15:23 | 27/06/2017 Energy
(VEN) - The Binh Son Refining and Petrochemical Company Limited (BSR Co., Ltd) will launch its initial public offering (IPO) in the fourth quarter of this year. This will be the largest IPO in 2017, which is expected to quench the thirst for high-quality goods in the Vietnamese securities market.
|A corner of the BSR Co., Ltd - Photo: baocongthuong|
When a company launches its IPO, investors pay primary attention to the position of that company in the sector where it operates. So let’s have a look at BSR’s capacity. BSR is the company that takes over, manages, operates the Dung Quat Oil Refinery and sells its products. It has been investing in a modern, international standard fixed asset system, i.e. the equipment of the Dung Quat Oil Refinery, all imported from G7 countries.
Data from BSR show that after more than seven years of operations, the company’s total revenue has reached over US$36 billion, profit more than VND13 trillion (by the end of the first quarter of 2017), and tax payment over US$7 billion, more than double total investment in the refinery (US$3 billion).
BSR currently holds a 30 percent share of the domestic petroleum market. The company is operating according to market mechanisms and competes fairly with foreign imported petroleum products. BSR is allowed to fix prices of its products. The company has established cooperative relations with 31 petroleum wholesalers nationwide. Its domestic market share is expected to increase because of not only attractive prices but also advantages compared with other petroleum companies that have to import foreign products. Petroleum prices in Vietnam are lower compared with other countries in the region, so BSR can promote exports to increase sales.
The quality of BSR’s products is above standard. According to Vietnamese standards, the highest allowed content of sulfur in petrol is 500 millionths, while that in BSR’s petrol is a mere 30-135 millionths; the highest allowed content of benzene and aromatics in petrol is 2.5 percent, while that in BSR’s petrol is 1.15-1.46 percent. BSR’s diesel oil for automobiles also has a low content of sulfur with inconsiderable toxic exhaust fume emissions when in use.
BSR has promoted research and development (R&D) activities to create new, high-quality and environment-friendly products, for the purpose of diversifying its products to meet the demands of different types of consumers. The company expects that after the Dung Quat Oil Refinery is completely upgraded and expanded, its products will meet EURO 5 standards.
Firm financial foundation
Above mentioned data show BSR’s firm financial foundation. In 2015, the company’s revenue and after-tax profit reached more than VND95.06 trillion and VND6.12 trillion respectively, with the Return on Equity (ROE) ratio being 21 percent.
Last year, the company exceeded its annual plan in terms of revenue, after-tax profit and tax payment. Specifically, its actual revenue reached nearly VND73.60 trillion, four percent above the annual plan, and after-tax profit more than VND4.49 trillion, almost fivefold the annual plan.
These were meaningful results because 2016 saw strong changes in global prices of crude oil, which sometimes plunged to below US$30 per barrel, leading to a decline in BSR’s revenue and after-tax profit compared with 2015. Despite these unfavorable conditions, the company recorded a rather high ROE ratio, 14.2 percent.
This year, BSR expects to exceed its annual targets by 15-20 percent. It achieved satisfactory production and business results in the first quarter of 2017, with output reached 1.7 million tonnes of products, revenue exceeding VND21 trillion, and tax payment more than VND2.5 trillion. Data of the first five months also showed BSR’s satisfactory profitability, with the ROE ratio reaching 8.67 percent, the Return on Assets (ROA) ratio 4.81 percent, and the Capital Adequacy Ratio (CAR) 1.091.
BSR’s efficiency has improved remarkably. In 2013, its total revenue and after-tax profit reached VND154 trillion and VND2.93 trillion respectively. Last year, although its revenue decreased to VND74.57 trillion, the company’s after-tax profit doubled that of 2013, reaching VND4.49 trillion.
Great room for further growth
The Dung Quat Oil Refinery currently meets just more than 30 percent of domestic demand, and the remainder, 70 percent, still relies on imports. Even next year, after the Nghi Son Oil Refinery commences operations, the two refineries will only be able to meet 80 percent of domestic demand. Clearly, there’s still room for BSR to increase sales. Its earnings before interest and tax are expected to grow strongly because increases in sales will bring rises in after-tax profit and ROE ratio.
The upgrading and expansion of the Dung Quat Oil Refinery is underway and expected to finish in late 2021 to increase its capacity by 30 percent to 8.5 million tonnes per year, meeting 50-60 percent of domestic demand. So far, Front-End Engineering Design (FEED)-related work has been completed.
This project will help BSR diversify its products and increase petrochemical output. In fact, petrochemicals account for a mere three percent of BSR’s output but contribute as much as 44 percent to its profit.
Based on quantitative analyses, BSR can be compared to a kind of food that meets the tastes of different types of investors. To attract investors, especially value investors, however, the company should provide them with detailed information about its operations.
BSR’s management system meets international standards.
The quality of BSR’s environmental treatment system is above standard. Wastewater from the Dung Quat Oil Refinery can be
used for irrigation and fish breeding. The company’s laboratory has been certified as meeting ISO 17025 standard and
recognized as one of the most modern and accurate laboratories in the Asia-Pacific region.
To enable BSR to implement its approved equitization (partial privatization) plan on schedule, Minister of Industry and
Trade Tran Tuan Anh on May 31, 2017 signed Decision 1938/QD-BCT identifying the company’s value for equitization as