CEU Electronic Theses and Dissertations, 2021
| Author | Drury, Josué George Lima |
|---|---|
| Title | Equity Valuation of Royal Dutch Shell Business Segments Using Discounted Cash Flow (DCF), Dividend Discount, and Relative Valuation Models with Multiple Scenarios for Oil Prices |
| Summary | The aim of this capstone project summary is to present an equity valuation of Royal Dutch Shell business segments using different methods to find a target price and give a final recommendation about the security RDSA.AS. The main objectives of this study were to read and familiarize with the market, historic trends of demands for certain refined products, do a relative valuation by comparing Royal Dutch Shell with European peers, elaborate on the pace of expansion of electric vehicles in the EU and how it can impact the oil demand in the EU, and estimate the impact of the COVID-19 on the industry and integrate it into the model. To have a better understanding in how different oil prices could affect the valuation, three scenarios for crude oil, natural gas, LNG, and oil products prices were built. Moreover, this project allowed for thorough analysis, in which several scenarios for capital structure were created. For instance, different Beta for the business, debt, equity, tax-rate, cost of equity, cost of debt, and cash flow scenarios were projected. However, a standard scenario was taken into consideration to give the final recommendation. The final share price will be a combination of share prices from each business segment such as Upstream, Integrated Gas, Downstream oil products and chemicals, and corporate. There are many macroeconomic trends that should be taken into consideration when analyzing equity valuation for oil companies such as oil price, proved reserves, OPEC + Agreement, climate change, ascension of electric vehicles, and recent impact of Covid-19. After conducting the analysis, the target price for Royal Dutch Shell was estimated by using Discounted Cash flow model, which indicated a 32.6% upside from the last closing price as of July 17 2020 and 7.2% upside from the price on 31 March 2020. Based on both forecast for the Standard Scenario, a HOLD recommendation is issued for Royal Dutch Shell stock. |
| Supervisor | Chan, Joy |
| Department | Economics MSc |
| Full text | https://www.etd.ceu.edu/2021/drury_josue-george.pdf |
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