The limelight is still with San Miguel.
Just 1 straight to the point Question will do: Under Petron Corp, What’s the profit attributable to NCI?

To certain extent they did hedge a portion of forex exposure

Better to ask questions during tomorrow briefing then you will have clearer picture. As usual, the briefing slides will only show 1 pg Petron Corp with net income only

Operating income = Pre-tax profit excluding finance charges = 6120+7291=13411

So far what I have learned:
In-the-money
At-the- money
Out-of-money
Nothing else

HRC appointed additional director which is from Singapore IMC Group

Petron Corp (Philippines) may announce it's bottom line these few days

Short and Precise. Well explained!
i3lurker

European warrants are just Fixed Deposits where general public pay the interest to rich Investor

Has anyone ever studied the profiles of the top 30 largest shareholders and their movements?
Mind sharing?
This is excluding EPF as it has been made known that they have doubled their holdings as at March 2022 if compared to last year position.

Multitasking….
I must admit that I could get out of 2008 crisis is mainly attributed to watching Bloomberg TV every night plus magazine from my wife foc as she was the corporate user of Bloomberg terminal. It highlighted how serious was the subprime thingy since 2006…

@i3lurker
you will find it more interesting and informative if you subscribe to Bloomberg Market magazine

Posted by probability > 8 hours ago | Report Abuse
can HY realize all their hedging instruments on refining margin swap, e.g for gasoline in order to realize whatever gain they can make now due to present crack spread, in a single quarter instead of using it for hedging purpose distributed along with the physical market transaction, if they wish to do so?

If I understand you question correctly, it’s simple. Since the contracts were entered via OTC over-the-counter market, they can unwind their position by entering into the opposite direction of their existing refining margin swap contract (new contract) with another counterparty to square off their position. Traders/speculators usually did it. However, it is unlikely for HRC to do so as I personally do not see any commercial benefit at all. What comes around goes around. They can stop entering new contracts but not unwinding the existing contracts as it can be costly.

Unrealised loss on cost of hedging reserve will never be realised and hence, do not expect HRC can realise when they are in a gain position. Once unwind, their business is no longer being protected. It may expose them to greater volatility in the P&L.

By hedging, you will see erosion in the profit margin of HRC is delaying when spot refining margin is trending downward and vice versa. Due to this, at least now we know that the profitability for the next 3 months is intact due to hedging.

Cost of hedging reserve is mainly attributable to the widening gap between the spot and the forward contracted rate. If the gap is narrowed, amount shown in the cost of hedging reserve will also be narrowed, be it gain or loss, and it’s a non-cash item.

I mean, is it legally/based on audit requirement, acceptable to do so?

The only way is to enter into opposite direction of the contract (a new contract) to unwind. Nothing wrong from doing that but I see no commercial benefit in doing so.

HRC has been consistently applying its hedging strategy for many years and I didn’t observe any speculative behaviours at least for the past 3 years.

If they apply it selectively, their numbers will longer be predictable and I will be the one who is pulling out.

@probability
Will reply you tonight when I'm free

Likely someone is collecting to cover call warrant (seller) position.

@Probability. Welcome back!

All this forward derivative transactions are entered via over-the-counter OTC through brokers. well known financial institutions are part of the game. There's contract binding each other. People seldom called it private and it's also the first time I heard.

Til today still not many people know what is hedging. hedging is simply mitigating your risk exposure, not magnifying your risk. Based on this principal, you can ignore the accounting part unless you are doing profit projections.

similar to hedgehog

Learning new word 'Hedge Die'.. interesting

The best part is even if you know, you won't share but he did.

Not many people know how to compute Petron's profit by using Petron Corp's financial statement. If he's not an accountant, he must be intelligent..

Good monster usually appear in kid's world..

HIB people better evacuate...

@ Ular...I tossed HIB and now I come to HRC n Petron..

That's the problem, every time I tossed coin I kena sapu 100%...very sueh..

At least doing some high level research can increase my winning odds.

From dark hair to white hair is a journey ..at least the hair is still growing.

Me not much hair to grow and that's y I research their research to save my time..

Can't convince kakijudi doesn't matter. The more you research the more you learn....at least you can shiok sendiri..

Have to admit that both HRC and Petron are cyclical stocks. Just that how long the record quarterly profit could sustain. Everyone have different view.
..

@sslee Anyway, for plain vanilla forex swaps, only 1 settlement per contract

@sslee,
As I know, for interest rate swaps, there will be periodical settlement on fixed rate vs variable rate with reference to the notional amount, be it monthly or quarterly until it’s maturity.

For refining margin swaps, would it be the same? Or there will be 1 contract 1 settlement on the maturity?

In my mind, all swaps contract shall have this similarity but apparent I couldn’t get any write up here to confirm on this. If it is, the % hedged by HRC shall vary significantly. Appreciate your thought.

@Zhuge, I have never ever audit nor involved in any refinery company. Just that I peanut knowledge about hedge accounting if derivatives are taken as hedging instruments as general. As I said, I blow water only and I could be wrong.

@Probability, I could be wrong as I'm still learning

@Probability, please do not quote me as I'm only blowing water like others:)

@Probability @Johnzhang @Sslee @Zhugeliang @Hng33
Not sure whether this will be the better example to explain marked to market thingy…
You purchased a bond RM1 mil at 3.8% interest p.a. with a tenure of 3 years. Due to OPR movements, investors’ risk and reward expectation, the market yield of your bond increase to 4.3% and hence causing the market price of your bond now dropped to below RM1 mil I.e. unrealized marked to market loss. However, if you hold your bond until maturity, you will still get your 3.8% fixed interest p.a., with all this marked to market gain or loss will eventually reset to zero on the maturity date as you will get back exact amount principal repayment of RM1 mil from the issuer.
Fair value of derivatives consist of 2 components which is the spot element and forward point (basis swap spread) element. Spot element is like the 3.8% interest element, basis swap spread/cost of hedging is like the market expectation which the unrealized gain/loss will eventually reset to zero on the contract maturity date.
This is why I said losses on cash flow hedge will be recycled to pnl when the settlement is due, whereas losses on cost of hedging will eventually reset to zero upon maturity.

The reason why all these movements in reserves were recognized in other comprehensive income instead of pnl are to reduce volatility in pnl since they are non-operational in nature, and it serves the purpose as intended.

@johnzhang
Cash flow hedge reserves will be recycled to profit to match it hedging purpose when transactions ended, translation reserves will be recycled to profit only when you dispose of a subsidiary with reporting currency denominated in foreign currency. Cost of hedging reserves which is the movement in the basis swap spread will unlikely recycle to profit unless it is terminated. That amount of losses will slowly write down to eventually become zero on the contract maturity date. This is mark to market I.e. when matured, no more forward element, only spot element.

Losses recognized on derivatives held for hedging is not a concern. Do not expect the losses on cost of hedging to recycle to pnl unless the contract is terminated. Losses on cash flow hedge will be recycle to pnl to offset the gain on the spot market whereas losses on cost of hedging will be gradually reset to zero when near to the contract maturity dates.

@johnzhang
Net assets per share is available at the face of Bursa template. For computation, just simply use shareholders’ equity divided by 300 m shares then you will get the number.
The drop in NA per share is mainly attributable to the losses in cash flow hedge reserves and cost of hedging reserves.

Just imagine with low PE and high EPS, how these will trigger the big machines like Refinitiv, Bloomberg terminal to initiate coverage and subsequent buy call….only setback is not many people understand how hedging works and the mechanism of hedge accounting.

Seems like both HRC and Petron have yet to recognize the additional 9% prosperity tax. HRC may be yes but Petron definitely not yet.

The cost of hedging will not be reclassified to P&L unless the contract is terminated. My feel is that it will be zerorised upon maturity of the contracts.

@Sslee you are right! The marked to market loss on spot element is reflected in the cash flow hedge reserve. However the marked to market loss on forward point element (i.e. basis swap spread) is reflected in cost of hedging reserve which I explained to your friend OTB 3 months ago.

HRC is applying MFRS 9 hedge accounting rule i.e. the noise created in basis swap spread is reflected in other comprehensive income.

Derivative loss (cost of hedging) for sure will reduce dramatically if taking today's date as a cutoff.

Cost of hedging = forward points = basis swap spread
This is the problem when the contracts entered are long tenured > 2 years

@Tuchel you are right except physical delivery which is not practical at all. should be cash settlement

@Tuchel
Any marked to market gain/loss on derivatives will be reset to zero on its maturity date (i.e. reversal) eventually, leaving net settlement with counterparty only.

@Probability
Yes. There are many ways. You have the choice of either applying mfrs 139 (old) or mfrs 9 (new but irrevocable) hedge accounting. Or for simplicity doing natural hedge and ignore about the accounting impact.

@Sslee
Agreed that derivative losses will be reversed but it's not a provision. It is merely a marked to market losses as at end June to reflect the current contract price in the market. This will eventually be reversed and replaced with actual periodical settlement.

If HRC and Petron consistently apply its hedging strategy and based on today's 29 August cut off, most losses will be reversed and likely there is a marked to market gain by now.

Accounting standards are trying hard to force all companies to reflect their numbers based on current fair values but it comes with unintended consequences in particular to those companies that are entering derivatives for hedging purposes.

If both HRC and Petron apply new hedge accounting rules under MFRS 9, these marked to market losses/gains could possibly be reflected under other comprehensive income instead of profit or loss.

That's my thought.

The announcement is available at Petron Corporation website.

Petron Corporation, the holding company of Petron M had already announced it's profit early this month which is doubled. From there you can actually gauge roughly the results of Petron M.