Goodbye gasoline cars? EU lawmakers vote to ban new sales from 2035. New refinery anyone?

https://www.cnbc.com/2022/06/09/goodbye-gasoline-cars-eu-lawmakers-vote-to-ban-new-sales-from-2035.html

Pls refer to the annual report before talking rubbish stockraider. They Already produced.

I see a lot of wrong crack spread applied in analysing refiner's margin. If the company ONLY sells gasoline, then yes just use the gasoline crack spread but HY sells more than that. For example diesel, most people are not even aware that diesel crack spread has been a lot higher than gasoline; last week reached a high of USD56.55 in asia; way higher than gasoline; diesel is 35.1% from crude processing (annual report pg22) and is adjustable for complex refinery. Same goes for jet fuel (7.1%). It's possible that overall refining could be higher than the gasoline margin most people used. This never happens before but same goes for the war.

Main concern is with the commodity options contract because it's most likely a naked call and when they set up, there wasn't any stock/inventory to cover the price rise against the strike (e.g. fair value gain from inventories) and losses might rise further but I suspect lower; and also HY quickly build up inventories in the current quarter. The good news is they never increase this options position further.

On the refining margin swap, the notional value of swap contract is about RM1.28bil currently with a net liability position of RM294mil. Most likely they swap a refined product (gasoline or diesel?) for a fixed price and we all know that refined products' prices have gone up way higher than crude. If you were to interpret the net gain from the counter party perspective, it is 23% gain and yes, refining margin has gone up a lot! The good news is that the notional value is only about 26% of its current quarter revenue. The next big position HY established is the commodity swap contracts. Can't really guess is it fixed or floating position but so far so good. Will have a better view in the next quarter.

@probability. I don't think HY uses futures contract to hedge but rather the option and swap contracts as stated in the financial statements. On the commodity options contracts, HY likely sold a naked call on its refined products and prices went up, losses increase. On the refining margin swap contracts, HY took a fixed against floating margin and as margin went up, the contracts incur net losses. The overall position made has a consistent view of weak commodity prices coupled with weak margins (due to covid weak outlook and before the war). I recommend a useful book Energy Trading
and Risk Management by Iris Mack 2014. You need some basic understanding in derivatives which I think you have. Hope this helps.

To all shareholders, write to Hengyuan's IR/CEO voicing your concerns/displeasure on the hedge losses. Make the company improves! Play your part!
email to: HRCPD-Corporate-Affairs@hrc.com.my

Either you use a refinitiv terminal or you have access to reuters news feed. Otherwise you get gasoline crack info from other news site like this. You can see the number they quote is the same as mine but just that mine is earlier.

https://www.brecorder.com/news/40174604/gasoline-crack-scales-new-high-on-supply-worries

Asia gasoline crack ended Usd37.27 today and will possibly stay elevated next week. Have a good weekend everyone!

S-Oil shuts processing units after one killed, nine injured in blast https://www.kedglobal.com/energy/newsView/ked202205200014

Quote from the news "The shutdown is expected to tighten gasoline supply further in Asia as S-Oil is a major fuel exporter in the region, fuel market participants said.

S-Oil exported 401,000 barrels of refined products including gasoline a day in the fourth quarter of last year, far more than selling 369,000 barrels a day at home, according to its quarterly earnings statement. It did not provide details on how much gasoline was shipped to overseas markets.

Gasoline prices in Asia rose on Friday, reflecting the expectations, with the Asian benchmark gasoline with 92% octane up about $5 per barrel to $137.7, according to gasoline trading sources in Singapore, Asia’s energy trading hub."

Gasoline crack spread spot was usd31.75 yesterday. Futures price converging towards the spot.

The Onsan fire will have an immediate impact on the spot market for the next few days but ongoing impact and how long will depend on the scale of the damage. Before this fire according to market sources the refinery requires maintenance, and this has led to a decline in output.

Short podcast (18 May) with Javier Blas, Bloomberg Opinion columnist covering energy and commodities. Quote last part "Oh, no, we are not going to be building new refineries. And if we were even thinking today about expanding any refinery, that will be resolving a crisis that may happen five years from now, but it’s not going to resolve the current crisis. Gasoline prices and diesel prices are going to be very high through the summer, potentially higher than they are today." Happy listening.

"Trying to explain the dissonance between oil and gas prices" https://www.marketplace.org/shows/marketplace-morning-report/trying-to-explain-the-dissonance-between-oil-and-gas-prices/

Wonder what will be the new normal moving forward ...

Asia gasoline crack Usd33.91 today. U.S. gasoline inventories fell by 5.1 million barrels, market sources said, compared with analysts' expectation of a fall of 1.3 million barrels in a Reuters poll.

My guess is RON97 should be about RM4.6 per litre.

Asia gasoline crack USD32.03 today.

Hi all, today asia gasoline crack crossed the USD30 mark @USD30.96. The futures price should come close.

Hi all, Asia crack spread did hit historical high this week; do note the spot rate is different from the futures price some of you get.

The Asian gasoline swap crack spreads hit an all-time high May 10 on improving demand spurred by easing pandemic-related mobility restrictions and increased industrial activity. The front-month May FOB Singapore 92 RON gasoline crack against Dubai swaps was assessed at $29.21/b at the 0830 GMT Asian close May 10, up 35 cents/b on the day, S&P Global Commodity Insights data showed. This was the widest the crack has ever been on record, according to S&P Global data dating back to Oct. 2, 2008

@probability you brought up a good point. I remember some people used this to extrapolate into many quarters of high profit but it was really just a temporary event. Many people were caught when the price fell. This time round it's structural but yet people see it as temporary!

@probability, I track years of daily crack spread data from reuters (minus weekends and holidays). What I observe is Jan and Feb have been higher than past few years average (most likely due to lifting of pandemic restrictions). The real spike started in March due to the war. In the article I just posted, it mentioned that analysts forecast of average GRM USD12 for this year but this was before the war. Though GRM plays a big role for refiners, another area is how they run their operations (hedging, cost management, maintenance etc). For HYR, I believe their main weakness is hedging (and hopefully I'm wrong here!!!). This time round because the GRM has risen so high, I hope this will negate any hedging loss, if not increase the gain!

As mentioned in my post, I don't expect much impact on March quarter result (I might be wrong) but rather the June quarter will be interesting.

Another interesting read "Oil margins to help Reliance sustain its premium valuation" . Quote from the article: "The Singapore gross refining margin (GRM) - a gauge of regional refining margins - rose to $8.2 per barrel in the March 2022 quarter, compared with $6.1 per barrel in the previous quarter driven by tight crude and product market conditions, further accentuated by disruption by the Russia-Ukraine conflict." and "The boost to earnings from refining is likely to continue for the first quarter of FY23 thanks to regional GRM currently trading at a record level of $26/barrel. GRM is likely to remain elevated as one million barrels per day (mbpd) of Russian refinery capacity has gone offline due to the conflict. Also, about 3 mbpd of global capacity is shut due to the pandemic."

Read more at:
https://economictimes.indiatimes.com/industry/energy/oil-gas/oil-margins-to-help-reliance-sustain-its-premium-valuation/articleshow/91388005.cms

Hi all, another new post from me https://klse.i3investor.com/web/blog/detail/Crackspreads/2022-05-06-story-h1622444383-Why_crack_spreads_for_refined_oil_products_have_NOT_peaked

castus81 you can't unless you use professional terminals such as Refinitiv or Bloomberg or from specialist site such as Platts (need to pay) cater for industry players. Otherwise you do get some data drop occasionally from news (example from Reuters news).

Asia gasoline crack spread close at historical high (again) today at USD22.62.

Just wrote an article https://klse.i3investor.com/web/blog/detail/Why_Hengyuan_price_run/2022-04-29-story-h1622351323-Why_Hengyuan_share_price_rise_is_just_the_beginning
Happy reading and cheers.

And one more fact for investors to ponder. in Aug news Saudi is willing to pay about USD15bil for a 20% stake in Reliance Industries (complex refinery) 500K b/d valuing the deal at USD75bil. Go and calculate yourself HY at 156K b/d refining capacity, is it over or undervalue. That's all from me.

Has not written for quite sometime but here goes.

To people who are totally clueless about the recent Asia refined products price movement, margins have improved a lot since Q2 this year. Q2 cracks averaged USD3.3-3.6 with some days even going below USD1, yes very low. But in Q3, due to 1.late Q2 Philly refiner's fire that permanently shutdown 335K b/d refinery, 2.multiple refineries going into maintenance and 3.attack on Saudi's production and refining facilities. A lot of news focus on the oil production but for market players on the refining products, things have not recovered yet. Say Naphtha, which Hengyuan doesn't produce a lot, the price has shoot up to multi years high. Even in Q2, its spread was negative to a low of about -USD15 but guess what, after the attack, Saudi's supply was affected and spread shot to a high of about USD110 on 14 Oct, unimaginable in recent time! As for gasoline spread, about USD11 on 4 Oct (beginning Q4). So far this month's average is about USD9. I suspect despite the recent event, the much improved refined products margins will help Hengyuan make up for the loss. Lets wait and see Q3 results in Nov.

Hey Ricky, you are one of the few writers in this forum whose articles are worth reading. I share your multidisciplinary approach/thinking in investing and yes, absolutely agree that it's a liberal art.

with ringgit appreciating strongly against usd; whoever buying today must brace themselves for lower yoy profit in the next quarter due to margin compression. Hopefully the company can reverse this trend soon.

The first thing management should do to show confidence is to go & buy the shares themselves if they feel strongly that the company will make a comeback. I don't see that happening. Are they also taking a wait & see approach because they can't tell yet?

I really don't understand why the persistent stock bashing here. Surely there are many more stocks in the 1000+ companies in Bursa with totally no value. Why not spend more time on bashing those stocks with no fundamental at all but already run up 50, 100% ... this year to date, instead of this which already came down? An axe to grind here?

Contrary to what CKCS wrote, the net debt of this company is quite low, at about RM44.4 mil after deducting the cash. Most of the remaining liabilities are for deferred tax (happy to pay if you make money) and trade payables (smart businessmen would love to drag payment ... just check with Mr Trump!). By the way, CKCS seems to have an axe to grind on Evergreen .... interesting, very interesting....

Calvin, you are giving people the wrong impression that MUI was sold all the way down from RM24 to 19sen. Come on, the shares outstanding is 2.933 BILLION today, not million. Are you trying to tell people that in 1984, the company was worth RM70.39bil. You should know that over the decades, there were more shares issued to raise money and therefore shares dilution. By the way I have always enjoyed reading your articles and I do agree that the company is undervalued. However, my take is that if a person cannot share his wealth with his love ones, I don't think he can be generous with the general public.

I read the part on publicinvest AFE Solutions and I can conclude that the writer doesn't understand traders mentality. Quote "More importantly however is that N2N will become the largest Asian based platform provider across various Exchanges to enable Institutional, Retail and Proprietary trading." The last thing any trader wants is for someone to mess around with their terminals and that means you either have to offer HUGE incentives (read VERY competitive pricing)to the financial institutions to get your terminals or you really need to offer very good content. To those who think it's so easy to sell terminals, just go check with reps from Bloomberg or Thomson Reuters. I know of people not able to sleep well because they can't hit their sales target and it have been hard for the past few years cos worldwide banks have been downsizing.

BJ Group has been around for a long time. One has to ask over the years has minority shareholders benefited from the management of this company (also major shareholder)? Has the management changed for the better or still the same?

For investment, you can't possibly try every product of the companies you invest in but this one you definitely can. Go try the products & see whether you like them or even better than the competitors. Buy for friends and relatives to let them try too since not expensive at all. It will cost you more if you made an investment mistake.

A lot of people trading based on emotions and forgetting about the facts.

A potential red flag here if auditors quit without an explanation on the underlying reason.

Agree with soojinhou's comments.

Basically there is No Growth at all for this year, just like the iphone sales. PE still too high for the company.

Still price for perfection.

Don't think it's fairly value but room to go down some more. The current price using my PE is a forward EPS of about 19sen/share or about 184mil in profit which looks unlikely now. So that means the market is now trading at a higher multiple which is untenable. Note I use the word trading which is the current outlook & short term nature. Also, using PE is about the price but not valuation.

14 times is the sector "average" PE for most semicon stocks so you won't be too far off using 15. If growth comes down too fast or turns negative, this PE will need to adjust downwards.

loveygramps, I don't think I can find the text; too many to read and locate but anyway ... whenever analysts say that this company should be price at this PE compared to their peers in HK, US or whatever, take it with a pinch of salt as there could be underlying market factors that will never cause the PE bands to narrow.

Pricing and also valuation can be market/country specific and not comparable across markets. One good example is the A shares listed in China vs same company listed in HK. There exists premium/discounts in both markets for many years and even though theoretically there should be arbitrage opportunity but in reality, cannot be done.

Actually I pointed out the FY16 so that I hope people will check the other forecasts themselves ;). The moral of the story is that every investor should not just rely on analysts, website or whoever/whatever but check the facts themselves.

For companies under the same group and also conducting some business with each other, you need to eliminate inter-segment profits to avoid double counting; especially in consolidated financial statements.

Just want to highlight to all on the point I made regarding EPS calculation & it shows you whether the analyst is sleeping or not. Take the latest RHB 27Apr report "Inari Amertron - Turning Cautious", which you can find it posted by kiasutrader; thanks :). FY16 the forecasted profit is 143m and the EPS is 18sen; ok sure and the shares outstanding use is ....... 794.44mil .... huh????? This was the number before the ex-rights cum warrants! And on the same research report, it did put the current shares outstanding as 956 mil! So the correct EPS forecast should be 143/956 = 14.96sen! Huh???

The fully diluted share count is now close to 1.1b. Even the basic share outstanding is 956,109,504 recently. 2016 earnings going down and the current valuation is untenable.