probability

The implications:


http://www.cmegroup.com/apps/cmegroup/widgets/productLibs/esignal-charts.html?code=D1N&title=AUG_2017_Singapore_Mogas_92_Unleaded_%28Platts%29_Brent_Crack_Spread_&type=p&venue=0&monthYear=Q7&year=2017&exchangeCode=XNYM

1 USD rise = 14.4 cent eps/qtr = 60 cents/annum

Using a PE of 10 (remember you only use PE lesser than 10 when you incorporate uncertainty in earnings - to discount it),

10 x 0.60 = RM 6

Meaning this change in Refinery margin by 1 USD/brl should theoretically raise the HRC price by RM6 from its current price.

If some are not convinced and would like to use a PE of 5 as per very conservative market rating, then it immediately deserve to rise by RM 3 for every rise in Refinery margin by 1 USD/brl....

unless the only exception is that u believe it will definitely go down from here.....


perhaps it will......perhaps it wont.

2017-08-06 12:48

probability

http://economictimes.indiatimes.com/opinion/interviews/the-supply-of-crude-right-now-in-the-world-is-overwhelming-vandana-hari-vanda-insights/articleshow/59898250.cms


"So if Singapore margins which are a benchmark for Asia have climbed up almost 8 dollar 30 cents yesterday, 30 cents up almost and compared with June they are nearly 2 dollars higher. So as long as this refinery remains shut, it is going to pull barrels and one of the obvious suppliers is Indian refiners including Reliance. So it should be supported to them for their margins definitely."


"So there is almost a dichotomy between crude and refined products, they do not always necessarily go hand in hand. The supply of crude right now in the world is overwhelming but when it comes to refined product supplies it is contingent, it depends on to what extent that surplus crude sloshing around in the world is being converted into refined products and then we have things like seasonal shutdowns that the world in this part of the region is just coming out of shutdowns for maintenance and so on. So all of those things have created a bit of a tightness in refined products certainly speaking for Asia as a result of which margins as I have mentioned before have been generally supported and will continue to be remain supportive I imagine through the summer months until all of the refining capacity is complete its scheduled maintenance and comes back on stream. In such an environment with a major refinery of 400,000 barrels a day shutting down just gives you another leg up for refining margins but GENERALLY THEY WERE LOOKING STRONG EVEN BEFORE THAT.

2017-08-06 12:49

probability

Posted by Alex Foo > Aug 5, 2017 04:15 PM | Report Abuse

come sit down. angmo article teach u a lesson

https://seekingalpha.com/article/4058710-oil-oil-products-crack-spreads-signal-best-worlds

too long didn't read spoonfeed me pls~

Crack Spreads = Real time indicators of refinery profitability.
HRC = refinery

Therefore, HRC = profit

Posted by probability > Aug 5, 2017 04:32 PM | Report Abuse

"Singapore margins which are a benchmark for Asia have climbed up almost 8 dollar 30 cents yesterday, 30 cents up almost and compared with June they are nearly 2 dollars higher"

2 dollar higher woh! RM 6 rise for PE of 5? he he..

nevermind...i must have used some maths trick...

2017-08-06 12:50

John Lu

By this month sure above rm10...monday panic buying again. All fund manager sapu...what u worry?

2017-08-06 12:52

Bruce88

Game over

2017-08-06 13:14

jackfruit

John Lu are fund managers allowed to buy a Co share with that have not paid dividen for the last 4yrs.

2017-08-06 17:06

Larrytrader

well said

2017-08-06 19:58

swiftwind

Based on the rosy pictures being painted here, I would like to provide a balanced view on Hengyuan.

Investors please be reminded that there will be stock loss of equivalent to ~40 million and payment of Term Loan I (equivalent to 44 million) in Q2 2017.

As such, assuming everything else remains the same as previous quarter, expected EPS will be around 55 - 65, lower than Q1 2017.

Looking forward to Q3, if the crack spread maintains, the results going forward will be good (perhaps even better than Q1 2017).

2017-08-06 20:22

360Capitalist

The inventory losses can easily be offset by forex gains and higher crack spreads ( gross margins ) registered during Quarter 2.

Please refer industry wide guildelines for Q2'2017 (Higher than Q1'17
https://csimarket.com/Industry/industry_Profitability_Ratios.php?ind=606

2017-08-07 07:59

Alex Foo

swiftwind, i like ur input. pls tell us more =)

2017-08-07 08:37

swiftwind

That is true but forex gains are difficult to gauge and it's best to be conservative in estimating profit growth.

That way investors don't get spooked when results are announced such in the case for LCtitan.

Disclaimer: I own hengyuan shares too.

2017-08-07 08:38

Alex Foo

ic....so swiftwind, do you think it can maintain 171 eps this year?

2017-08-07 08:53

swiftwind

Alex if u observed the eps of q3 2016 is -ve around -30 cents. If q3 2017 can be better than q12017 I am optimistic that they can achieve higher than 250 eps for 2017. Whether they can achieve 300 eps depends on the q4 results.

2017-08-07 09:05