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Contrarian bet: Why I sold PETRONM?

Bullmarketz
Publish date: Sat, 01 Jul 2017, 08:48 PM
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Very simple. PETRONM plans to spend at least US$1.5 billion to expand capacity of its oil refinery in Malaysia.

At the AGM last week, PETRONM are said they are reviewing options on the US$1.5 billion capex, including funding with debt and equity. 

3 possible options I can think of

  1. If they use debt, borrowing will increase RM6 billion! They may cut dividend for many years. 
  2. Private placement or rights issue means huge dilution to current shareholders. PETRONM has 270 million outstanding shares. They may issue 800 million new shares to raise RM6 billion.
  3. 50/50. RM3 billion debt and RM3 billion private placement/ rights issue also means huge dilution. Market capitalization for PETRONM is RM2 billion only.

All options are very dilutive and very risky to me. I decided to sell.

I welcome constructive comments.

 

News article

Petron to start $20B oil refinery in early 2018

Other than its planned greenfield project, Petron plans to spend another $2 billion (P99.41 billion) to expand its plants in Bataan and Malaysia

 

Expansion in Malaysia, Philippines

Other than its greenfield project, Ang said Petron plans to earmark a spending budget of another $2 billion (P99.41 billion) to expand its plants in Bataan and Malaysia.

He said Petron plans to spend at least $1.5 billion (P74.57 billion) to expand the capacity of its oil refinery in Malaysia to 150,000 barrels a day from 88,000 barrels a day. Petron also plans to spend about $500 million (P24.86 billion) to upgrade its refinery in Bataan.

"Right now, Malaysian investment contributes about 25% of our revenue. It will only grow if we invest in the Malaysian refinery upgrade. Otherwise, it is just like buy and sell. So, the Malaysian refinery, we have to upgrade. At the moment, we are finalizing the study to do the upgrade," Ang told reporters.

He said the Malaysian market is promising, with about 25 million population, consuming around 600,000 barrels a day.

Petron acquired in 2011 Esso Malaysia's Port Dickson refinery and fuel retail network in Malaysia.

Source: http://www.rappler.com/business/170029-petron-new-petrochemical-plant-ang 

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Discussions
2 people like this. Showing 24 of 24 comments

Superbjet

I don't think one should fear because of an increased in Capex for the future expansion. Without addition Capex, PetronM today and 10 years later will remain the same. Refinery biz is like any other O&G, which requires substantial Capex

2017-07-01 21:07

Flintstones

in b4 petron fansi come n shoot the author

2017-07-01 21:39

gohkimhock

Private placement means a big shareholder is coming in. Actually not a bad sign.

2017-07-01 23:08

lizi

kind of hard to imagine how to raise 6 billion, sure must be combination of debt and equity..too huge compare to its size now.

2017-07-01 23:22

lizi

good for those dividend investors to take note.

2017-07-01 23:27

leechen88

Give 1-1 bonus issue first then its price will surpass rm 10 easily. Then bonus issue again 1-1 , at this time it should worth more than 5b market cap. Then finally right issue with warrant

2017-07-02 06:01

leechen88

Petdagang market cap now 23.8b vs Petronm market cap 2b. I can't imagine this price. If in us or hongkong , petronm should worth more than 10b due to its more than 20% market share in Malaysia n its very attractive export figures .....stated under its recent financial statements

2017-07-02 06:30

leechen88

With share capital 135m @ 0.50 par value n 1.13b retained earning . Bonus issue call should be made. 1-1/2-1/3-1 even5-1 ratio also can ...

2017-07-02 07:09

leechen88

If 5b market cap : the valuation will be 5b/270000 big lots = rm 18.50

2017-07-02 07:11

superwoman

yeah better sell

2017-07-02 13:34

paperplane2016

I buy more

2017-07-02 17:11

popo92

its way easier to raise fund with higher share prices, it should be a buy call rather than sell call.

2017-07-03 00:01

skyea

during the AGM, some investors asked about bonus, but ramon already shoot them back that they have no plans on bonus issue, nor make changes to shareholding structure.

2017-07-03 02:36

Alex Foo

so no need expand. good. maintain at current level. share price rocket up tp20 buy and hold.

2017-07-03 07:59

nekosan

is ok, Bullmarketz is not controlling stake holder of petronm. just a ikan bilis

2017-07-03 09:15

talkyourkok

You sold, because you are stupid, you are stupid because you thought you are a genius.

2017-07-03 10:10

younginvestor92

you can only choose aggressive growth or dividend..... how to expect two edge sword?

2017-07-03 15:28

yapts

Once you sold the price shoot up! Buy back ? Contrarian???

2017-07-03 17:49

Flintstones

hahaha, contrarian in wrong direction?

2017-07-03 17:50

yapts

Contrarian , don't act smart, you should have sold it when it touches > RM 8.50 {so many occasions} and buy back around RM 7.20. That is called Contrarian.

2017-07-03 17:55

leelc99

Hahaha when I read this I want to laugh! https://klse.i3investor.com/blogs/Bullmarketz/126535.jsp

2017-07-03 19:02

yapts

I have a strong feeling someone want to collect Petron cheap by creating the fear but backfired!

2017-07-03 19:30

nekosan

lol, another half pass 6 Bullmarketz ... petronm to break 8 soon ...
hahaha

2017-07-05 09:20

nekosan

next time after sell, wait 1-3 months, when petronm confirm price down, then only post ... hahaha

market is not owned by you alone genius

2017-07-05 09:21

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