A Coming-out party for an Oil Colossus: Pricing and Valuing Aramco's IPO!

[@ricardopiovezanjr.3409]

As always, full of great insights. Thank you, once again, Professor Damodaran. I will be applying for NYU Stern (my third and last chance) as an undergraduate transfer (Fall 2020). Even if I get in and I end up not taking a class with you for whatever reason, just to be able to see you around campus and say hi would be worthwhile. Have a great thanksgiving, Ricardo

[@CesarDominguez_]

Thank you for sharing with us all your knowledge and your thoughts Professor. I go to watch your videos as fast as I can whenever youtube notifies me of a new one. Greetings from Spain.

[@RiteshPandya]

As usual some fantastic and fascinating information from Mr Damodaran. Always look forward to your uploads. Thanks for your generosity in sharing your knowledge.

[@briancrane7634]

Shining light into an almost opaque company in a country with a true monarchy! Very impressive! Thank You once again Professor! [It seems to me this is a bond masquerading as a stock...I'd be very interested in your views on why the Saudis are doing it this way]

[@mohammedsindi761]

Before I watch this video, thank you so much. I’ve been waiting for this video for weeks .

[@abdulazizs2978]

Prof. Damodaran, thanks for sharing your valuation with us. Royality and tax fess used in your model does not reflect the actual percentages mentioned in Aramco prospects. The actual percentages are 15% if oil price is under $70, 45% if oil price is between $ 70-100 and 85% if oil price is above $100.

[@seeker4430]

Thank you for increasing the volume of the audio.... And once again thank you humbly for the great content you have been creating. 🙏

[@nileshgada]

Excellent work !! Such an indepth research of numbers and organizing in to facts and possibilities!! Truly inspiring work by you and your Team !!

[@tayebbennegueouch4679]

Thank you professor !! as always, concise and straight to the point !

[@zhaoziyang-c5h]

Great video Aswath, really easy for a newbie to understand, your wisdom is impressive and your generosity in sharing these for free is very much appreciated.

[@danshmilovich6943]

Dear Prof. You're amazing! Thanks for what you're doing! One tiny correction, if I'm not mistaken, there is a typo problem with the equation which calculates the expected AT operating income in the firm valuation. It's suppose to be 213*(1-0.477)*1.018 and not 213*1.477*1.018.

[@maratospanov9510]

sharp analysis as always

[@rajjisep]

Thanks for the valuable inputs sir ... you did not talk about risk of electrical vehicles..

[@gangsta8929]

Thanks for making such great content!

[@maddysydney]

A very timely post. Wondering how you have actually thought about: - political risk due to links with US being broken or affected - Change of currency from petro dollar to other currencies - Rise of China (e.g.) and it potentially buying its oil from Iran and less from Saudi - Increase in hybrid/ electric/ renewable energy cars/ automobiles Thanks

[@ramjiYahoo]

Humble comment Sir- in 11:04, similar oil companies, if we have UAE, Oman, Qatar Oil company's data that will be great Sir

[@ayahassanfadl7898]

Why did we use different (beta) for "promised dividend model" of 0.5 only while Beta= 1.2 for "potential dividends model" - Is it because the 1st scenario, these dividends are promised? so we used a little beta??

[@maddysydney]

Prof... just pointing out that you said ‘Billion’ instead of ‘Trillion’ a few times possibly because we are not used to talking about market caps in Trillions.

[@harshsmi]

Professor, could you please do a video on monetary policy of central banks around the world. Every central bank around seems to be on same path of easing and increasing balance sheet. What does it mean for inflation and metals like gold etc. Thanks heaps for these great videos.

[@andyy6481]

so how do people trade this stock in the USA market?

[@FabianFaccini]

Wow, you’re a god, Aswath! I am wondering why you don’t touch the topic of the price of oil and gas which in my opinion have a very strong influence on FCFO, FCFE and dividends?

[@Economivision]

I think the network of investment opportunities between different nations serves as better policing strategy to our geopolitics than ammunition. Seeing that a great amount of stake could potentially affect a US Presidential voters, we might be more prudent thinkers in how we negotiate our global powers. I hope it works both ways as well, being that I can’t possibly imagine that the saudis would fully divest from something as lucrative and cash flow-rich in the immediate horizon. This is might be a meaningful position in play for a lot of fresh retirees.

[@nikhilkediya5686]

Screen 17 - Expected AT operating income next year: What is that 1.477 that we are multiplying to 213(1.018) ?

[@tobiasd4194]

Read (1-0.477) ie. (1-tax)

[@naziakhan5238]

Thank you so much sir...i was waiting for this video. ❤

[@flamingjob2]

thank you so much professor

[@vibhavmishra2002]

Prof this is such a nice video. Would have been nicer if the billions and trillions that were used had been consistent. Lot many times in slides it is supposed to be trillion but it’s written billion.

[@AswathDamodaranonValuation]

I know and I am sorry. I tried to fix it in the downloadable slides, but the use of the word trillion in company valuations is so uncommon that I just tripped up and used billions.

[@eng.sohail1395]

Is he work with Saudi Aramco?

[@jeroen6275]

I'm pretty certain Aramco will be valued like Russian statecompanies: purely on the dividend. Considering it's low-cost moat and room for dividend growth & general political risk i'd personally expect a yield somewhere between 5% and 7% (Russia's Gazprom is similary in many ways currently yields 6.5%). Given 75 billion in dividends I'd value Aramco somewhere around 1.5 Trillion.

[@Михаил-д6х1з]

How can you value companies on something as discretionary as dividends? If they are ever reflective of the true capacity of a business to produce value, it is purely by chance.

[@jeroen6275]

@@Михаил-д6х1з you value the company purely of dividends because shareholders have no rights and the company in questions is first and foremost being run for the Saudi's. Corporate Governance is the main risk. Dividends reflect the policy of the government

[@Михаил-д6х1з]

@Jeroen What if the policy changes tomorrow and they decide they don't want to pay dividends?

[@jeroen6275]

@@Михаил-д6х1з that's the risk.

[@Михаил-д6х1з]

I mean, is it a measurable risk though? Or is it like in the popular joke: what's the probability I'll see a dinosaur in the street? - 50/50, either you will see it or you won't.

[@George_Beth]

I don't see what's the point for this listing. I know they say that they want to sell some shares in order to use the proceeds so as to diversify in other sectors, but already Aramco is producing so much cash that in one way or another ends up in the government's bank account, so why don't they simply invest this cash? Why sell out a stake?

[@FireEverLiving]

They basically want to reorient the entire Saudi economy from an "oil curse" country to something completely different. This will take a generation or more, and they want to get well underway now. They don't want to do a little bit here and there while also being held hostage to the oil market. I don't like the regime, but it's honestly a good idea.

[@necromancer7712]

I am the king of youtube and this channel is one of the top 5 in KZbin. Thanks Aswath.

[@brendanwhite8519]

I'd be interested in seeing you value private prison companies, as they're probably even more politically incorrect.

[@simonweiguny]

Gazprom is mainly a natural gas company, isn't it?

[@Михаил-д6х1з]

Primarily, yes. Only ~10%-15% of revenue comes from oil.

[@simonweiguny]

Well, then comparing Gazprom with Aramco doesn't make much sense in my view. Nevertheless, Gazprom is a remarkable company.

[@alhiddell6810]

The dividend would have to be pretty sweet for me to risk it, sometime in the future the Saudis are going to re-nationalize it, and investors are going to be screwed, I find EM risk is not worth it for the reward you get.

[@sapbwguru]

I'm currently living and working in Riyadh Saudi Arabia and planning to invest in Aramco IPO shares as it's open for foreign nationals too , is it wise decision to invest ? this is my first time dealing in shares.

[@FireEverLiving]

You should watch the whole video and do more research on investing and Aramco besides, but a summary of the Prof's view is that it's probably not the worst investment you could make, but nor is it the best.

[@sapbwguru]

@@FireEverLiving thanks for your valuable feedback , I really appreciate it and I'm digging further.

[@talktomethere]

The biggist and most profitable company in the world. Enough said.

[@sapbwguru]

@@talktomethere That makes sense

[@PercyWellington]

Professor, ESG issues are relevant in pricing.

[@simonchol9092]

Luckin Coffee is creating so much buzz, any thoughts ?

[@C_R_O_M________]

I am not familiar with that case but where there's a buzz it's difficult to find an extraordinary opportunity for investment. Too many eyes on them (hence it's more likely that you are going to be paying a premium than getting a discount).

[@Михаил-д6х1з]

Read it wrong the first time :D

[@playlistjohnnybitter]

Less than 30% income seems low leakage Gov that could get worse over time

[@HelLo-dl4ne]

المهتدي❤️

[@dodolino99]

:)

[@sahilvihal7143]

Prof is,as as usual!! Conclusion : not for me🙏

[@intpsoftware5784]

First!

[@naziakhan5238]

No you are second. 😜