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Author: Icon8888   |   Latest post: Fri, 5 Apr 2019, 12:40 PM

 

(Icon) Why I Bought Hengyuan and Petronm Recently

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Recently, I bought Hengyuan and Petronm. And I did it without even checking the crack spread. 

 

Why ? Isn't crack spread an important determinant of their profitability ? 

 

Yes, of course it is. But it is only important if you are a short term player.

 

If you put on the cap of a long term investor, you will think like this :-

 

(a) Hengyuan and Petronm are currently trading near their recent years low, so it is a good time to enter (less susceptible to sell down by early birds as there is simply no excesses there);

 

(b) PER is low (based on earning power);

 

(c) Crack spread goes up and down all the time. Why should you be bothered ? If it comes down and causes the company's profitability to drop drastically, it is likely to be a temporary blip. History shows that crackspread never stay depressed or elevated indefinitely. In a few quarters time, earning is likely to recover when spread reverses to the mean.

 

By saying so, I am putting what I have been preaching recently into practice : "Investing involves buying something that in the event that things turn sour, will ultimately recover if you hold on for a reasonable period of time." (something to that effect)

 

 

 

(d) But what are the criterias for picking Hengyuan and Petronm out of so many stocks in Bursa ?

 

Because they are established players in a robust industry. The quality is there (as far as I am concerned). Instead of putting my money in an ACE counter selling tickets to the moon, I am buying into companies with many years of track record, sizeable in scale, high entry barriers, well regulated by the government and plenty of room to grow (driven by demographics and growth in per capita income). The ACE counter might not be there in 3 years' time, but Hengyuan and Petronm will very likely still be there.        

 

In short, they are of investment grade quality.

 

(e) What is the gameplan ? How do you intend to make money out of them ?

 

Through organic growth !!! Crackspread will cause their profitability to fluctuate from quarter to quarter. In certain quarters, they might even dip into the red. But who cares ? Earning will ultimately rebound when spread normalised. Just ignore the volatility. It is merely paper loss, if it happens. 

 

Over an extended period of time, they will reinvest their earning, expand their network and capacity. If you come back 10 years later, they might have grown into sizes beyond your recognition. So will their profitability.

 

We are talking about investing mah. 

 

(f) How about moat ? Don't you want to check whether they have moat ?

 

Nah... moat is overrated. Many companies in Bursa do not have visible sign of moat. But many investors still make money out of them. As long as you have a good feel of how the company can evolve and grow over an extended period of time (in this case, together with the economy, without insane competition), they are good for investment.

 

 

Concluding Remarks

 

First of all, the major reason I bought into Hengyuan and Petronm is because they are trading at very low PER (based on earning power).

 

By taking a long term view, I cease to worry about the coming quarters result. Meaning I can just put them aside and get busy with other things in my life. This is the most basic definition of investing, isn't it ?

 

However, this is not applicable to all companies in Bursa. If you take exposure in a fly by night ACE counter, you better monitor it closely, because it can eventually go kaput.

 

Happy investing !!!

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Labels: HENGYUAN, PETRONM

Related Stocks

Chart Stock Name Last Change Volume 
HENGYUAN 5.82 -0.05 (0.85%) 276,300 
PETRONM 6.53 -0.02 (0.31%) 29,800 

  8 people like this.
 
stockraider U need understand this loh....!!

1. ROE is a powerful inward looking tools for looking at the quality of investment, but it does not help u to determine whether it is good buy even the roe is high mah...!!

2. Good buy is determine by the reasonable PE or and with earnings growth mah....!!

A good example Nestle has a superb ROE of more than 100% but the company cannot n unable to find good investment to support high ROE returns as a result it pays high dividend loh...!! But bcos of its share price of exceed Rm 140.00 investing in it give u an earning yield of PE 50x or less than 2.6% pa, but yes there is some growth about 10% pa...including this growth will give u less than 5% pa loh..!! Unless u r a fixed deposits holder looking to punt a bit then Nestle may consider investable loh....!!

On the other hand insas The ROE is only 4% pa but bcos its high shareholder fund of Rm 2.54, it generate an eps of rm 0.10, giving an earning yield of 14% pa or pe 6.5x loh basing on share price rm 0.72 loh...!!
This insas is a credible long term margin of safety investment loh..!
22/01/2019 10:58 AM
stockraider The concept is simple, if u ask a taxi driver which is better as a taxi benz or proton ??....everyone will say benz mah...!!

But after factoring the price....they decide to buy proton mah...!!

Same concept mah....do not overpay for quality loh...!!
22/01/2019 11:02 AM
probability not a good time to buy (yet)...especially hengyuan...in my opinion

investors need to make use of all visible information...including near terms i suppose
22/01/2019 11:06 AM
stockraider Raider says can start to nimble abit loh....!!

U only wallop big when big info visible confirm loh...!!

Posted by probability > Jan 22, 2019 11:06 AM | Report Abuse

not a good time to buy (yet)...especially hengyuan...in my opinion

investors need to make use of all visible information...including near terms i suppose
22/01/2019 11:09 AM
probability how if big info is available to short soon?
22/01/2019 11:14 AM
Choivo Capital Thanks Unker, i appreciate it. Send me an email, lets meet up if you're in KL.
====

Posted by Icon8888 > Jan 22, 2019 10:57 AM | Report Abuse

learn a bit from you also, Ah Boy
22/01/2019 11:16 AM
Icon8888 wait for you to grow up first
22/01/2019 11:30 AM
value88 I am also tempted to buy PetronM..rather than Hengyuan. What makes me hesitate is PetronM's coming quarterly earnings may be poor due to poor crack spread in Oct-Dec'18 period and potential stock holding loss as oil price declined quite sharply during Oct-Dec'18 period.
22/01/2019 11:41 AM
value88 I am thinking to buy after PetronM reports its Oct-Dec'18 quarterly result by end Feb'19. I probably can get cheaper price then.
22/01/2019 11:43 AM
value88 Having said that, PetronM is indeed selling at low valuation and attractive at current price level.
22/01/2019 11:43 AM
stockraider U need to know Petron has not spend on any plant upgrade yet mah...once they spend on capex their financial will look bad loh...!!

Unless they decide to close down their refinery, then they can avoid the poor balance sheet loh...!!

Posted by value88 > Jan 22, 2019 11:41 AM | Report Abuse

I am also tempted to buy PetronM..rather than Hengyuan. What makes me hesitate is PetronM's coming quarterly earnings may be poor due to poor crack spread in Oct-Dec'18 period and potential stock holding loss as oil price declined quite sharply during Oct-Dec'18 period.


value88
383 posts
Posted by value88 > Jan 22, 2019 11:43 AM | Report Abuse

I am thinking to buy after PetronM reports its Oct-Dec'18 quarterly result by end Feb'19. I probably can get cheaper price then.


value88
383 posts
Posted by value88 > Jan 22, 2019 11:43 AM | Report Abuse

Having said that, PetronM is indeed selling at low valuation and attractive at current price level.
22/01/2019 12:01 PM
qqq3 nasty surprises......like it or not, still have to check against possible nasty surprises......
22/01/2019 12:41 PM
qqq3 nasty surprises......like it or not, still have to check against possible nasty surprises......

that is why predictability is a valued commodity.
22/01/2019 12:44 PM
paperplane Great icon. Im looking still. Might join you later... Hehe
22/01/2019 12:46 PM
qqq3 $12? sure or not? This thing will eventually serve as production center and all the products send to China, subject to transfer pricing.....remember RAPIDS.

This thing is here not to make money for u minorities but to serve China.....
22/01/2019 2:23 PM
PotentialGhost Buy Petronm is right choose.
22/01/2019 3:26 PM
Fabien Extraordinaire After DKSH, Hengyuan, Petronm...waiting for more write-ups from Icon.
22/01/2019 3:49 PM
dusti OK if you have plan to distribute ANG POW
22/01/2019 4:00 PM
tftey Probably you can get at lower price by end February especially with Hengyuan
22/01/2019 4:27 PM
3iii 3 recommendations from icon8888 within the SAME day!

Must have more ideas than money to invest.




Between Hengyuan, PetronM and Petdag, which one do you prefer for the long term?
22/01/2019 5:39 PM
3iii What I gather from reading icon8888's post.

The crack spread margin is at its lowest. Crack spread margin is cyclical. Therefore these stocks are at their cyclical lows. Therefore, got margin of safety.
22/01/2019 5:42 PM
stockraider Use brain to think mah...!!

1. Crack is the lowest, it is best to buy bcos share price undemanding mah....it will usually normalise bcos it is cyclical mah...!!

2. margin of safety preposition : Come up a equivalent Plant like hengyuan, it will cost at least Rm 10 billion or more mah....!!


Posted by 3iii > Jan 22, 2019 05:42 PM | Report Abuse

What I gather from reading icon8888's post.

The crack spread margin is at its lowest. Crack spread margin is cyclical. Therefore these stocks are at their cyclical lows. Therefore, got margin of safety.
22/01/2019 5:48 PM
3iii http://www.corporateinformation.com/ImageSvr/Chart.ashx?T=SS&C=C45852900


http://www.corporateinformation.com/ImageSvr/Chart.ashx?T=SS&C=C458C1820


http://www.corporateinformation.com/ImageSvr/Chart.ashx?T=SS&C=C45878390
22/01/2019 5:48 PM
3iii Buy companies with strong histories of profitability and with a dominant business franchise.
22/01/2019 6:20 PM
stockraider but don overpay loh...!!

Posted by 3iii > Jan 22, 2019 06:20 PM | Report Abuse

Buy companies with strong histories of profitability and with a dominant business franchise.
22/01/2019 6:23 PM
3iii The ability to say NO is a tremendous advantage for an investor.
22/01/2019 6:24 PM
supersaiyan3 You broke my heart when you talk about warrant (unimech-wa?), you nearly killed me when you talk about priceworth....(and what’s wrong with you buying jaks-wa, no offence)

I am pleased you come back to the right path. Great move!
22/01/2019 6:25 PM
3iii 3 recommendations from icon8888 within the SAME day!

Must have more ideas than money to invest.






Much success in investing can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.
22/01/2019 6:27 PM
Alex™ don buy pls
22/01/2019 10:34 PM
Alex™ and also dun buy PE168 company
22/01/2019 10:34 PM
newbie8080 Good write up
23/01/2019 9:16 AM
GrahamNewman Munger once said his investing strategy is akin to "sit on your ass" investing. Indeed one had to do the legworks and have the right temperatement for this strategy to work, else they won't be able to sit alone in a room and think and left the room rather hurriedly when they hear some bad news.
23/01/2019 4:43 PM
Aseng icon888,

good buy . petronm is my wife
24/01/2019 10:16 AM
Aseng this year I got 4 wives that i will keep till end of the year to see whether it still takes good care of me or not , others just hit and run to test my lucks
petronm is one pf them . still reluctant to let go though the price seems disappointing but i really like its business model
24/01/2019 10:24 AM
Icon8888 Petronm better than hengyuan
24/01/2019 10:25 AM
Aseng better or not not better God know

I only know holding petronm can sleep well
24/01/2019 10:31 AM
Aseng as I grow older ,
sleep well is more important than seeing your big profit tomorrow
24/01/2019 10:33 AM
Icon8888 You don't need to be god to know

There are objective facts to substantiate

I don't simply say things
24/01/2019 10:36 AM
Aseng growing older doesn't mean no entertainment
hit and run is a good choice
win, you got the pleasure of a lucky bet in 4 ekors
lose , there is always a better next bet

right ?
24/01/2019 10:37 AM
Aseng ekovest , I like highway
petronm , refinery cum retailing
hibiscus, matched my pa-zhi
krono , big data
24/01/2019 10:40 AM
Icon8888 Ekovest I like also

Just a bit worry about PH asks them to cut construction margin

Just a bit worry
24/01/2019 10:44 AM
Aseng life is simple , just do or invest in what you like

when you are old , what you like comes first ,profit will come by itself

Mr market is crazy , if you think you understand what a crazy man thinks, then you will die hard standing

when your investing theory is simple , your life is simple
24/01/2019 10:45 AM
Aseng 1. you must believe PH that we had elected is a responsible government

2. it is ruled by the principle of "rule of laws" NOT " ruled by manifesto"

3. nation needs construction to build

4. No nation will kill a good businessman who bring in good tax

5. there is no enemy in politic , there is only good partners





Icon8888 Ekovest I like also

Just a bit worry about PH asks them to cut construction margin

Just a bit worry
24/01/2019 10:51 AM
Aseng Posted by Aseng > Jan 24, 2019 12:03 AM | Report Abuse X

Mr market is a crazy guy
If you think you understand what a crazy man think you will die hard standing at the end
The best is still dumb dumb hold a stock that worth RM1. 50 at the current price of 52 sen and do nothing but knowing we'll that Duke will generate more and more cash every quarter and worth more and more value as time go by.
24/01/2019 10:53 AM
Aseng Mr Market gives him a good and hot slap right on the face



Posted by qps9999 > Jan 24, 2019 12:06 AM | Report Abuse

EVOKEST condition is not good..tommrrow will go down
24/01/2019 10:55 AM
RainT EKOVEST is highway toll

WCEHB also is highway toll


Which one is better and good? EKOVEST or WCEHB?
24/01/2019 4:10 PM
Connie555 Oh mai god come back from vacation see my son at there PLP icon8888 again i buay tahan liao....


Aiyo I thought i am the only one feel like everything other than himself is unethical and cynical....let me remind u something son, please stop your PLP bullshit....please remember how u start the fire on everyone else included icon8888.....

but its ok, normal symtoms as investor always fail to remember the past or history....




Stock: [JAKS]: JAKS RESOURCES BHD

Sep 14, 2018 11:43 AM | Report Abuse

I bet you make way more from overly optimistic people who follow you :)

There is a very fine line between being realistic and cynical.

And for the person making money off the optimist, it might be best for him to imply those who are realistic as cynical individuals, and hope that whatever said, does not dampen the exuberance of the foolish optimist.

=====


Posted by Icon8888 > Sep 14, 2018 10:59 AM | Report Abuse

ok ok whatever...

why are you so cynical ? everything people said you will imagine ulterior motive, cheating, etc... aiyohhhh why I keep bumping into people like you... that means there must be a lot of cynics out there...

good also lah... cynics cannot think straight... easier to make money from them..

I encourage you all to continue your way of thinking ... good good good...
25/01/2019 12:21 AM
Nicholasming91 Hengyyuan ok la.. cash increase 600m,
25/01/2019 12:29 AM
paperplane Absent,I like all your picks
10/02/2019 4:29 AM
paperplane Aseng
10/02/2019 4:29 AM


 

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