Company Background:

Petron Malaysia is a part of Petron Corporation in Phillipines, an emerging and rapidly evolving Asian oil company. Petron involves in downstream businesses by producing a wide range of petroleum products which include gasoline, diesel, liquefied petroleum gas (LPG), industrial and commercial fuels, and aviation fuel.

Share Price Movement:

PETRONM share started to caught the eye of traders/investors 2H of 2015 by doubled its sprice from RM 3.5 to above RM7.0 in 3 months as they reported superb two quarters of EPS 27 cents each. The main reason was the high profit margin as differential between cost of lower crude oil with high price of finished products. Then, the share price plunged back to low 3.55 with two quarters of surprise EPS 6 cents each. The reasons were they underwent 1.5 months of mandatory maintenance shutdown at its Port Dickson refinery that reduced their revenue and they no longer enjoy high profit margin. In latest two quarters report, they had registered encouraging EPS 22 and EPS 17 cents. The share price raised back and has been in consolidation mode between RM4.0 – RM4.50 for almost 4 months now. This is where it get interesting as the crude oil was stabilised between $40-$50 as well as its finished products in that period.

Positive:

1)      Growing demand and gaining popular among local consumers.

2)      Finished product prices are in uptrend

3)      At current price RM 4.10, PE is low at 7.79 and if they can register subsequent quarters of around EPS 20 cents, with current low PE, the share price is over RM6.0.

4)      Attractive dividend yield of 4.88% with current price.

Negative:

1)      Some suggest oil price up is bad for petron but if you check their earnings in recent years, it go along with the oil price. In general, higher crude oil price increases their cost but they would register inventory holding gain.

Petron entered Malaysia market four years ago and build the brand from zero to well recognise brand today with 580 service stations end of last year. Currently Petron has 15% market share and expects to increase this year following business expansion strategy and new products introduction. Among the new products introduction were environment-friendly Blaze 97, first-ever RON 100, and Turbo Diesel. Retail business management said more service stations will be build to cater for increasing demand for their products.

It is fair to say that Petron is in good hand as we can notice their growing brand and management actively produce and promote quality products. People might still skeptical on the huge swing in earning/share price but recent two quarter results give us better chances to analyze company true performance and value as crude oil price stabilised. It is reasonable to suggest that Petron can continue to register around EPS 20 cents coming quarters.

Trade at own risk,

Hopefully, AllWin.