Business entity financial valuation for Malaysia oil & gas industry: A qualitative case study approach

The Oil & Gas sector has played a crucial role in Malaysia’s economy in which 20% is contributed to the nation’s gross domestic product (GDP). Hence, when the global oil price crisis begun in mid 2014, Malaysia’s economy suffered a setback in terms of lower revenue being generated for the country and loss of investor confidence causing the FTSE Bursa Malaysia KLCI to fall as well. Therefore, with this in mind this paper examined a number of financial instruments with the aim of identifying the suitability of these instruments in evaluating business entity financial valuation of Oil & Gas companies before and after the oil price crisis. The literature review of this research presented five (5) financial instruments which are price to earnings (PE), enterprise multiplier (EM), discounted cash flow (DCF), net assets value (NAV) and net tangible assets (NTA) that can be used for business entity financial valuation of Malaysia Oil & Gas companies. Therefore, in order to confirm the literature findings, this study was conducted using a case study approach with the objective of contributing to the body of knowledge of the Oil & Gas industry both globally and locally. As a result of the findings, the study finds that the all five (5) financial instruments as mentioned above can be used before crisis periods but only four (4) financial instruments with the exclusion of the discounted cash flow (DCF) approach can be used after or during crisis periods. The exclusion of the discounted cash flow (DCF) valuation methodology is due to its inability to accurately produce consistent business entity financial valuations during times of crisis. In conclusion this research provides a conceptual framework which can be used as a guideline for business entity financial valuation of Malaysia Oil & Gas companies.