Hi guys, just a reminder on below info. Do not blindly dispose using herd mentality. The crack spread of all products presently are way higher than what i used on below derivation.

We can wait for 1 month for our salary, 2 months is not that long.. NTA will shoot up by RM 4 by Q3 results along with below EPS.

........

Q3 - Rock bottom EPS analysis

(using lowest possible average crack spread during the period - as if it was this level every single day of 90 days in a quarter)
.........................

Using extreme conservative scenario where 50% of HY throughput is hedged where they will only reflect hedge margin at extra low 10 USD/brl, with the balance free to capture market margin

1. Diesel at 46% yield, cracks USD 39/brl

www.tradingview.com/symbols/NYMEX-GZ1!/

2. Jet fuel at 7% yield, cracks USD 29/brl

www.tradingview.com/symbols/NYMEX-ASD1!/

3. Gasoline at 35% yield, cracks USD 7/brl

www.tradingview.com/symbols/NYMEX-D1N1%21/
www.tradingview.com/symbols/NYMEX-SMU1!/

3. Rest of product yield at 12%, using Mogas 95 cracks USD 7/brl

Gross profit from (Hedged) portion:
..............................

= (10.7 million x 50%) x (10 USD/brl) x (MYR 4.5/USD)
= 240 million MYR .....(1)



Gross profit (UN-HEDGED) portion:
............................

Refining margin/brl:

= (0.46 x 39) + (0.07 x 29) + (0.35 x 7) + (0.12 x 7)
= (17.9 + 2.0 + 2.5 + 0.8)
= US $ 23.2 / brl

Gross profit:
= (10.7 million x 50%) x (23.2 USD/brl) x (MYR 4.5/USD)
= 558 million MYR ......(2)



Total gross profit (1) + (2)
= 240 + 558
= 798 million MYR

PBT = 718 million
PAT = 545 million
EPS = 1.81

Cost of Hedging Reserve at above mark-to-market pricing was 100 million gain at end of Q1.

As such for Q3 results, NTA will increase RM 4 assuming closing of Q3 (30th Sep) is at above crack spread level...

Q3 - Rock bottom EPS analysis

(using lowest possible average crack spread during the period - as if it was this level every single day of 90 days in a quarter)
.........................

Using extreme conservative scenario where 50% of HY throughput is hedged where they will only reflect hedge margin at extra low 10 USD/brl, with the balance free to capture market margin

1. Diesel at 46% yield, cracks USD 39/brl

www.tradingview.com/symbols/NYMEX-GZ1!/

2. Jet fuel at 7% yield, cracks USD 29/brl

www.tradingview.com/symbols/NYMEX-ASD1!/

3. Gasoline at 35% yield, cracks USD 7/brl

www.tradingview.com/symbols/NYMEX-D1N1%21/
www.tradingview.com/symbols/NYMEX-SMU1!/

3. Rest of product yield at 12%, using Mogas 95 cracks USD 7/brl

Gross profit from (Hedged) portion:
..............................

= (10.7 million x 50%) x (10 USD/brl) x (MYR 4.5/USD)
= 240 million MYR .....(1)



Gross profit (UN-HEDGED) portion:
............................

Refining margin/brl:

= (0.46 x 39) + (0.07 x 29) + (0.35 x 7) + (0.12 x 7)
= (17.9 + 2.0 + 2.5 + 0.8)
= US $ 23.2 / brl

Gross profit:
= (10.7 million x 50%) x (23.2 USD/brl) x (MYR 4.5/USD)
= 558 million MYR ......(2)



Total gross profit (1) + (2)
= 240 + 558
= 798 million MYR

PBT = 718 million
PAT = 545 million
EPS = 1.81

Q3 - Rock bottom EPS analysis

(using lowest possible average crack spread during the period - as if it was this level every single day of 90 days in a quarter)
.........................

Using extreme conservative scenario where 50% of HY throughput is hedged where they will only reflect hedge margin at extra low 10 USD/brl, with the balance free to capture market margin

1. Diesel at 46% yield, cracks USD 39/brl

www.tradingview.com/symbols/NYMEX-GZ1!/

2. Jet fuel at 7% yield, cracks USD 29/brl

www.tradingview.com/symbols/NYMEX-ASD1!/

3. Gasoline at 35% yield, cracks USD 7/brl

www.tradingview.com/symbols/NYMEX-D1N1%21/
www.tradingview.com/symbols/NYMEX-SMU1!/

3. Rest of product yield at 12%, using Mogas 95 cracks USD 7/brl

Gross profit from (Hedged) portion:
..............................

= (10.7 million x 50%) x (10 USD/brl) x (MYR 4.5/USD)
= 240 million MYR .....(1)



Gross profit (UN-HEDGED) portion:
............................

Refining margin/brl:

= (0.46 x 39) + (0.07 x 29) + (0.35 x 7) + (0.12 x 7)
= (17.9 + 2.0 + 2.5 + 0.8)
= US $ 23.2 / brl

Gross profit:
= (10.7 million x 50%) x (23.2 USD/brl) x (MYR 4.5/USD)
= 558 million MYR ......(2)



Total gross profit (1) + (2)
= 240 + 558
= 798 million MYR

PBT = 718 million
PAT = 545 million
EPS = 1.81

agree ular sawa of course digest slowly...but once its able to see the opportunity...he wont let go...

i must admit this ular IQ higher than everyone here

Posted by UlarSawa > Sep 14, 2022 10:41 AM | Report Abuse

Bcos Ular OKU mah. You IQ so high leh. Tulis long thesis Ular pun take very long time to digest it leh. Haiyoh. Correct?

aiyo ular, only now you are asking such a critical question, this is what all my effort to enlighten everyone, haiyo correct?

Posted by UlarSawa > Sep 14, 2022 8:35 AM | Report Abuse

Is crackspread is the only variable that important until all also use it as the main variable to calculate refinery profit. Must be something else also right. Haiyoh. Correct?

ular, isnt borrowing is actually investment...investment with a stable return unlike volatile crack spread? haiyo, correct?


Posted by UlarSawa > Sep 14, 2022 10:33 AM | Report Abuse

Budget tak cukup pakai so borrow more and more. Mana can afford to pay leh. Poor country lah. Haiyoh. Correct?

wtf..malaysia is heading to disaster if bullies are allowed to rule

aiyo Ular, what case study on HY? no case to study..its an open book....all numbers are crystal clear...haiyo, correct?

you will be surprised to see tomorrow's crack spread...live data showing refining margin is rising...

@Ular, its time people move out from volatile tech stocks to refineries...LOL!

@MM.

your lay man theory ABSOLUTELY WRONG, as they have hedged with maturities up till 2024

YOU NEED TO IMPROVE YOUR IQ..

9 million barrels of hedged instruments cannot expire within 3 months

if that happens, Q2 would have reported EPS as if its 100% hedged at 12 USD/brl margin but they reported above 20 USD/brl after derivative loss of 400 million!!

1 QTR revenue is 10 million barrels

that should be simple common sense to layman...

.........


@MM simple question to you...

what is the difference between Cash flow hedge reserve and Cost of hedging Reserve...

you do not know IFRS 9...

MM - OBVIOUSLY DO NOT KNOW A SINGLE THING ABOUT OCI...LOL!

Q3 - Rock bottom EPS analysis (using lowest possible average crack spread during the period)
.........................

Using extreme conservative scenario where 50% of HY throughput is hedged where they will only reflect hedge margin at extra low 10 USD/brl, with the balance free to capture market margin

1. Diesel at 46% yield, cracks USD 42/brl

www.tradingview.com/symbols/NYMEX-GZ1!/

2. Jet fuel at 7% yield, cracks USD 30/brl

www.tradingview.com/symbols/NYMEX-ASD1!/

3. Gasoline at 35% yield, cracks USD 7/brl

www.tradingview.com/symbols/NYMEX-D1N1%21/
www.tradingview.com/symbols/NYMEX-SMU1!/

3. Rest of product yield at 12%, using Mogas 95 cracks USD 7/brl

Gross profit from (Hedged) portion:
..............................

= (10.7 million x 50%) x (10 USD/brl) x (MYR 4.5/USD)
= 240 million MYR .....(1)



Gross profit (UN-HEDGED) portion:
............................

Refining margin/brl:

= (0.46 x 42) + (0.07 x 30) + (0.35 x 7) + (0.12 x 7)
= (19.3 + 2.1 + 2.5 + 0.8)
= US $ 24.7 / brl

Gross profit:
= (10.7 million x 50%) x (24.7 USD/brl) x (MYR 4.5/USD)
= 594 million MYR ......(2)



Total gross profit (1) + (2)
= 240 + 594
= 834 million MYR

PBT = 734 million
PAT = 557 million
EPS = 1.85

Sustainability?
...............

what a state of chronic paranoia due to past volatility on earnings of refinery

one shall talk about sustainability of earnings when stocks are trading above PE 20 may be..or the least PE 10

panicking now for a stock that barely moved up from its historic avg low?

refinery stock like HY only needs 13 USD/brl avg refining margin to deliver EPS above RM 1 consistently

now its averaging above 26 USD/brl

and we dont need RM 1 EPS per qtr to justify current price, even 40 cents consistently would do...

there are too many structural changes GLOBALLY that indicates constraints will remain due to shortage in global refining capacity and takes years (more than 5 years to build a refinery and investors are not keen despite high margin currently) unlike gloves for supply to catch up with demand...

its earnings can certainly be volatile, but the mean avg of the crack is expected to be significantly higher than previous years as intermittent shortage due to refinery maintenance, break down etc is high....

as such the odds of margin spiking intermittently is just too high going forward

this especially so considering russian sanction (which is the core of the structural changes that we are basing here)

keyword: sanctions are expected to last years

@JConnor, good sharing...

Posted by JConnor > Sep 13, 2022 7:48 PM | Report Abuse

https://oilprice.com/Energy/Energy-General/The-Global-Fuel-Market-Will-Remain-Tight-For-Years-To-Come.html

The Global Fuel Market Will Remain Tight For Years To Come

spot on sslee... great to have you here

well if my hunch is right on your age, my hunch on your thought process is also likely to be correct then

i have nothing to learn from your advise... TQ


Posted by anthonytkh > Sep 13, 2022 6:09 PM | Report Abuse

Probability, I can be a teenager or a really old dude or even be another Lee Thiam Wah. That’s below the belt from you. And I ain’t a lady that gets sensitive about age questions

what a boring rhetoric..

are you in late 60s or 70s?

Posted by anthonytkh > Sep 13, 2022 5:55 PM | Report Abuse

A public listed company is not defined by opportunities and circumstances when it comes to its share price. Why are we here? The company’s performance or its share price movements?

Record breaking profits with no real enthusiasm from “investors”. Cash balance reduced, debtors and creditors both increased, liabilities way higher than equity. That’s at least 3 quarters in a row last time I checked

The MTN? Look at my above paragraph…

hope by then (mid 2020s..) we have anthonytkh repeating the same rhetoric here...LOL!

Posted by BoomBerg > Sep 13, 2022 5:53 PM | Report Abuse

Fuel markets to stay tight till mid-2020s as refining shrinks
Reuters |
Sep 13, 2022 05:09AM

By Ahmad Ghaddar
LONDON (Reuters) - Crude oil refining capacity has shrunk by a record 3.8 million barrels per day from March 2020 to mid-2022 as demand expanded, setting the stage for fuel markets to remain very tight until at least mid-decade, International Energy Forum and S&P Global (NYSE:SPGI) research showed.
The fall in capacity comes as oil demand rose by 5.6 million bpd over the same period, the report released on Tuesday said.

@tehka, MM defeated by these:


Posted by probability > Sep 13, 2022 4:16 PM | Report Abuse X

@MM.

your lay man theory ABSOLUTELY WRONG, as they have hedged till 2024

YOU NEED TO IMPROVE YOUR IQ..

9 million barrels of hedged instruments cannot expire within 3 months

if that happens, Q2 would have reported EPS as if its 100% hedged at 12 USD/brl margin but they reported above 28 USD/brl!!

1 QTR revenue is 10 million barrels

that should be simple common sense to layman...


Posted by probability > Sep 13, 2022 4:26 PM | Report Abuse X

@MM simple question to you...

what is the difference between Cash flow hedge reserve and Cost of hedging Reserve...

you do not know IFRS 9...

MM - OBVIOUSLY DO NOT KNOW A SINGLE THING ABOUT OCI...LOL!

you should know why i never came to HY forum since 2017, but only after Mar 22...

a company is not a like an animal where it has inherent property that never changes..

a company is defined by the opportunities & circumstances that arise..

its extremely dynamic and even more so - stock trade/investments

Posted by anthonytkh > Sep 13, 2022 5:33 PM | Report Abuse

Lol probability wants to know the truth

Truth’s been there for 5 to 7 years when it comes to the company. Truth’s been there for the past 5 months when it comes to the share price

Trade it like I said before

aga agak numbers ok...but not agak agak feelings

agak2 numbers thats what i am providing

Posted by UlarSawa > Sep 13, 2022 4:37 PM | Report Abuse

Not agak agak then how to predict leh. Ada lesen punya analist pun pakai agak agak to TP mah. Not like this meh. Haiyoh. Correct?

no we cannot use feelings..and agak agak

we must debate and find the truth...

take the challenge?

Posted by MoneyMakers > Sep 13, 2022 4:30 PM | Report Abuse

Aiyaa if confident HY just buy lo..cheap ma

If scared (smart) then stay away lo..simple ma

Alot info provided alrdy..ownself decide lo - later dont cry mother father when collapse to rm3

@MM simple question to you...

what is the difference between Cash flow hedge reserve and Cost of hedging Reserve...

you do not know IFRS 9...

MM - OBVIOUSLY DO NOT KNOW A SINGLE THING ABOUT OCI...LOL!

those chose to listen to MM will lose out big opportunity to make money!


Posted by MoneyMakers > Sep 13, 2022 4:23 PM | Report Abuse

Aiyaa whatever calculation/explanation no use alrdy

At this stage all alrdy made their bed (choose side) - those choose ignore ‘pending’ 1.07Bil hedging loss need sleep with huge stock loss lo

Pending to become unrealized half a billion gain be end of Q3!!


Posted by MoneyMakers > Sep 13, 2022 4:21 PM | Report Abuse

Aiyaa whatever calculation/explanation no use alrdy

At this stage all alrdy made their bed (choose side) - those choose ignore ‘pending’ 1.07Bil hedging loss need sleep with huge stock loss lo

OCI accounting has COHR which is forecasted mark-to-market valuation of forward contracts based qtr closing date....

these are forecasted transaction at prevailing spot rate..the hedging instrument has not expired

it changes the moment spot rate changes back to to how it was at Q1 closing

@MM.

your lay man theory ABSOLUTELY WRONG, as they have hedged till 2024

YOU NEED TO IMPROVE YOUR IQ..

9 million barrels of hedged instruments cannot expire within 3 months

if that happens, Q2 would have reported EPS as if its 100% hedged at 12 USD/brl margin but they reported above 28 USD/brl!!

1 QTR revenue is 10 million barrels

that should be simple common sense to layman...

yes, its distributed with front end loading...

Posted by BobAxelrod > Sep 13, 2022 4:12 PM | Report Abuse

Moreover, to be Hedging for 24 months down the road, seems like a task for Hercules........or God of Thunder, Thor Ordinson.

Post removed.Why?

@MM.

your lay man theory is wrong, as they have hedged till 2024

9 million barrels of hedged instruments cannot expire within 3 months

if that happens, Q2 would have reported EPS as if its 100% hedged at 12 USD/brl margin but they reported above 25 USD/brl

1 QTR revenue is 10 million barrels

that should be simple common sense to layman...

THE ABOVE IS THE SAFEST LOW END ESTIMATE FOR Q3 RESULTS

Q3 - Rock bottom EPS analysis (using lowest possible average crack spread during the period)
.........................

Using extreme conservative scenario where 50% of HY throughput is hedged where they will only reflect hedge margin at extra low 10 USD/brl, with the balance free to capture market margin

1. Diesel at 46% yield, cracks USD 42/brl

www.tradingview.com/symbols/NYMEX-GZ1!/

2. Jet fuel at 7% yield, cracks USD 30/brl

www.tradingview.com/symbols/NYMEX-ASD1!/

3. Gasoline at 35% yield, cracks USD 7/brl

www.tradingview.com/symbols/NYMEX-D1N1%21/
www.tradingview.com/symbols/NYMEX-SMU1!/

3. Rest of product yield at 12%, using Mogas 95 cracks USD 7/brl

Gross profit from (Hedged) portion:
..............................

= (10.7 million x 50%) x (10 USD/brl) x (MYR 4.5/USD)
= 240 million MYR .....(1)



Gross profit (UN-HEDGED) portion:
............................

Refining margin/brl:

= (0.46 x 42) + (0.07 x 30) + (0.35 x 7) + (0.12 x 7)
= (19.3 + 2.1 + 2.5 + 0.8)
= US $ 24.7 / brl

Gross profit:
= (10.7 million x 50%) x (24.7 USD/brl) x (MYR 4.5/USD)
= 594 million MYR ......(2)



Total gross profit (1) + (2)
= 240 + 594
= 834 million MYR

PBT = 734 million
PAT = 557 million
EPS = 1.85

refer page 130 of 2021 annual report

Posted by qqq3333 > Sep 13, 2022 3:06 PM | Report Abuse

this possibility just a goreng kaki............lol.........

what is this USD 12.70 thing? and USD 9.10 thing?........ u got all their contracts meh?

Cash flow hedge (CFH) figures (544 million):
...........................................

Is the loss for the hedging instrument that has matured awaiting recognition along with the hedged item (once sales transaction takes place in future) to realize this amount as derivative loss to deliver the hedged margin (after derivative loss) of USD 12.7/brl on P&L statement.


Cost of hedging reserve (COHR) figures (786 million):
...................................................

Is a hypothetical - forecasted loss if the balance - remaining portion of hedging instrument that has not matured as of 30th June (currently has maturity till 2024) , matures as per the mark-to-market spot rate figure of 30th June within next 12 months.

Considering that, Gasoline Mogas 95 had its spot price the highest ever on 30th June (31.7 + 4 = 35.7 USD/brl), the COHR value mark-to-market was extremely high as per below number: 786 million (or 1,034 million before tax)

= 9 million barrels balance not matured x ( hedged crack of 10 USD/brl - Spot figure 35.7 USD/brl as of 30th June) x 4.5 MYR/USD
= 1040 MYR

From the above we can conclude that about 9 million barrels of Gasoline Mogas 95 will mature in 12 months at average rate of 0.75 million barrels per month. At sales volume of 3.5 million barrels per month, thats at 21% level.

Even with the assumption of 'front loading', i.e more hedged instruments are expiring earlier than being evenly distributed over the 12 months period, we can expect max maturity as per the gasoline yield of 35%.

As such the rock bottom EPS estimation with 50% hedging is extremely conservative.
........

Further, the above forecasted COHR loss figure will change at the end of Sept when the gasoline Mogas 95 crack spread is hovering 10 USD/brl, i.e COHR will register almost zero figure (but this does not matter at all for the overall EPS).

Important take away from above is how much opportunity is lost due to hedging - and we can see its likely max 35%.

Rock bottom EPS analysis - update 13/09/22
.........................

let us assume as extreme conservative scenario where 50% of HY throughput is hedged where they will only reflect hedge margin at extra low 10 USD/brl, with the balance free to capture market margin

1. Diesel at 46% yield, cracks USD 53/brl

www.tradingview.com/symbols/NYMEX-GZ1!/

2. Jet fuel at 7% yield, cracks USD 39/brl

www.tradingview.com/symbols/NYMEX-ASD1!/

3. Gasoline at 35% yield, cracks USD 9.7/brl

www.tradingview.com/symbols/NYMEX-D1N1%21/
www.tradingview.com/symbols/NYMEX-SMU1!/

3. Rest of product yield at 12%, using Mogas 95 cracks USD 9.7/brl

Gross profit from (Hedged) portion:
..............................

= (10.7 million x 50%) x (10 USD/brl) x (MYR 4.5/USD)
= 240 million MYR .....(1)



Gross profit (UN-HEDGED) portion:
............................

Refining margin/brl:

= (0.46 x 53 ) + (0.07 x 39) + (0.35 x 9.7) + (0.12 x 9.7)
= (24.4 + 2.7 + 3.4 + 1.2)
= US $ 31.7 / brl

Gross profit:
= (10.7 million x 50%) x (31.7 USD/brl) x (MYR 4.5/USD)
= 763 million MYR ......(2)



Total gross profit (1) + (2)
= 240 + 763
= 1003 million MYR

PBT = 900 million
PAT = 684 million
EPS = 2.28

The difference between (1) 240 million & (2) 763 million, is what will be the maximum possible derivate loss - ie, opportunity lost.. the extra money they could have made if they did not hedge at all.

Cash flow hedge (CFH) figures (544 million):
...........................................

Is the loss for the hedging instrument that has matured awaiting recognition along with the hedged item (once sales transaction takes place in future) to realize this amount as derivative loss to deliver the hedged margin (after derivative loss) of USD 12.7/brl on P&L statement.


Cost of hedging reserve (COHR) figures (786 million):
...................................................

Is a hypothetical - forecasted loss if the balance - remaining portion of hedging instrument that has not matured as of 30th June (currently has maturity till 2024) , matures as per the mark-to-market spot rate figure of 30th June within next 12 months.

Considering that, Gasoline Mogas 95 had its spot price the highest ever on 30th June (31.7 + 4 = 35.7 USD/brl), the COHR value mark-to-market was extremely high as per below number: 786 million (or 1,034 million before tax)

= 9 million barrels balance not matured x ( hedged crack of 10 USD/brl - Spot figure 35.7 USD/brl as of 30th June) x 4.5 MYR/USD
= 1040 MYR

From the above we can conclude that about 9 million barrels of Gasoline Mogas 95 will mature in 12 months at average rate of 0.75 million barrels per month. At sales volume of 3.5 million barrels per month, thats at 21% level.

Even with the assumption of 'front loading', i.e more hedged instruments are expiring earlier than being evenly distributed over the 12 months period, we can expect max maturity as per the gasoline yield of 35%.

As such the rock bottom EPS estimation with 50% hedging is extremely conservative.
........

Further, the above forecasted COHR loss figure will change at the end of Sept when the gasoline Mogas 95 crack spread is hovering 10 USD/brl, i.e COHR will register almost zero figure (but this does not matter at all for the overall EPS).

Important take away from above is how much opportunity is lost due to hedging - and we can see its likely max 35%.

Rock bottom EPS analysis - update 13/09/22
.........................

let us assume as extreme conservative scenario where 50% of HY throughput is hedged where they will only reflect hedge margin at extra low 10 USD/brl, with the balance free to capture market margin

1. Diesel at 46% yield, cracks USD 53/brl

www.tradingview.com/symbols/NYMEX-GZ1!/

2. Jet fuel at 7% yield, cracks USD 39/brl

www.tradingview.com/symbols/NYMEX-ASD1!/

3. Gasoline at 35% yield, cracks USD 9.7/brl

www.tradingview.com/symbols/NYMEX-D1N1%21/
www.tradingview.com/symbols/NYMEX-SMU1!/

3. Rest of product yield at 12%, using Mogas 95 cracks USD 9.7/brl

Gross profit from (Hedged) portion:
..............................

= (10.7 million x 50%) x (10 USD/brl) x (MYR 4.5/USD)
= 240 million MYR .....(1)



Gross profit (UN-HEDGED) portion:
............................

Refining margin/brl:

= (0.46 x 53 ) + (0.07 x 39) + (0.35 x 9.7) + (0.12 x 9.7)
= (24.4 + 2.7 + 3.4 + 1.2)
= US $ 31.7 / brl

Gross profit:
= (10.7 million x 50%) x (31.7 USD/brl) x (MYR 4.5/USD)
= 763 million MYR ......(2)



Total gross profit (1) + (2)
= 240 + 763
= 1003 million MYR

PBT = 900 million
PAT = 684 million
EPS = 2.28

The difference between (1) 240 million & (2) 763 million, is what will be the maximum possible derivate loss - ie, opportunity lost.. the extra money they could have made if they did not hedge at all.

Rock bottom EPS analysis - update 13/09/22
.........................

let us assume as extreme conservative scenario where 50% of HY throughput is hedged where they will only reflect hedge margin at extra low 10 USD/brl, with the balance free to capture market margin

1. Diesel at 46% yield, cracks USD 53/brl

www.tradingview.com/symbols/NYMEX-GZ1!/

2. Jet fuel at 7% yield, cracks USD 39/brl

www.tradingview.com/symbols/NYMEX-ASD1!/

3. Gasoline at 35% yield, cracks USD 9.7/brl

www.tradingview.com/symbols/NYMEX-D1N1%21/
www.tradingview.com/symbols/NYMEX-SMU1!/

3. Rest of product yield at 12%, using Mogas 95 cracks USD 9.7/brl

Gross profit from (Hedged) portion:
..............................

= (10.7 million x 50%) x (10 USD/brl) x (MYR 4.5/USD)
= 240 million MYR .....(1)



Gross profit (UN-HEDGED) portion:
............................

Refining margin/brl:

= (0.46 x 53 ) + (0.07 x 39) + (0.35 x 9.7) + (0.12 x 9.7)
= (24.4 + 2.7 + 3.4 + 1.2)
= US $ 31.7 / brl

Gross profit:
= (10.7 million x 50%) x (31.7 USD/brl) x (MYR 4.5/USD)
= 763 million MYR ......(2)



Total gross profit (1) + (2)
= 240 + 763
= 1003 million MYR

PBT = 900 million
PAT = 684 million
EPS = 2.28

yup, if cannot improve by learning...low IQ can also help to lift up like what happen in 2017 for wrong reasons...

e,g, next qtr shows cost of hedging reserve swinging to positive 0.5 billion..or oil price shooting up...many low IQ reason can pop up..

Posted by UlarSawa > Sep 12, 2022 11:53 PM | Report Abuse

Sometimes low IQ no matter how to improve just cannot improve leh. Haiyoh. Correct?

time will allow low IQ to improve their IQ level..
you dont need to bring down yours

Posted by UlarSawa > Sep 12, 2022 11:43 PM | Report Abuse

Then you must lower down your IQ and miggle with low IQ one lah. Baru they faham what you are talking leh. Haiyoh. Correct?

how to see when its a sea of low IQ...

Posted by Mikecyc > Sep 12, 2022 11:39 PM | Report Abuse

Haha see how IQ ke … hahaha

but this is after low IQ traders who thought Cost of hedging Reserve is a hedging loss... it shows the level of education of most malaysian retail investors

the news could be an important factor for market (at least for IB) to rethink its wrong assumption

Posted by Mikecyc > Sep 12, 2022 11:27 PM | Report Abuse

Haha no worries… as it is approved before the 2nd QR is released… let’s see tomorrow market reaction:

https://home.kpmg/de/en/home/insights/2020/10/super-contange-crude-oil.html

COST OF HEDGING RESERVE - IFRS 9 (WHY IT CAME ABOUT)

Fair value hedge accounting and volatilities from inventory valuation. Price volatility on the commodity markets creates both opportunities and risks when trading or procuring commodities.

For companies in industries that are commodity-intensive or in commodity trading that according to IAS 2 are defined as "broker-traders" and that measure their inventories at fair value, price volatility causes the consolidated net income to become highly volatile. These volatilities arise from the fact that both inventories and derivative financial instruments (e.g. futures, forward contracts) must be recognized at fair value.

Inventories are measured at spot prices, whereas the fair value of derivative financial instruments is determined by the respective forward rate.

Even if a company procured its inventory at a "moderate" price, the market situation in the wake of Covid led to MASSIVE VALUE CHANGES DUE TO THE SHARP DROP IN SPOT PRICES in the inventory. As a result of the "broker-trader" rule, the inventory valuation resulted in a significant expense entry in the income statement.

Given the LARGE DIFFERENCES between the SPORT and FORWARD rates, the desired compensatory effect of existing financial hedging with futures or forward contracts mitigated volatility on the income statement only so much.

This begs the question of whether companies subject to the "broker-trader" rule could have mitigated their income statement volatility better by using fair value hedge accounting.

Employing fair value hedge accounting with a spot designation and simultaneously applying the cost-of-hedging approach means that the value changes of the spot component of the hedged item and the hedging instrument offset each other (ceteris paribus) for the duration of the inventory hedge.

In contrast, changes in the forward component are recognized in Other Comprehensive Income II under the cost of hedging approach and reclassified to the income statement over the duration of the hedging relationship (so-called cost-of-hedging approach; see IFRS 9.B6.5.29 et seq.)

This leads to a "smoothing" of the income statement over the term of the hedge, particularly for long-term hedging relationships, while significant changes in the forward component's value are not directly reflected in the income statement.

.....

Any of you giving weightage to the Cost of Hedging reserve reported on HY financial report, take note on the above.

https://home.kpmg/de/en/home/insights/2020/10/super-contange-crude-oil.html

COST OF HEDGING RESERVE - IFRS9 (WHY IT CAME ABOUT)

Fair value hedge accounting and volatilities from inventory valuation. Price volatility on the commodity markets creates both opportunities and risks when trading or procuring commodities.

For companies in industries that are commodity-intensive or in commodity trading that according to IAS 2 are defined as "broker-traders" and that measure their inventories at fair value, price volatility causes the consolidated net income to become highly volatile. These volatilities arise from the fact that both inventories and derivative financial instruments (e.g. futures, forward contracts) must be recognized at fair value.

Inventories are measured at spot prices, whereas the fair value of derivative financial instruments is determined by the respective forward rate.

Even if a company procured its inventory at a "moderate" price, the market situation in the wake of Covid led to MASSIVE VALUE CHANGES DUE TO THE SHARP DROP IN SPOT PRICES in the inventory. As a result of the "broker-trader" rule, the inventory valuation resulted in a significant expense entry in the income statement.

Given the LARGE DIFFERENCES between the SPORT and FORWARD rates, the desired compensatory effect of existing financial hedging with futures or forward contracts mitigated volatility on the income statement only so much.

This begs the question of whether companies subject to the "broker-trader" rule could have mitigated their income statement volatility better by using fair value hedge accounting.

Employing fair value hedge accounting with a spot designation and simultaneously applying the cost-of-hedging approach means that the value changes of the spot component of the hedged item and the hedging instrument offset each other (ceteris paribus) for the duration of the inventory hedge.

In contrast, changes in the forward component are recognized in Other Comprehensive Income II under the cost of hedging approach and reclassified to the income statement over the duration of the hedging relationship (so-called cost-of-hedging approach; see IFRS 9.B6.5.29 et seq.)

This leads to a "smoothing" of the income statement over the term of the hedge, particularly for long-term hedging relationships, while significant changes in the forward component's value are not directly reflected in the income statement.

This has proven to increase the predictability of the company's earnings per reporting period.

@Philip, no assertion here for you to invest on HY. Its highly subjective to the diesel crack spread. I have no comparison with Pchem.

Just highlighted above as you were linking HY with oil price whil i had the opinion that Pchem only has this advantage coz of cheap raw material price from Petronas.

Nothing to comment here. I had accidentally pasted my HY articles here (thinking it was my blog on HY earlier) in the first place..he he
and continued doing so after your comments.

no worries..have a good day

HY makes margin from refining, independent on oil price

PCHEM only has the competitive advantage as long oil price is high and help by petronas, the moment price goes down - it loses its competitive advantage if i am not mistaken


Posted by Philip ( buy what you understand) > Sep 11, 2022 5:15 PM | Report Abuse

One of those 2 does not gamble with the price of oil.

>>>>>
AlsvinChangan

SELL PCHEM BUY HENGYANG ?

3 hours ago

Cost of hedging only shows the potential loss / gain on the 'hedged instruments' in the future in OCI, but it does not show the reverse gain / loss on 'hedged items' that negates this as it takes place in parallel in the future....


hedged instruments and hedged items always goes on opposite direction to offset each other - that is the basic fundamental of hedging.

Understanding the Cost of Hedging

www.treasuryandrisk.com/2021/10/13/understanding-the-cost-of-hedging/?slreturn=20220811021228

Why Hedge Performance Is Not the Right Measure of Cost
.......................

Individuals less familiar with hedging may think that the cost of a hedge is equal to the monetary gain or loss upon settlement of the derivative. This is not an accurate assessment, as it ignores the fact that hedging is ultimately meant to reduce risk and uncertainty.

Consider a company that is planning a bond transaction. In one month, the organization will issue a $1 billion, 10-year bond at 3.5 percent. The treasurer is worried that interest rates may rise over the next month, making the bond more expensive than expected, so she decides to partially hedge that risk using $500 million worth of 10-year treasury locks. If rates rise, the derivative will be an asset that offsets the increased interest rate at issuance, reducing the financial impact that market shift has on the company’s new debt.

By contrast, if rates fall, the derivative will become a liability; the bond will be priced better than expected, and the derivative will look like an unnecessary cost. Suppose rates fall by 50 basis points (bps) from the time the hedge is executed until the time the bond is issued. The bond issuance will be executed at 3.0 percent, and the derivative will be a liability of roughly $2.5 million. However, that is only half the story. Amortizing the termination value of the hedge over the life of the financing results in an effective cost of debt of roughly 3.25 percent, which is still better than the original expectation of 3.5 percent.

Some executives facing such a scenario will view the hedge as costly because it ultimately was not needed. This is not the right perspective. The purpose of the hedge was to reduce risk in future outcomes, giving the company greater certainty around cost of capital planning. Think about the opposite scenario: If rates had risen 50 bps instead of falling, the hedge would have been an asset worth roughly $2.5 million, and the effective cost of debt would have been roughly 3.75 percent—higher than the original expectation because only half of the issuance was hedged. In this case, would the treasurer be happy that the hedge was an asset, even if the cost of financing was higher than anticipated?

In both scenarios, the hedge serves its purpose by reducing the potential volatility of future issuance outcomes and narrowing the band of possible issuance rates. By keeping in mind that derivatives are meant to reduce risk, companies can move away from measuring the costs of their hedging programs using gains and losses.