Corporate Finance Analysis Of Dana Gas Company Finance Essay

This undertaking talks about corporate fiscal analysis of Dana Gas Company. It involves a calculating analysis of the company harmonizing to its fiscal public presentation in the recent yesteryear. Harmonizing to the analysis made on the subject recommendations are given whether the one should put in the company or non. This is rather an interesting undertaking of corporate finance.

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Analysis of the Economy

Dana Gas Company comes from UAE and at that place fore we are traveling to discourse economic system of UAE in this subdivision. Equally far as economic system of UAE, is concerned it is a oil and gas based economic system. It is considered to be one of the major manufacturers of gas in the universe. With oil and gases, existent estate is besides responsible for economic development of the state.

UAE Economy is one of the fastest turning economic systems in the nowadays ‘s universe. Abu Dhabi being its capital is the richest emirate of the state and it has a GDP AED 62 million with a immense population of 420,000, upper limit among all the emirates. This increasing GDP of the state is chiefly responsible for addition in the economic state of affairs of the state. ( UAE probably to see existent GDP growing of 2.5 % in 2010, 2010 ) ( 8 ) In footings of Income, Abu Dhabi stands 3rd in the universe after Luxemberg and Norway. When we are speaking of income, so we talk about per capita income of the metropolis.

Economy of UAE is continuously turning at a really high gait and as a consequence of which there was an addition of 9 per centum in the GDP of the state during the period of recession. One thing which needs to be pointed out is that oil and gas industry is chiefly responsible for addition in the gross domestic merchandise of the company during the periods of recession because existent estate was really barely hit during this period but still with an addition in the oil and gas monetary values, UAE comfortably maintained a good degree in the addition in GDP. Abu Dhabi is a chief beginning of oil and gas for UAE and it ranks 3rd in the buying power para in the universe. ( Shihab )

UAE plays a major function in impacting the universe ‘s economic system which means that state ‘s growing is truly appreciable. Economic Development of the state is measured in footings of addition in merchandising capableness of the state. UAE is considered to be Western Asia ‘s chief commercial hub for fiscal and touristry. Main factors which give rise to the success for the company are oil and gas sectors.

Analysis of Industry

Industry which we are traveling to speak about in this undertaking is gas industry of UAE as we are sing undertaking on Dana Gas Company. Oil is considered to be the chief beginning of economic development of UAE but as oil is going lesser, there are really much opportunities that in the close hereafter gas will play most of import function as a major beginning of energy in the state. UAE is major manufacturer of natural gas and along with this it is the hub for the production of natural gas for all the emirates.

UAE has a immense resource of natural gas and one of the most surprising things is that around 90 per centum of the whole natural gas militias of the universe are at that place in Abu Dhabi which is great for the company ‘s economic development. Abu Dhabi is considered as the major manufacturer of gas with in the state.

UAE is that topographic point where gas energy is considered to be most of import beginning of energy for the hereafter. ( The Oil & A ; Gas industry in UAE )

There are several companies in UAE which produces natural gas and among them Abu Dhabi Liquefaction Company takes the first place. There are assorted LNG plans built for the production of gas in the state. Gas is chiefly produced in the state because of the ground that it is considered as chief fuel for production of energy in the future clip. Future fuel because oil is become more and expensive in the state. And another ground is that gas is considered to be chief manufacturer of power and petrochemicals. Gas is chiefly produced in order to run into the demand for the clients for demand of energy in the state. It besides helps in electric and H2O supply.

There is an increase in the monetary value of the gas in UAE and this increase has gone from 15 to 20 % . The LPG which is used as for cookery has been increased at a border of 20 % . Gas industry in UAE is booming like anything and it is expect as per the analysis that this industry is future fuel beginning for the state. As UAE is the major manufacturer of gas in the universe, high production will assist the state to develop its economic system globally.

Analysis of the company

Dana Gas, Public Joint Stock Company is the anterior natural gas company in the private sector in UAE instead it is the first in the full Gulf part. It is a company which holds assets of natural gas supply concatenation at the largest degree in the full Gulf part. And in the position of increasing its present position in the industry, it is be aftering to travel further in assorted other Fieldss of bring forthing natural gas through out the Gulf part. It is besides spread outing its work in Middle East, South Asia and North Africa part. ( Dana Gas: Corporate Profile Year 2010 )

Dana Gas chiefly focuses on the undermentioned activities of the concern:

Ownership of natural gas undertakings through long supply understandings

It besides aims in selling dry gas to the Federal part and other State owned public-service corporations

It helps in processing of gas

It besides aims in selling crude oil merchandises and liquefied natural gas merchandises

There are assorted grounds because of which there is a development of undertaking enterprises in Dana Gas. The grounds are as follows:

There is an increasing demand for the natural gas

There is strong expertness in the direction and industry

Dana Gas has upper border in the bing assets

Major Rivals

Major rivals of Dana Gas are as follows:

Abu Dhabi National Oil Company

TAQA

Dragon Oil

Likpin LLC

RTE Group

Burley SubSea

Unique Wellube

Lamp ell Energy LTD.

Comparative Analysis for three old ages

In this subdivision of the undertaking, comparative analysis of the companies ‘ public presentation in the industry in the last two old ages will be done. For the same intent, the informations of Dana Gas PJSC from the 2008 to 2009 has been taken and from this informations comparative analysis of the company is performed and the company ‘s present public presentation will be described ( Dana Gas PJSC ( DANA ) 2006 FY one-year study )

2009 Financial Data of Dana Gas Company

Balance Sheet

Analysis of Datas

Comparison between 2008 and 2009

In the twelvemonth 2009, entire assets of the company increased to 11,424,000,000 AED. This was marginally a good addition in the assets of the company. There was an addition of 58 % in the net assets of the company. Along with the addition in the net assets of the company the net liabilities of the company increased to 31.76 % . There was an addition of 0.19 % in the net liabilities of the company. This was a great mark for the investors. Now the company is acquiring into more stable place than earlier. Financial hazard for the investors to put in the company are going lesser as the company ‘s liabilities are traveling down which means that company do non hold to return much money to the market as a return on debt as compared to the plus available with the company. This means that there will be more dividends available for the investors.

Addition in the assets of the company reflects its fiscal stableness in the market because company has more valuable things in the market and lessening in the liability as compared to the assets shows that there company is doing more stay in the market with less adoptions. This shows that company is more trust worthy for the investors to put in.

Main Financial Ratios during the period of Study

Ratio Calculation of 2008

Ratio Calculation of 2009

Asset Management Ratios

Fixed Asset Turnover Ratio

NA-

NA-

Debt Management Ratios

Debt Ratio

Debt to Equity Ratio

33.53 %

0.5045

31.76 %

0.4655

Profitability Ratios

Tax return on Equity Ratio

Tax return on Asset Ratio

Net income Margin Ratio

1.7 %

1.1

10.5 %

%

%

9 %

Market Value Ratios

Monetary value to Earning Ratio

Market to Book Ratio

27.1

0.5

17.4

0.9

Interpretation of Financial ratios for TWo old ages

Based on our ratios analysis of fiscal old ages 2008 and 2009. The undermentioned reading of the fiscal ratios for the two old ages:

Debt Management Ratio

In debt to equity ratio every bit good as the debt ratio of the company in continuosly diminishing for the last three old ages. This means that the company is under lesser sum of debt and lesser adoption is made by the company in the last three old ages. This besides suggests that company is holding higher sum of assets which means that value of the company is increasing:

Profitableness

We can see from the last three old ages that return on equity ratio every bit good as return of assets ratio is invariably increasing which means that there is an addition in the sum of net income for the stockholders for the past three old ages. This means that stockholders are acquiring more dividends.

Net income Margin Ratio: Net income Margin Ratio has been increased in instance of 2008 as compared t0 2007. This shows that the per centum of the net income which the company is gaining is traveling high which is evidently a good mark for the company

We can see from the above tabular array that return to equity every bit good as return to the assets has been decreased in the span of one twelvemonth

Market & A ; Book

Monetary value to net incomes ratio is diminishing with the addition in the assets of the company. This means that company ‘s net incomes are traveling higher.

Along with that market to book value of the company is increasing this means that market value of the company is increasing twelvemonth by twelvemonth

Recommendations

We can urge in this undertaking that a stockholder should put in the company because of the ground that the company ‘s stockholder ‘s equity has increased marginally in the twelvemonth 2009 with a really less addition in the liabilities. This means that company ‘s debt is really less as comparison to the assets of the company. We know that company had a really bad clip in the twelvemonth 2008 when debt increased at a really fast gait in the company but still after that daze company has covered a batch and that we can see from the company ‘s tendency from the last two old ages that there is considerable addition in the assets and really less addition in the debt. This means that company ‘s debt to equity ratio every bit good as debt ratio is diminishing which means that there is really less sum of fiscal hazard associated with puting in the company. Hence we can urge to the general stakeholders that they can easy put in the company in order to gain more dividends. There is another ground for which stockholders can put in the company because we have described that the company is a manufacturer of natural gas and natural gas is considered to be the future fuel of the state. Hence this suggests that company is traveling to boom in the close hereafter.

In short we can give some short description for puting in the company:

Market value of the company is increasing

Company is holding higher net incomes

Higher assets and lower debt

Investors are acquiring more dividends

Decision

We can urge from our analysis that harmonizing to the fiscal informations given to us and our analysis to the fiscal information, earlier informations were the best as per the investing by the stockholders are concerned. The chief ground behind this is that there is an addition the liability of the company during this period of clip for the company was really less. Hence from our survey during the period of our survey we can state that the best periods in which stockholders could hold invested in the company were earlier periods. But as the clip passed, there was a great addition in the liabilities of the company. This addition in debt of the company shocked the people and made the people or the portion holders to alter their determination as all the stockholders thought that with this immense addition in the liabilities of the company, company would ne’er be able to last in the industry. Harmonizing to our analysis of two twelvemonth period, 2008 was the worst as per the point of position of the investors to put in the company because there was a immense addition in the liabilities of the company.

With this lessening in the trust of stockholders on the company, there a small better scenario in the twelvemonth 2008 and a little more better in the twelvemonth 2009. And in the last two old ages company has done a batch to better its status in the industry. In the twelvemonth 2009, addition in the liabilities is so less as compared to the assets of the company.

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