bought hiaptek at 21sen

sold back supermax at 69sen.

Whether or not commodity swap can fully mitigate big stockholding loss due to steep decline in crude oil storage value remain a question. But, for certain, it will record less profit in Q3 than in Q2.

Daily Crack spread = Purchase price of crude oil - selling price of finished products gasoline, diesel and jet fuel

Net crack spread = (Purchase price of crude oil + operation cost + maintenance cost ) - selling price of finished products gasoline diesel and jet fuel

Its real funny why many calculations use daily publish crack spread to arrive net profit but ignore the fact that for refinery to refine crude oil, its need operating cost including use some of feedstock as fuel to operate plant, electricity/manpower/Maintenace/chemical to crack crude into different component etc.

In general, to run refinery plant, it need at least crack 4-5 to operational breakeven. Current depress gasoline crack is actually loss making or merely near breakeven

Upcoming Q3 definitely lower than Q2 result. The reason are

1. Average crack spread in Q3 is lower than Q2
2. In Q2, there is one-time writeback inventory gain RM 54m, these writeback is non recurrence in next Q3
3. Realize and unrealize forex loss will increase due to further strengthen in USD.
4. Stockholding loss. Crude oil storage tank purchase price is > USD100 in Q2, but mark to market price based on first in first out in Q3 < USD 90 now. On average incur -USD12-14/barrel loss.
5. Refinery gasoline is now at operation loss as gross crack spread tumbling below breakeven cost USD 5. However, refinery crack for diesel and jet oil still command high profit margin.

However, the above factors is partially offset by
1. Hedging gain on gasoline crack spread but, Hedging on diesel and jet oil may continue at loss due to continue elevated crack.

Remark: In early next year 2023, hengyuan will have major 5 year plan Maintenace shutdown, which could last 1-2 month period.

Very funny, can ukraine withstand tactical nuclear weapon!? first few strike will already destroy almost all weapon from US. Can US continue supply unlimited weapon to ukraine? Russian possess 1600 unit of tactical nuclear weapon is far more than US only have 300 unit. US is self-interest country, only mind its own core interest.

Rusian will use Tactical nuclear weapon only if Ukraine contine attack its new territory. Once tactical nuclear weapon force to launch, the first few strike will create stop war effect already. EU, US, ukraine will all refrain to conter attack as it will lead mutual destruction. Afterall, everyone know Putin escalate to de-escalate aim is to stop war

Sslee

You must know history squence event first. US first nuclear bomb is actually taken from Jerman when it defeated Jerman first. Then, US only use these new invented nuclear bomb on Japan later

In world war II, US also adpot escalate to de-escalte strategy to stop war. US use nuclear bomb Japan, force it to surrender. If without nuclear bomb, Japan will continue virgourously defend its territory and occupied land in China and Asean country.

Once temporary easefire achieved, EU (lead by France) will take role to replace Nato (lead by US). Both China and India will help EU to inititate peace negiotation between Ukranine and Russian. As pease talk is prolong process, tension will still retain at border alike what happen between Isreal and palestine.

Remark: Currently all parties inculding Russian/ukranie/EU, all wanted easefire, but only US wan prolong war as part of its strategy to weaken Russian economy. But if US territiroy, its core interest is under threat due to Russian initial tactical nuclear weapon, US will force to join on peace negiotation.

Russian own 1600 tactical nuclear weapon, specific design to target limited battle field. Its power is about 1/15 bomb in japan, capable to destroy limited strike on military target without causing widespread radioactive fallout.

Russian own world most powerful submarine

hahahaha, you think Rusian nuclear cannot reach US ??? actually, go to look at world map. Russian and US actually is neighbour country :)

Russia action is escalate to de-escalate to stop war

If Russian initiate nuclear war, EU or US wan counter attack, it will lead mutual destruction. US is fear of nuclear war as it absolute none of its core interest

Once temporary easefire achieved, EU (lead by France) will take role to replace Nato (lead by US). Both China and India will help EU to inititate peace negiotation between Ukranine and Russian.

Remark: Currently all parties inculding Russian/ukranie/EU, all wanted easefire, but only US wan prolong war

Poll showed win in Donetsk, Luhansk, Kherson and Zaporizhzhia. Now these 4 state are recognized as part of Russian territory similar to what happen in 2014 when Crimean vote to join Russia without international recognition

Ukranie war is at taillling end now. The reason is simple, no any countries dare to invade Russian territory

According to a Russian military doctrine stated in 2010, nuclear weapons could be used by Russia "in response to the use of nuclear and other types of weapons of mass destruction against it or its allies, and also in case of aggression against Russia with the use of conventional weapons when the very existence of the state is threatened".

In this case, Russia would pursue an 'escalate to de-escalate' strategy, initiating limited nuclear exchange to bring adversaries to the negotiating table. Russia will also threaten nuclear conflict to discourage initial escalation of any major conventional conflic

The factual is cyclical commodity stock is only for short term, simply ignore factual by holding cyclical stock long term is a mistake

To Russian, if invade into its territory, it have absolutely right to launch massive nuclear weapon to fend off western

Once donbas join Russian through referendums, the table turn opposite, Russian is defender, Ukrainians is invader

Whether or not hengyuan affect by crude oil through loss in stockholding or neutrallize by hedging, lets open market to decide.

The lower the crude oil, the better the hengyuan or opposite?

Wait next week hengyuan share price responsive to tumbling crude oil ya.

Afterall, share price is determined by supply/demand, its dynamic voting in react to change in crude oil

Depending on last end Sept crude oil price, hengyuan stockholding loss could be bigger than expected - USD 10-15/barrels, it will eroding crack spread profit significantly.

Oil is cyclical commodity, react negatively to recession

Recession is best tool to cool down oil market

Market responsive is Fed rate hike induce recession to curb inflation outweight oil supply risk

Affin bank director is too greedy asking share grant. The additional share grant now is now pending BNM approval.

Director wanna to get these share grant before declare special dividens foe them to entitle more

Crack spread for gasoline is at historical lowest range USD 3-5.

In contrast, dissel and jet fuel crack spread are at historical high range.

In winter time, gasoline is at decreasing demand, but, dissel is higher due to need to replace gas

Based on current gasoline crack spread of just USD 3-5 range, RON95 actually should lower instead of increase.

Only dissel and jet fuel are at elevated level. Gov can increase dissel retail selling price in accord to international crack, but, not gasoline which is now at historical lowest range

Based on current gasoline crack spread of just USD 3-5 range, RON95 actually should lower instead of increase.

Only dissel and jet fuel are at elevated level. Gov can increase dissel retail selling price in accord to international crack, but, not gasoline which is at now at historical lowest range

Added more HLC at 6.17-6.18

The schedule is early 2023 according to annual report

After 2018, next 5 year major shutdown maintenance is next year 2023

Also reminder to all hengyuan shareholder, that hengyuan refinary plant will under major 5 year plan shutdown for maintainance in early 2023. If you plan to hold for 1 year or more, please take note of it ya

Refiner profitability dependent on triple parameters.

1. Average crack spread - Q3 crack spread is lower than Q2, but still much higher than breakeven cost
2. Stockholding gain/loss- Q3 crude oil is lower than Q2 by about USD 10/barrel, so, Q3 will incur 1 month stockholding volume loss -USD 10/barrel
3. Hedging/swap contract - Depending on contract expire date or timing of settlement

Remark: All in, EPS in Q3 result is expect to lower than than Q2, but will still higher than corresponding Q3 last year

Today, bursa will approve RHB interim dividend reinvestment plan, 10sen cash + 5sen (reinvestment)

Chairman need to resume buyback to instill minority confident

If without take into accounts inventory loss, mark to realizable value, topglove should record breakeven eps.

Since ASP will increase 5%, there will no more inventory marked down in next Q result forward, topglove will return profitable next Q result

The root cause is oversupply due to aggressive expansion capacity, the demand is resilient and growth every year.

To solve problem, it just need to cut production rate, and collective action among top 4 in Malaysia to limit supply. ASP have bottom, time to rebound back to normalize level, profit margin 8-10% is good enought.

In additional, despite labour cost and gas hike, but major production cost, raw materials have decreasing. Overall, net impact is production cost still on downtrend.

USD stengthen also boost export oriented glove business

China glove manufacturers alrdy stop expansion, and is clearing nventory at below cost.

Glove oversupply is due to glove manufacturers expanding capacity too fast beyond markey can absorb, causing supply/demand imbalances, resulting ASP tumble below cost.

The situation cannot last longer as glove manufacturers have option to stop expansion, decrease capacity by decrease plant utilisation rate.

Once major glove manufacturers collective taking similar action to decrease production, supply and demand will reach balance faster than expected.

Aldy, topglove, a top glove producer have initiated cut plant utilisation rate to below 50%, initial increase ASP 5%.

Malaysia glove maker still control global 65% market share, topglove lead cut production rate, increase ASP will prompt other glove maker to follow, as afterall, its useless to produce glove is is loss making business, no other can sustain even for few quarter

Added second batch RHB at 5.66

Added second batch supermax at 68.5sen

Supermax US glove plants is next key earnings driver as US healthcare policy to gradually self sufficient on healthcare product including glove and mask. Policy to souce local US producr glove and mask to be based on contractual local produce healthcare product.

Alike other industries like semiconductor, US policy now emphasized on self supply by attract direct investment in US, souce on US produce product.

Large new semiconductor plant set up in US also increase glove and mask demand in US

Among all glove stock, supermax balance sheet is strongest. Net cash holding is higher than market capitalisation allow supermax to continue reward dividend to shareholders.

Supermax aldy propsed 3 sen final dividend to be declared next month.

ASP alrdy reached bottom based on topglove latest result. ASP to gradually increase 5% start next month

Dividend yield of mote than 10% now shpuld cushion any further downside risk.

bought supermax at 69.5-70sen

bought HLC at 6.22

Buy and hold is not applicable on cyclical stock

Sslee

This is strategy when deal with cyclical stock

Coming Nov is critical time as winter season reach coldest. Monitor whether EU situation, whether or not will reach deal with Russian to resume gas supply as Ukranie war may temporary easefire. Iran nuclear deal and easefire could press down gasoil crack spread