Send with CC to steven.chan@kenanga,com.my, research@kenanga.com.my

 

Dear MR. MANOJ DEVADASAN

General Counsel / Company Secretary / Manager-Human Resources/Compliance Office

Shahidah Aris

Senior Legal Advisor/Assistant Company Secretary

 

I refer Petron Malaysia holding company: Petron Corp Q3 financial result;

https://www.petron.com/wp-content/uploads/2022/11/Petron-Corporation-SEC-Registration-No_-31171_Quarterly-Report-SEC-Form-17-Q-3rd-Quarter-2022_14-November-2022.pdf

 

Year-on-year prices of Dubai grew by 59% to $95.6/bbl in 1Q 2022 vs. $60.0/bbl in the same period last year, due to the continued geopolitical tensions surrounding Russia’s invasion of Ukraine and a further draw in US crude and distillate inventories added to the price support. Ytd- March 2022 product cracks improved with strong demand as supply tightens.

Q12022

Prices of Dubai crude $ 95.6/bbl

Gasoline cracks increased from $7.1/bbl in 1Q 2021 to $17.8/bbl in 1Q 2022.

Diesel cracks from $5.8/bbl to $21.6/bbl.

kero-jet cracks from $3.3/bbl to $16.2/bbl.

 

Year-on-year prices of Dubai grew by 60.4% to $101.8/bbl in 1H 2021 vs. $63.5/bbl in the same period last year, as supply concerns continue resulting from the ongoing geopolitical conflicts amid recovering global demand. 1H 2022 product cracks also reached record-high level Q2. Average refining cracks of gasoline cracks increased from $8.5/bbl in 1H 2021 to $26.4/bbl in 1H 2022, diesel cracks from $6.4/bbl to $36.6/bbl, and kero-jet cracks from $3.9/bbl to $27.7/bbl.

Q2 2022

Prices of Dubai crude $ (101.8X2- 95.6) = 108

Gasoline cracks $ (26.4X2-17.8) = 35

Diesel cracks $ (36.6X2-21.6) = 51.6

Kero-jet cracks $(27.7X2-16.2) = 39.2

 

Dubai prices grew by 51.3% to $100.2/bbl as of ytd-September vs. $66.2/bbl in the same period last year, as supplies remained tight because of the sanctions on Russian oil after its invasion of Ukraine. Ytd-September 2022 product cracks have also been elevated with gasoline cracks increasing from $9.6/bbl in the same period last year to $22.0/bbl, diesel cracks from $6.9/bbl to $38.1/bbl, and kero-jet cracks from $4.4/bbl to $29.3/bbl.

Q3 2022

Prices of Dubai crude $ (101.2X3- 95.6-108) = 100.3

Gasoline cracks $ (22X3-17.8-35) = 13.2

Diesel cracks $ (38.1X3-21.6-51.6) = 41.1

Kero-jet cracks $(29.3X3-16.2-39.2) = 32.5

 

From Q3 end 30 Sept 2022

Net income attributable to non-controlling interest:  Philippine Peso 95 million

Petron Corp owned 73.4% Petron Malaysia hence Petron Malaysia net income is 95/0.266 = 357.14 million Peso;

On 30^th Sept 2022 MYR to Philippine Peso was 12.6426.

Q3 Petron Malaysia net income: RM 357.14/12.6426 = 28.25 million.

Q2 Petron Malaysia net income: RM 183.479 million

Q1 Petron Malaysia net income: RM 106.377 million

  

I am very disappointed with the projected Petron Malaysia Q3 net income of RM 28.25 million (from Petron Corp Q3 financial result) when Petron Malaysia petrol stations should be doing well and Q3 refining crack spread should also bring in the refinery profit. I just can’t understand how Q3 net income is lower than Q1 net income?

Q3 crack spread versus Q1 crack spread

Gasoline cracks $ 13.2/bbl versus $ 17.8/bbl

Diesel cracks $ 41.1/bbl versus $ 21.6/bbl

Kero-jet cracks $ 32/bbl versus $ 16.2/bbl

 

For your information I had posted my previous email to you in i3investor and the blog had generated 20,747 views, 6 likes and 17 comments.

https://klse1.i3investor.com/blogs/Sslee_blog/2022-10-31-story-h1651095893-Petron_Malaysia_My_email_to_Kenanga_IB_analyst_and_Petron_Malaysia_IR.jsp

 

The 20,747 views can only mean investing public care about accuracy of Kenanga IB analyst report on Petron Malaysia as investing public depend on accuracy of IB analyst report to make their informed investment decision. For me, I have high expectations on Petron Malaysia to engage with IB analysts to give a clearer picture on Petron Malaysia Business model and profitable moving forward. I believe Petron Malaysia Board of Directors will meet in the next few days before the Petron Malaysia Q3 result is released to the public. It is my hope the Board of Directors will consider giving investors’ briefings to Kenanga IB analysts and the briefing minutes published at Petron Malaysia website.

 

I am eagerly looking forward to Petron Malaysia Q3 financial report to confirm whether my projected Petron Malaysia Q3 net income from Petron Corp Q3 financial report is right or wrong and if I am right then the reasons why the Q3 net income is below expectation.

 

I am hoping Petron Malaysia BOD will reward shareholders with an interim dividend

 

Thank you

Have a good day

 

Best Regards

Lee Soon Sheng

PS:

https://www.petron.com/wp-content/uploads/2022/08/08-22-22-Petron-News-Clarification-Petron-targets-to-spend-up-to-P15B-annually-in-next-3-years_BusinessWorld_Online-Edition-August-22-2022..pdf

 

“PETRON Corp. is targeting to spend up to P15 billion annually for the expansion of its operations until 2025, a company official said last week.

 

‘The company is programming to spend between P10 [billion and] P15 billion on [an] annual basis for the next three years,’ said Albertito S. Sarte, vice president and deputy chief finance officer of Petron, during a virtual press briefing last week.

 

He said that the amount will be spent in the Philippines and Malaysia, with a sharing of 70% and 30%, respectively.

 

‘A good bulk of this will be allocated for the service station expansion in both countries because we see that as our growth strategy, to be able to sell more and reach more customers in the future,’ he added.

 

I think Petron Malaysia owes an explanation to Petron Malaysia shareholders on the above service station expansion in terms of cost per service station, profitability (IRR, ROI and Payback period) of service station and out of the current 740 service stations in Malaysia how many were controlled by Petron Malaysia. Of those controlled by Petron Malaysia Refining & Marketing Bhd how many are Company Owned Dealer Operated (CODO) and Dealer Owned Dealer Operated (DODO)

 

I quote a comment at i3investor on Petron Malaysia Service Stations (with minor censored):

Dealers at some Petron shops have dimmed their ceiling lights to reduce costs and or make it more romantic. This attracts some love deprived or love challenged women to go shopping there. However in the retail line, bright lights transfer happiness so some depressed people like MikeCheatYouCrazy and qqq3 will generally avoid such romantic shops. On the balance of probabilities net sales usually suffer more often than gain purely due to lack of relevant love deprived or love challenged women