11.70 from previous all time high in Sep 19,2005.



Disclosure: No position.