Fundamental of HY has changed

When investors / traders / punters pushed share price from RM10 to RM19, the anticipated fundamentals are sustained high refinery margin, stock holdings gain and high Free Cash Flow to pare down debts. Indeed, some anticipated at EPS 1.50 or Net Profit of Rm450m per quarter, HY would turn net cash by end 1Q2018.

4Q results had dispelled those blue sky assumptions or predictions. What is clear is net debts remain at elevated level, though net gearing has improved.

Indeed, with prolonged maintenance in 3Q this year, there is every possibility that 3Q EPS could be negative.

good sharing effort.

What is your reference of recent panic selling?? from share price of 60 sen?

If so, wouldn't you reckon that there was irrational panic buying from 30 sen to 60 plus sen? Or merely speculation and the rather muted 4Q result pricked the bubble?

The NTA of Huaan is still below the current share price. Cyclical stock at this stage, with high level of uncertainties, normally only trade at single digit PER.

share price have been on free falling from RM15 to sub RM9 now since 4Q result disappointment and recent negative news flows. Valuation is reflecting business fundamentals. what significant profit has Kenanga got to gain? even if they were to push price down, it is mere tens of cents while share price correction has been RM6 to RM7.

Good effort.

As highlighted by some, discount rates too low. U r using reported cost of debt. Interest rates are rising. Even our government 10 year bond yield is almost 4% NOW. likely to move to 5% by early 2019. Cost of Equity is way too low.

BTW, have u look at the analysts DCF for those KLSE blue chip stocks whereby Cash Flows are more predictable?

Haha.. U would likely find that there are so many quality stocks trade at huge discount to their DCF value!!

IF I were KYY, i would also have sold after the disappointing 4Q results.

Would you invest RM10m in a company whereby earnings for 2018 would decline, pays almost nil dividend and trade at 2.5x to 3.0x book value?

Or would you rather put your RM10m in say, Public Bank that gives 3% dividend yield, trades at 2.5x Book Value and continue to achieve revenue and earnings growth?

Of course it could be other stocks other than PBB.

credit to david_tan for sharing

however, thanks to Icon8818 for highlighting factors we may miss.

what is certain is EPS for 2018 would be lower than 2017.

How much is HY worth?

Let's not forget that when we compare to regional or global peer, a lot of these companies are covered by analysts and earnings are quite predictable. It is not like HY when so many, called sifus diligently showed their analysis but actual results is only half of the estimates.

Let me draw your attention to HK listed Sinopec. PER based on FY2017 EPS is 7.5x with a dividend yield of 6%. A lot of analysts cover this stock.

How much discount would global investors pay for HY? when dividend yield is almost nil. Where investors find it difficult to forecast the earnings, almost nil dividend.

So, the next time some contributors bark 10X PER, think twice. For every ikan bilis buyer like you and me, someone is selling to you at RM17 and RM19.

credit should be given to the author for the indepth analysis and info sharing. Logically, almost everyone believe 4Q EPS would be much better than what has been reported. I guess most are still looking for answers.
Imagine a dividend of a mere 2 sen for a RM10+++ stock. This speak volume. Maybe there are things we who are outside the company do not know and cannot analyse. Everyone thought HY would turn net cash either end 2017 or 1Q2018. But looks like the company is not generating enough free cash flow.

does anyone have a clue why is kwsp been selling Penta?

why should it rebound?? the expectations were high for 4Q eps. they push up the share price from rm13 to rm15. theoretically, for such a dissapointing result, it should go down from rm13. for all the high refining margin and inventory gain, why is the 4Q result so bad? i expect company to turn net cash, but debt levels still so high.

something to ponder..

gain on disposal of rm39,902k... compulsory acquisition of svc stations... why? i have 2 questions
1) why compulsory govt acquisition?? Petron retail revenue model is to open more svc stations and gain market share. Retail profits is less volatile and deserve higher valuation (as per Pet Dag)
2) The gain on disposal is almost RM40m!! This is a staggering amount.. it is not proceed but gain! How many svc stations was acquired??

Having said that, I still believe PetronM business model is robust... it is has turned net cash.. next question is capex for the next 2 or 3 years and funding requirements...

some have done great research and homework to empower us.. thanks to those hard work

i believe 2 things to bear in mind
1) for a company with huge debts, the appropriate valuation method should be Enterprise Value / FCF or Earnings
2) if all the earnings contribution is cyclical, the valuation of this company would always be range bound as compared to structural earnings uptrend. One forummer has kindly shared the price chart of Reliance Industries. If you look at the monthly share price movement, Reliance Industries' share price even at today's high is only the same level as in 2008. for most part of 2010 to 2016, the share price is stuck in a range 800 - 1,000. I have not look into the details of revenue / earnings contribution for Reliance Industires.

We all know now that crack spread is cyclical. What should we do if crack spread normalise to lower level? Do we chase share price when spread is high and try to dump shares when spread is low??
Crack spread is a function of demand vs supply. If I am not mistaken, there is meaningful capacity addition in 2018.

Just my humble opinion.. trade with care... all is good when crack spread is trending up...