Financial Analysis of Petronas Company

Running head: CORPORATE FINANCE
Corporate Finance:
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Introduction......................................................................................................................................2
Background of Selected Company..................................................................................................2
Nature of Core Business..............................................................................................................2
Markets and Products- Diversified..............................................................................................3
Past Key Financial Performance..................................................................................................3
Future-Outlook of Industry..........................................................................................................4
Key Challenges............................................................................................................................5
Maximizing Shareholder’s Wealth..................................................................................................5
Shareholder’s Wealth...................................................................................................................5
Effort Applied in Maximizing Shareholder’s Wealth.................................................................5
Primary Objective........................................................................................................................5
Other Objectives..........................................................................................................................6
External Sources of Long-Term Funds............................................................................................6
Define External Sources of Funds...............................................................................................6
External Equity and Debt Funds..................................................................................................6
Raising Equity Finance................................................................................................................7
Raising Long-Term Debt Funds..................................................................................................7
Factors for Financing...................................................................................................................8
Analysis of Long-Term Funds.........................................................................................................9

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Share Capital................................................................................................................................9
External Equity Funds.................................................................................................................9
Raising External Equity...............................................................................................................9
Debt Financing.............................................................................................................................9
Analysis of Past Performance........................................................................................................10
Internal Factors..........................................................................................................................10
External Factors.........................................................................................................................11
WACC...........................................................................................................................................12
Explanation................................................................................................................................12
Importance.................................................................................................................................12
Computation..............................................................................................................................12
Return Required by Shareholders..............................................................................................13
Capital Structure............................................................................................................................14
Explain.......................................................................................................................................14
Tax Advantage...........................................................................................................................14
WACC Theory...........................................................................................................................14
Conclusion.....................................................................................................................................15
Recommendation...........................................................................................................................15
References......................................................................................................................................16

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Executive Summary
The assignment aims at conducting financial analysis on the Petronas Financial Company
where relevant aspects of the company including the financial performance and financial position
of Petronas, that would be undertaken for the purpose of analysis. Explanation of the
shareholder’s wealth assumption and the effort applied in applying the same were some of the
crucial steps undertaken. The key external sources of long-term debt including equity and debt
financing were taken into detailed consideration for the purpose of analysis. On the other hand,
WACC for the company plays a crucial role and the same can be applied in the capital structure
of the company. There were certain recommendations and ideas been given after analysing the
financial position and various financial performance indicating the overview of the company.

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Introduction
The purpose of writing is to prepare an analysis on the PETRONAS Company also
known as Petroliam Nasional Berhad is fully integrated Malaysian company. It utilizes the
available technology for making the best of opportunity in producing and delivering the world’s
energy needs. Financial analysis of the company in terms of the performance of the company by
analyzing the share price trend, trend shown for ROCE, dividend paid. The outlook of the
industry was also analyzed by looking at the demand of the products and services and the key
challenges faced by the company in their operations (Petronas.com 2015). Maximizing the
shareholders wealth of the company and the importance of the same in the context of the
financial perspective and the importance of the same in the context of corporate finance has also
been discussed. The importance of having an optimal WACC and utilizing the long-term debt of
the company as per the financial and business risk of the company are some of the important
terms that needs to be accounted.
Background of Selected Company
Nature of Core Business
Petronas Company as the custodian of the Malaysian National Oil and Gas Resources is
an fully integrated Malaysian Company that uses extensive technological tools in meeting the
demand of energy sources. Increase in the demand of energy has been the key reason why the
company has shown a key development in the innovation and research and development program
leading to efficient operations of the company (Petronas.com 2014).

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Markets and Products- Diversified
Operations of Petronas is spread on an global basis whereby Europe is the key market for
the company along with North America, Latin America and Africa the key market for company.
The portfolio product of the company grows with the available conventional and non-
conventional resources; widens with diverse fuels, other lubricants and petrochemical products
that strengthens with every successful project delivered (Petronas.com 2014).
Past Key Financial Performance
Share Price: The share price of the company for the period of five-years were taken into
consideration for the purpose of analysis. The share price of the company has though declined in
five-year trend period, due to global macro-economic conditions like the volatility in the crude
oil prices, inflation rates and prevailing interest rate.