Company analysis of the Qatari Gulf international services Co (http://www.gis.com.qa - Research Paper Example

Gulf International Services (GIS) Company Gulf International Services (GIS) Company Overview On February 12, 2008, the Gulfinternational Services Company was incorporated as a Qatar shareholding company by Qatar Petroleum; although, it was earlier owned totally by the government (Clark, 2002). The Company was registered under commercial registration number 38200. The GIS Company acquires leases and establishes ownership as a holding Company. The Company’s legal form is a joint stock Company with an operational status.

Its headquarters is based at Doha Qatar, Dafna area at 3rd floor Al Saad plaza building. Company Analysis The Company’s 2011 consolidated –Audited Financial statement indicated a decrease in total net operational revenues by 1.12% compared to the previous year’s financial records. This was a decrease of up to QAR 1, 469, 488 from QAR 1, 486,087 thousand. The 2011 net operational revenues results further decreased to QAR 282,907 thousand by the end of the year as opposed to 2010 QAR 493, 166 thousand.

Total equity or net income also decreased to 12.1% from 19.58%, total assets or return on asset decreased from 10.40% to 6.14%. As a result, the net profit margin (net sales or net income) went down to 19.25% as compared to 2010 29.55%. Total liabilities increased from 88.18% to 95.53% within the two periods while the current rat0io of assets and liabilities was 1.48 from 1.58. From this result, it is apparent that a number of both micro and macroeconomic variable factors have been in play (Clark, 2002).

Macroeconomic Variables of the GIS Some of the macroeconomic variables that the company has to deal with include among others, interest rates, the rate of inflation, and industrial production. These variables have the potential of influencing either on the positive or negative direction, the stock return of the company. Ross’ arbitrage pricing theory (APT) offers an insight that provides the link between macroeconomic factors and the influence on the stock return through a multiple risk factor.

For instance, increased industrial production between 2009 and 2010 saw an increase in stock return and net profit margin of the company. It is evident that the behavior of the stock market is a direct reflection of the prevalent economic conditions nationally, regionally or globally (Clark, 2002). The inflation rate would be extremely high there could be low industrial productions coupled with a fall in net income and other accompanying environmental factors (Clark, 2002). These negatively affect the company’s output.

Decision-making has to be geared towards mitigating thee negative influences of the economic conditions in order to streamline the company’s operation with the market factors (Brigham and Houston, 2009). The Industry Gulf international services Company specializes in the oil and gases services field. It establishes, acquires, manage, and lease companies that engage in the production or sale of both oil and gases at the local and internat6ional level. First, it is faced with a lot of competition stemming from other sister companies (Clark, 2002).

These companies include Qatar gas transport Co., Qatar fuel Co., Dana gas, Oman Oil marketing, Shell Oman marketing companies and many others. Second, the establishment of GIS in 2008 was also a risk factor in itself. This is because the energy sector was affected to a certain level during the global financial recession. A number of companies that GIS managed downsized their operations as a measure of mitigating the uncertainties that became of the general market (Brigham and Houston, 2009). The stock exchange market was also a victim of the recession, thereby injecting fears of uncertainties on the shareholding base (Suwaidi, 1994).

The Market valuation ratio as at Tuesday 18 Dec 2012 Gulf International Service . Benchmark EV/EBITDA next 12 month Company Gulf International S . N/A Peer group Gulf International S. excluded4.98 Gulf International S. included5.20 Sector Oil Equipment & Services4.92 S&P 5007.86 STOXX Europe 6006.72 CountryQAT6.98 4- Determine the optimal price of the stock, by employing the equation we talked about (constant growth in dividend model - Gordon Model). If you do not remember it or if you were, absent in class then go back to your principle of Finance, Chapter common stock valuation.

The profit function; Where D is the random variable and F probability distribution representing the demand for each unit or item sold for price P. C is the purchase price while Q is the total units stocked and E is the expectation operation. Rearranging the question gives the solution to the optimal stocking quantity that gives the maximum expected profit: Where F-1 gives the inverse, cumulative distribution function that was earlier defined D (Brigham and Houston, 2009). The same element can be writing to conform to the company figures as and the optimal stock price can be obtained as in the following equation; TR= Q*P = (100-P)*P = 100P-P? MR=?TR / ?P = (TR)' = (100P-P?)' = 100 - 2P MR=MC MC=0 MR=0 100-2P=0 2P=100 P=50 Q=100-P= 100-50 = 50 TR [MAX] = 50*50 = 2'500 References Brigham, E. F., & Houston, J. F. (2009).

 Fundamentals of financial management. Mason, OH: South-Western Cengage Learning. Clark, E. (2002). International finance. London [u.a.: Internat.Thomson Business. Markazal-Imaratlil-Dirasatwa-al-Buh?uthal-Istiratijiyah. (1997). Gulf energy and the world: Challenges and threats. Abu Dhabi: Emirates Center for Strategic Studies and Research. Suwaidi, A. A. (1994). Finance of international trade in the Gulf. London u.a: Graham &Trotman.