2018
(Icon) HENGYUAN 2018 full year earnings
CynicalCyan
Publish date: Sat, 07 Apr 2018, 05:56 PM
I had given my prediction long time back. It gives a very good overview:
Posted by Icon8818 > Apr 7, 2018 04:15 PM | Report Abuse
EPS for 2018:
PBT 2017 was 972M
Take out inventory Gain of 400M in 2017, PBT becomes = 572M
Considering only 3 Qtr out of 4 Qtr will be in operation due to Upgrade & MTA,
PBT for 2018 = (3/4)*572M , PBT = 430M
Consider Inventory loss of at least 100M, PBT = 330M
Consider Fixed cost of 130M during Q4, MTA, PBT = 200M
PAT for 2018 = 152 M
EPS for whole year 2018 = 50 cents (considering the same exceptional refining margin in 2017 - Hurricane Harvey)
NOTE:
(Risk 1) There is much bigger potential for a heavier inventory loss exceeding 200M.
(Risk 2) EPS 50 cents is not worth it considering there is no certainty the upgrade will be successful.
(Risk 3) Implementing a new technology in a bought out plant carries significant risks of not functioning as expected. Even 0.05% of sulfur deviation from expected spec will render the technology not applicable.
(Risk 4) The above is not considering significant margin reduction we have seen in Q1 2018 . Just 1 USD/brl reduction will cause 160 M reduction in gross profit compared to 2017.
I trust with the above presentation, 2 cents dividend given makes better sense now.
ALTERNATE DERIVATIONS WITHOUT MTA & UPGRADE:
Gross Profit for 2017 was 1430M
Take out inventory Gain of 400M in 2017, Gross Profit becomes:
= 1030M
Consider Inventory loss of at least 100M, Gross Profit becomes:
= 930M
Consider Fixed cost of 150M per qtr x 4 qtrs per year:
= 600M
PBT for 2018 without any shutdown & upgrade
= 330 M
PAT for 2018 without any shutdown & upgrade
= 250M
EPS for whole year 2018 = 83 cents (considering the same exceptional refining margin in 2017 - Hurricane Harvey)
Do you know it only takes 2 USD/brl refining margin reduction to wipe out 160M profit in 2018.
If you consider that, the PBT becomes, 170M and PAT becomes 130M.
That is an EPS of 43 cents without any funny assumptions going forward.
43 cents per annum means 10 cents per qtr.
This means HY was generous to give a 2 cents dividend with a payout of 20%!!
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Be the first to like this. Showing 36 of 36 comments
Icon8818,
In another article, david_tan had already corrected you that your RM400 inventory gain in 2017 is wrong. And he explained with proper accounting stantards and calculatation. Don’t be so stubborn lah. If wrong, accept it. Why still keep on using salah figures and come up with manipulative article like this?
I copy and paste david_tan’s comment below:
—————
Your inventory gain of RM400m is incorrect. I believe you are referring to MFRS 13 (Fair Value Measurement). The inventory is classified as a Level 1 asset and the market market value is quite readily available.
As at 31 December 2016, inventory is valued at RM826m. Brent crude price was RM255 per barrel. This translates to approximately 3.2m barrels in hand.
As at 31 December 2017, brent crude price was RM272 per barrel. The fair value of the said 3.2m barrels is therefore RM870m.
The fair value gain on inventories in FY 2017 was therefore only RM44m, and not RM400m claimed by you.
2018-04-07 18:46
How you know 2018 will incur inventory loss of RM100m? You already know the price of crude oil on 31 Dec 2018? How you know? You time travel ah?
2018-04-07 18:48
And the fixed cost during upgrade exercise. I don’t know where you got your RM130m figure from lah. Regardless, according to accounting standards, that amount spent will be capitalised as fixed assets. Wont affect current year P&L. It affects cash flow but not profit.
Your article is terribly inaccurate. If you dont know your accounting, dont simply come up with accounting based articles lah. Keep to theoretical articles please.
2018-04-07 18:54
I am only interested if the cashfLows still healthy or not. Accounting figures are just gimmicks
2018-04-07 19:19
Dow Jones drop 500 points again, Monday will be bloodshed again everywhere. Just trade cautiously
2018-04-07 19:20
A deterioration of refining margins in the fourth quarter was a major factor behind the disappointing results.....good....
then the opposite also can be true.
2018-04-07 21:01
don't be funny icon....
what inventory gain $ 400m....accounting policy is lower of cost and net realisable value......
and what warren bufett wannabe values a company based on the results of an extraordinary year of upgradings?
business risks....sure got business risk......
icon
stock market about businessmen/risk takers vs professors
bulls vs bears
positive vs negative people
and of course fast actions vs arm chair critics.
pivotal moment vs frozen soldiers
and of course....buying for 3 years with 300% gain potential vs money in FD..........
2018-04-07 21:03
what is this inventory gain $400 million business icon? the accounting policy is lower of cost and net realisable value....
and if inventory loss....well....not every year is inventory loss year.....
2018-04-07 21:03
the refining margin is a complex between cost and net realized selling prices....and the good thing both Petron and Hengyuan is that since Jan, we have changed to weekly re pricing.....that has certainly stablised the PL of both Hengyuan and Petron.
and looks like the selling prices formula has improved since last year.....maybe that is the deal struck with the government before the takeover from Shell.
2018-04-07 21:04
Business risk of Hy is volatility of gross margins....
with $ 40 revenue per share p.a......the eps of HY is certainly very volatile...any slight change in gross margins translates to disproportionate changes in eps....that is a fact of life for refineries.....
In the life cycle of a share such as HY.....kyy got the money and the holding power to see the next up cycle and enjoy a 300% return.....can or not?
2018-04-07 21:05
y trulyinvest > Apr 7, 2018 07:42 PM | Report Abuse
When pengerang start operation, refined products wil flood the market.
================
that is a business risk and maybe a business solution but got nothing to do with icon's writings.
2018-04-07 21:05
cheoky..icon cannot just pluck a figure out of thin air...and say he is intelligent.
2018-04-07 23:12
Well, I salute Mr. 8818!!!! His previous post before the sharp increase in share price of HY really showed he has foresight. Now he is demonstrating rational thinking by showing good analyst on bad future of HY.
Unlike icon8888 and others who only knows to promote.....
2018-04-08 00:47
So Icon8818 was a fake one no wonder use a/c to mislead many n caused a drastic fall to Rm6.15,a dishonest person.Any person who impersonated another person's name would likely have questionable characters.
2018-04-08 08:02
Fam Jenny, you do not have a brain.
Well, Icon8888 finally u reappear.
2018-04-08 09:06
Global average refining margins shrank from $16.30 per barrel in the third quarter to $14.40 per barrel in the fourth, according to BP. That narrowed even further to $12.10 per barrel in the first few weeks of 2018. BP says that as a rule of thumb, its earnings fluctuate by $500 million for every $1-per-barrel change in the refining margin. While the figures are different for other companies, the general result is the same. Shell said it realized average margins of $8.59 per barrel in the fourth quarter along the U.S. Gulf Coast, compared to $13.04 per barrel in the third.
2018-04-08 10:15
Not to forget HRY refinery in PD is grandfather old complex fit for demolition.
Not an efficient facility to get cheap product.
How about maintenance for this grandfather facility?
Beware, this is the potential source for creative accounting.
Find out more from fake accountant............
2018-04-08 10:30
probability...u are just being stubborn...the $ 400 milllion figure is just as fake as the fake icon
2018-04-08 14:19
actually icon had presented plainly as it is....without any biased conclusion based on recent trailing earnings.
Humans/investors can become so blind...so biased looking at the rear mirror.
2018-04-08 16:54
Icon8818, you are not correct on your derivation below.
(1) You only need 1USD/brl reduction in refining margin to result with 160M reduction in gross profit.
(2) I think even in Q1 itself they would have bought high priced oil in Jan and sold at cheaper price in Feb and early March - big loss due to FIFO accounting.
(3) Not logical to say no shutdown and MTA in 2018.
.....................................................
Posted by Icon8818 > Apr 7, 2018 07:00 PM | Report Abuse
Gross Profit for 2017 was 1430M
Take out inventory Gain of 400M in 2017, Gross Profit becomes:
= 1030M
Consider Inventory loss of at least 100M, Gross Profit becomes:
= 930M
Consider Fixed cost of 150M per qtr x 4 qtrs per year:
= 600M
PBT for 2018 without any shutdown & upgrade
= 330 M
PAT for 2018 without any shutdown & upgrade
= 250M
EPS for whole year 2018 = 83 cents (considering the same exceptional refining margin in 2017 - Hurricane Harvey)
Do you know it only takes 2 USD/brl refining margin reduction to wipe out 160M profit in 2018.
If you consider that, the PBT becomes, 170M and PAT becomes 130M.
That is an EPS of 43 cents without any funny assumptions going forward.
43 cents per annum means 10 cents per qtr.
This means HY was generous to give a 2 cents dividend with a payout of 20%!!
2018-04-08 17:07
Compared to Q4 2017 average spread , Q1 2018 is at least 2 USD/brl lower.
I am really really blind not to discover this implications much earlier.
I think we get hypnotized looking at the historical earnings and cant think clearly....
unbelievable
2018-04-08 17:16
compare to david_tan report, this one looks like something coming out from kinder garden.
2018-04-10 00:27
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CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
lizi
50 sens only for whole year? That's very scary, at rm8.35 that will be trading at forward pe of 17....don't scare me leh...
2018-04-07 18:42