The msg here is you dont need a large rise in crack spread for Hengyuan to deliver extraordinary earnings.

You just need about 13 USD/brl to hit TP of RM 24 with PE 5.

Guys, study the Q3 2017 vs Q4 2021 Income Statement as closely as possible.

Compare the Gross Profit and divide them by the avg barrels processed & sold usually in a qtr (about 10m) to see the margin per barrel.

All you need is 3 USD/brl higher average margin in Q1 2022 vs Q4 2021 to obtain an EPS close or more than RM 1.

The depreciation per qtr now is half of it used to be in 2017.

For Q2 2022 no need to estimate lor.....buta buta jackpot!

i was not aware of point no.3, thanks for sharing

Summary:

Oil refining is typically not a high ROIC business except for the Finnish based Neste, but the recent jump in crack spreads are causing revenue growth to soar to above 70% y/y and with crude oil supply remaining tight these refining margins will remain high for a considerable time period. The question is how long this new golden age of oil refining will last. As long as capital expenditures are not being raised considerably in the energy sector the market will remain tight for quite some time.

A new golden age of oil refiners

4th May 2022

https://www.home.saxo/en-mena/content/articles/equities/a-new-golden-age-of-oil-refiners-04052022

13 USD/brl is actually good enough for RM 10 TP, seriously

will apple168 help us clear 6.50? :)

i welcome everyone to voice their opinion, as long as they have access to real current refining margin information like i do

.........


@pang72, valueguru, cactus81, kl-guy etc who have been here for sometime, a very shocking news is unfolding...

like what valueguru said, i have access to some powerful tool to know the current margin of refinery and just within last 3 days it had exploded to a value no one would belief...

this will come to surface from news soon

as such please hold on tight for a few weeks no matter what (roller coaster ride we may face) as its possible that HRC price breaks RM 10 very very soon

https://www.theedgemarkets.com/article/bursa-energy-index-rises-most-led-refiners-rally-line-crack-spread-spike

Reuters also reported that profit margins for complex refiners in Singapore — the bellwether for Asian refiners — had tipped over US$20 a barrel on Wednesday while crack spreads for gasoline, diesel and jet fuel had set fresh record highs of US$22.28, US$47.53 and US$37.38 per barrel respectively on Thursday, as transportation returns to form amid easing of pandemic containment measures across the globe.

Earlier this month on April 4, rating agency Moody’s Investors Service had also said Asian refining margins will remain buoyant in 2022 as easing movement restrictions boost demand for transportation fuels, while uptake for Asian fuels from Europe has increased due to international sanctions on Russia.

It noted that at the same time, supply has fallen due to significant refinery closures last year, coupled with decreased fuel exports from China.

Strong demand for transportation fuels amid a supply shortfall would drive refining margins even as a recent surge in crude prices bolsters feedstock costs, Moody’s added.

correction: more than half of its market cap

actually i myself cannot belief the margin information i have.... there appears to be acute shortage of refining capacity worldwide..

at this rate , if the margin persist till end of June...

2nd qtr earnings of Hengyuan can exceed its entire market cap now...

@pang72, on the same article they already mention the below:

Refining margins in Singapore, bellwether for profits at export-oriented refineries in Asia, hit an all-time high of $19.12 a barrel in April as Western sanctions hit Russian supplies while global oil inventories are at multi-year lows.

Purely FYI, the current margin is even higher than above but i will not disclose at the moment

RM 440M per qtr for 67000 bpd (6 million barrels per qtr)

That means approximately USD 17 per barrel profit margin

https://www.reuters.com/article/s-oil-results/update-1-s-koreas-s-oil-sees-q2-refining-margins-staying-firm-on-seasonal-demand-idUKL2N2WP08C

S-Oil reported an operating profit of 1.3 trillion won for the first quarter, up 112% from the year-ago period.

The company said it operated the crude distillation units at its 669,000 barrels-per-day refinery in the southeastern city of Ulsan at 99.6% of capacity on average in the January-March period, up from 98.7% in the fourth quarter.

...........

thats approximately 440 million RM for a 67,000 bpd capacity

https://money.usnews.com/investing/news/articles/2022-04-26/valero-kicks-off-u-s-refiners-first-quarter-earnings-with-profit

Refiners' earnings are expected to remain strong in coming quarters as sanctions on Russia following its invasion of Ukraine have cut global product inventories at a time when fuel demand has rebounded to near pre-pandemic levels. In addition, numerous facilities have closed in the last year, boosting profitability for existing refiners.

Valero's quarterly refining margin more than doubled to $3.21 billion from a year earlier.

@pang72, there are two errors on the above derivation from KYY posting..

1) EPS calculated above of 50 cents is per month (30 days) not per qtr
2) Refining margin obtained from average crack spread of all products including gasoline & diesel, has to be deducted with 'break even' margin (the cost of production per barrel).

PetronM just announced 20 cents Dividend

thanks for the wishes apple168

https://klse.i3investor.com/web/blog/detail/koonyewyinblog/2021-11-09-story-h1593748000-Never_buy_stocks_in_anticipation_of_future_profit_Koon_Yew_Yin

@apple168, i test your maths intelligence..can you see the error in KYY's EPS derivation on point - 02 on the link you provided...? :)

@apple168, FYI... HRC is beneficiary of weakening RM against USD

The crack spread is in USD/brl and HRC margin (to Shell retail) is fixed on the Singapore crack spread

If this prolongs for a few more months, Earnings can actually exceed the entire market cap of HRC... it will be flushed with cash for expansion. NTA will hit RM 10 easily by end of June.

Hurricane Harvey in 2017 had only momentarily made the crack spread to shoot up about 16 USD/brl....
This 2022 Russia-Ukraine war and China refined oil export tax has triple the power of the hurricane now. They say this can last for 3 years...

Refining margins have hit a high on the back of record-high diesel spreads. Singapore complex hovered between $ 19-20/bbl last week, while diesel spreads have been between $ 40-45/bbl.

https://www.5paisa.com/tamil/blog/indian-omcs-refining-margin-spike-to-continue

@Johnzhang, market have not realized crack spread for Diesel yet....wait till it realize

Check Page 41 on the Annual Report just released

https://klse.i3investor.com/web/staticfile/view/457915

sifu pang72 so silent....

Tips: check page 37 of Hengyuan's annual report (refining margin FIFO)

It will also show what is was like in 2017 (the Hurricane Harvey year)

https://pulsenews.co.kr/view.php?sc=30800028&year=2022&no=347756

South Korea refiners will likely report strong results in the first quarter while display and battery makers could be disappointing due to slowed demand coupled with spike in raw materials prices.

According to the consensus of seven analysts compiled by Yonhap Infomax, SK Innovation is expected to have raked an operating profit of 1.3 trillion won ($1 billion) for the first quarter, reversing from previous quarter’s loss and doubled from a year earlier. S-Oil is expected to report record-high operating profit of 1.2 trillion won, up 94.9 percent from a year earlier. Its best record so far is 704.1 billion won earned in the second quarter 2008.

“Oil refiners’ profitability has improved sharply as inventory value rose on surging global oil prices while refining margin also jumped, said Cho Hyun-ryeol,” Samsung Securities analyst. “Strengthening in refining margin will likely continue as jet fuel demand is also projected to pick up from the second half,” Cho projected.

Refining margin, the difference between the price of raw materials (crude oil) and price of petroleum products, and which is considered refiner’s key indicator of profitability, has hit a 22-year high recently. Korean refiners see $4 to $5 per barrel a break-even point. The benchmark Singapore gross refining margin (GRM) reached $18.2 per barrel, the highest since recording tracking began in 2000, in the third week of April, after adding $0.8 in a week. Singapore GRM had $6 averaged early this year but rose rapidly to $13.9 per barrel in late March as Western countries sought cutting off Russian oil while global demand for petroleum products continued recovery.

The oil price spike has also helped refiners’ inventory value surge, which is translated as higher profits.

sifu Pang72...lets play Q&A game...

can you guess what will be the PAT of Hengyuan if the crack spread is maintained about 12 USD/brl? :)

those who missed will never get it

Lets see if this could pull in some intelligent information

It shows this new management (after Shell) is good

I mean end of 2015 (NTA 2.25) - end of 2020 (NTA 7.22)

RM 5 in just 5 years.

Hengyuan from 2016 - 2021 (5 years), despite very difficult refining margin managed to increase its NTA by about RM 5, that is like on average RM 1 per year.

For 50% payout, at 5% yield RM 10 is minimum target...

But now with current crack spread, easily RM 1 EPS per QTR!!

@Pang72...just hold tight tight till the results speaks

To sifu Pang72, Stockraider..Annetan and all the senior comrades of i3.. its time to wallop HENGYUAN!

I am in...we are talking about minimum TP of RM 10 here.

both macro & micro factors makes investment in bursa difficult..

local politics is making malaysia appear like the doomed MH370 awaiting crash..as if the pilot is missing

same here fortunebull..i can understand what u r saying..

well said, i seriously prefer the previous format.. @TanKW , thanks for the link

myself left clueless on what is the strategy that works in bursa...simple PE 10 thesis appears to be hidden in the sand for now...as future earnings prediction became increasingly difficult...

i believe with the tech stocks dropping some sanity on valuation will appear to bursa

only Charlest sifu surviving...proven the fittest...most adaptive...just like sifu OTB..does not matter black or white cat..as long as can catch the rat

Orang utan definitely appears more peace loving creature than Zuraida..as all she can think about is killing and being killed..

actually orang utan statement is so apt..cause it kinda make us reflect we malaysia are being governed by apes...

malaysia has become 'country' of the apes..

agree sslee & tobby...LOL!

steel traders margin is good

Nice selection Charlest!
Annjoo and Uzma is clear cut winners to me...

no idea on KPS..can you enlighten a bit?

I see.. Thanks for the info!

Its hitting 4700 now..

Posted by alenac > Dec 16, 2021 3:03 PM | Report Abuse

Good news Chinese local provincial officials has taken over the management of Evergrande to ensure construction of houses continue and completed. Hopefully the demand for steel will pick up further.

CNY 4683 now!