Shell expects net income of P7 B this year

Despite depressed oil prices, rising oil demand could push earnings of Pilipinas Shell Petroleum Corp. (Shell) to rise more than two-fold this year, according to a market research firm.

In a research note, COL Financial said Shell could match Petron Corp.’s projected net income of P7.3 billion this year.

That would represent an increase of more than double last year after the company booked a net income of P3.6 billion. For the first semester, earnings rose 28 percent to hit P5.1 billion.

“Assuming that Shell and Petron will earn the same amount in 2016 (P7.4 billion based on consensus estimate), Shell would be trading at a 2016E P/E of 14.2 times based on its offer price of P67 per share,” Col Financial said.

COL Financial said Shell is poised to benefit from the Philippines’ rising oil demand due to the country’s strong economic growth.

But the major attraction for potential investors, COL Financial said, is Shell’s cash dividend.

“Based on the company’s plan to pay out at least 75 percent of previous year’s net income as cash dividends and its offer price of P67 per share, Shell’s implied dividend yield is 5.3 percent, which is higher compared to the 2.7 percent average dividend yield of its peers,” it said.

Last week, Shell officially launched its P19.5 billion initial public offering, dangling before investors sustained demand growth that follows strong economic growth.

“The underlying performance of the business is good,” Shell country chairman Ed Chua had said.

Shell is set to list on the stock market on Nov. 3, with the offer period to run starting today to Oct. 25.

The company is selling a total of 291 million shares including an over allotment option of 16 million secondary shares.

At P67 per share, Shell expects to generate at least P18.425 billion and up to P19.5 billion if the over allotment option is exercised.