Posted by kelvin61 > 2017-12-31 01:33 | Report Abuse

Good write up. This guy has analysed HY very well and has hit the nail on the head. So far, this is the best view of HY's price direction going forward. The only think left out is HY's high gearing which would still be a thorn in 2018. Historically, refiners' margins are volatile from quarter to quarter. The industry therefore received lower PE ratio from investors. The price of HY at current levels are fairly valued going into 2018, cheers.

Posted by Flintstones > 2017-12-31 09:27 | Report Abuse

Hengyuan is like any other cyclical counter. Buy high PE, sell low PE

Posted by 3iii > 2017-12-31 09:28 |

Post removed.Why?

Posted by HENGYUAN Sexy Babe @ RM21 > 2017-12-31 11:19 | Report Abuse

Doesn't matter much alredi. 90% now at the hand of top 30 I guess.a few million will pish this stock up and down. Only of fundamentally change a lot will this stock move. If expectations is positive, move up faster than u imagine. If expectations is very bad move down a lot faster also.

Posted by myongcc5 > 2017-12-31 11:30 | Report Abuse

Overly detail n meticuolous is the root cause to become academician or good commentators but can never pick any stock when it was undervalue!
The eyes were blinded by their rigidity n ignoring the facts of the great beauty!

Posted by pjseow > 2017-12-31 11:33 | Report Abuse

Good analysis by the Lau 333. I do agree with him that PE of 12 is fair comparitively with other refineries . I also agree with him that the current range bound crack spread in 2017 is not abnormal compared with the past year. I also agree with him that there will be a huge inventory gain in Q4 with the closing of $66.41 crude oil price yesterday .As such, Q4 result is expected to be as good if not better than Q3. Hence we expect 2017 total EPS to be at least 360 sen ( 242+120). Moving forward , with Q3 shutdown, 24 % tax and some tax allowance from the RM 700 capital expenditure , we can assume a total earning of 55% of 360 sen for 2018 which is estimated to be 198 sen . Assuming a PE of 12 , the target price should be 198 x 12 = RM 23.76. With last Friday closing at RM 16.3 ,looks like there is still some 30 % upside .

Posted by Fabien Extraordinaire > 2017-12-31 11:35 | Report Abuse

why using PE of 12? care to explain

Posted by OPMS > 2017-12-31 11:36 | Report Abuse

myongcc5 Yet the world top investor couldn't be more detail on company valuation. That will explain why 90% of stock trader losses pants instead of making fortune.

Posted by myongcc5 > 2017-12-31 11:44 | Report Abuse

Absolutely agreed! OPMS
Traders losses r mainly due to their indulgence of trading n also lack of analysis on particular entry!

While traders busy in n out, their results also hairwire but the academician n famous analyst will zoom in to b overly detail n particular on certain issue while the shares gone higher n higher to materialise it's fair value n fair fundamentals valuation like PE etc.
Still tis people will continue with their negative n negativity!!!

Posted by happy888 > 2017-12-31 12:23 | Report Abuse

Why mogas 92 and not mogas jet kerosene?

Posted by stockraider > 2017-12-31 12:30 |

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Posted by stockraider > 2017-12-31 12:32 |

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Posted by stockraider > 2017-12-31 12:32 |

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Posted by stockraider > 2017-12-31 12:35 | Report Abuse

Posted by stockraider > Dec 31, 2017 11:34 AM | Report Abuse X

U NEED TO UNDERSTAND THE MATHEMATICAL ADVANTAGE OF HENGYUAN OVER PETDAG LOH......!!

HENGYUAN HAS A HIGHER EPS RM 3.10 AND LOWER PE 5X COMPARE WITH PETDAG EPS RM 1.30 PE 20X LOH....!!

IF EPS OF HENGYUAN REVISE TO RM 3.60 AND PE REVISE TO 7X...U WILL BE SEEING RM 25.00 MAH...!!

IF EPS RM 3.10 MAINTAINED BUT PE REVISE TO 20X....U WILL BE SEEING HENGYUAN RM 60.00 LOH....!!

THIS TYPE OF MATHEMATICAL ADVANTAGE WILL SEE HENGYUAN SHARE PRICE WILL EXCEED PETDAG SHARE PRICE OF RM 24.00 IN 3 MONTHS TIME SOON LOH...!!
HENGYUAN NOS OF SHARE 300M V PETDAG 1000M.

IF CASH GENERATION RM 1 BILLION

PETDAG GENERATE CASH RM 1.00 PER SHARE BUT HENGYUAN GENERATE RM 3.00 PER SHARE MAH....!!

THATS WHY PE PETDAG PE 20X V HENGYUAN PE 5X MAH....!!

HENGYUAN IS UNDERVALUE LOH...!!
IF HENGYUAN PE 20X LIKE PETDAG IT COULD EXCEED RM 42.00 LOH..!

Posted by stockraider > 2017-12-31 12:36 | Report Abuse

Think about this, people.
......................
pjseow I do agree with Felicity 's article that Hengyuan cannot be compared with Nestle , Dutch Lady which has a PE of 30x .
However , KYY did not ask HY to be accorded a PE of 30x but only 1/3 of it at 10x only .
Now . Can HY be compared with small caps like JHM and Penta which are favoured by many IB s ??

Both Penta and JHM did not make profits before 2015 .

THese companies are very similar to HY which started to make profits from 2015 onwards with record profits in 2017 .

These companies were accorded PE of more than 25 now by the markets with very optimistic views of strong growth in automotive and semicon sectors in 2018 .

Shouldnt HY be give only a PE of 8 ( 1/3 of Penta and JHM PE) with an optimistic crack spread outlook and high demand of refined oil products ?? A PE of 8 will give HY a price of RM 3.11 x 8 which is 24.88 ???
29/12/2017 20:08

THE ABOVE COMMENT IS VERY REALISTIC WE ARE ASKING HENGYUAN TO BE GIVEN A FAIRER PE RATING WE ARE NOT ASKING ABSURB NESTLE PE RATING OF 40X MAH..

Posted by stockraider > 2017-12-31 12:37 |

Post removed.Why?

Posted by stockraider > 2017-12-31 12:41 | Report Abuse

U MUST UNDERSTAND HENGYUAN IS GENERATING CONSECUTIVE RM 500M TO RM 1 BILLION CASH FOR THE PAST 3 YEARS, THIS EQUIVALENT TO AT LEAST AVERAGE RM 2.30 FREE CASH PER SHARE MAH....!!

HENGYUAN CASH GENERATION IS COMPARABLE IF NOT BETTER THAN PETDAG AND PETGAS MAH....!!

HENGYUAN LAYEST EPS IS EVEN HIGHER THAN NESTLE WOH....!!

HENGYUAN EPS IS INCREASING WHEREAS NESTLE EPS IS DECLINING LOH...!!

HENGYUAN PE 5X V NESTLE PE 40X V PETDAG 20X MAH...!!

THIS IS THE STRONG FUNDAMENTAL OF HENGYUAN LOH...!!

SO STAY WITH FUNDAMENTAL LOH...!!
DON LET THE ENVY & NAYSAYERS CONFUSE U LOH...!!

GENERAL RAIDER SPECIAL ADVICE;

THE CURRENT CORRECTION IS VERY HEALTHY LOH....!!

SHARE PRICE DO NOT SHOOT UP LIKE ROCKET, THERE ARE INTERMITTENT SHAKEOUT, CORRECTION AND PANIC RUN.

IF U HAD DONE UR HOMEWORK & KNEW HRC IS WORTH RM 22.00 TO RM 42.00, WHEN CORRECTION HIT U R NOT WORRY MAH...!

IF U R SEEING RM 18.80 BUT U DO NOT WANT TO SELL....THE PRICE THAN COLLAPSE BACK TO RM 16.30....IS IT END OF THE WORLD LEH ??

NO LOH ....UR COST COULD BE RM 1O.20 ONLY MAH...!!

IN 2 MTHS TIME....WHEN Q4 OUT...IT SHOULD ABOVE RM 20.00...R U GLAD U HANG ON LEH ??

Posted by stockraider > 2017-12-31 12:43 | Report Abuse

Only with understand what is true intrinsic value...u will not be endangered by naysayers, conman,the misinformed and the envy and the naive loh...!!

Below is basic understanding what is true value mah..!!

CORRECTLOH...I WAS SAYING ALL ALONG HENGYUAN IS UNDERVALUE WITH PE 5X WHEREAS THE REST OF THE BLUECHIPS STOCK TRADE AT PE 18X TO 35X LOH...!!

NOW IF HENGYUAN IS RERATED TO BLUECHIP AT LEVEL PE 12X, IT IS NOT UNREASONABLE & CONSERVATIVE MAH....AS IT IS STILL LOWER AT PE 12X COMPARE TO THE LOWEST PE OF 18X LOH...!!

NOW IF PE 12X AND EPS RM 3.24 THE SHARE PRICE SHOULD BE RM 39.00 LOH. !!..THIS IS WITHIN RAIDER ESTIMATED TP RANGE OF RM 22.00 TO RM 42.00 FOR HENGYUAN LOH...!!

FYI PETDAG THE PEERS IN PETROL DOWNSTREAM BUSINESS TRADE AT PE 16X TO 24 RANGE...THUS PE 12X FOR HENGYUAN IS EXTREMELY CONSERVATIVE MAH...!!

WHY HENGYUAN SHARE PRICE KEEP FLYING LEH ??
THE CURRENT SHARE PRICE IS RM 16.30 BUT THE FAIR VALUE IS CLOSE TO RM 40.00, SURELY HENGYUAN SHARE PRICE WILL FLY EVERYDAY TO GO UP CLOSE TO RM 37.00 EVENTUALLY LOH....!!

Posted by stockraider > 2017-12-31 12:46 | Report Abuse

TODAY U SEE REFINERY VALUATION ARE STRONG AS FOLLOWS LOH;

PHILLIPINE PETRON PE 9.5X
PHILLIPINE SHELL PE 12.5X
PHILIP 66 USA OWN BY W,BUFFET PE 22X
SKOREA REFINERY PE 13X
EUROPE REFINERY ABOUT PE 10X.

HENGYUAN EVEN AT RM 16.30, ITS PE IS 5X LOH....!!
CERTAINLY THERE IS ALOT OF OPPORTUNITY LOH..WITH COMING EPS RM 3.60 AND CASHFLOW POSITIVE PER SHARE RM 3.80....THE CURRENT SHARE PRICE IS STILL UNDERVALUE MAH..!!

VERY IMPORTANT NOTE;
If Warren Buffet refinery Philip 66 Usa PE 22x, surely Hengyuan with PE 5x, is very much undervalue and has huge upside loh...!!
Our great guru also hold on refinery at PE 22x, surely the prospect is good going fwd loh....

Posted by soojinhou > 2017-12-31 13:45 | Report Abuse

I don't understand why people keep saying HY's tax allowance will be exhausted in 2018. At as 31/12/16, HY has tax losses carried forward and unabsorbed reinvestment allowance of 763m. In 2017 excluding q4, they have made a total of 725m in net profit. Even at 24% corporate tax rate, the tax is only 174m and they should still have 588m of tax credits in the worst case. The earliest the tax credit will be exhausted is 2019 or 2020, not 2018.

Posted by mneo > 2017-12-31 16:08 | Report Abuse

good writeup...especially on the tax portion... the writeup is objective and arguements are strong, supported by facts... much better than the "C'mon Hengyuan is no Nestle, Dutch Lady - felicity"

Posted by Pangsh62 > 2017-12-31 16:59 | Report Abuse

What the writer didn’t mentioned is HY management ‘s contigency plan for coming shutdown, since they have 1.5 years to prepare for it!

Posted by Aero1 > 2017-12-31 17:59 | Report Abuse

@soojinhou I think I am reading it same like you

The tax loss carried forward is expected to be substantially utilised by profit made in 2017.

Going forward HY effective tax rate is to remain lower as there is still unabsorbed reinvestment allowance of 495 million.

That's a lot of savings ... cover about 70% of the upgrade capex of 700 mil and not forgetting the 700 mil itself will also bring additional tax allowances.

Posted by sunztzhe > 2017-12-31 18:14 | Report Abuse

HengYuan is now a component stock in MSCI Malaysia Small Cap Index. The market has been re-rating the price of HengYuan upward indicating than HRC deserves a higher PE multiple relative to the past.

HengYuan had languished in sideways mode for many years since 1987 (about 30 years). It's share price easily broke out of its old high of RM 12.30 (old high since Sept 23, 2005) on Dec 13, 2017. Since it broke out of old high effortlessly, it became a strong uptrending stock both in big and short time frame. It closed at RM 16.30 last Friday ..chalking a respectable gain of +32% since Dec 13, 2017.

The chart shows HengYuan is a strong uptrending momentum stock.It took HengYuan slightly over 12 years to break out of its old high of RM 12.30. The driver for the strong momentum is the stellar earnings chalked up during the 3 quarters of 2017. The strong momentum is indicating that upcoming Q4R 2017 due in Feb 2018 will be impressive.

Based on its closing price of 16.30 and with a prospective EPS 2017 of RM3.6 per share, HRC is commanding a PE of only 4.528. Its regional peers r commanding a PE higher than 10, much higher than HengYuan. A market re-rating towards PE8 to PE10 in line with its local n regional peers is reasonable. Moreover HRC in now a MSCI Malaysia Small Cap index component.

As we enter 2018, its risk on for equities meaning PE multiples for equities in general will move higher. Besides crack spread is expected to remains favourable in 2018 and with a gradual upside bias to crude oil prices in 2018, it will likely translate into higher absolute net profit value for HRC implying higher EPS.

We r looking at potentially a future price range of RM 25 to RM 36 for HRC. The recent correction last Friday accords an excellent opportunity for a "risk on trade with HengYuan" due to its relative undemanding valuation.

Posted by pjseow > 2017-12-31 18:14 | Report Abuse

Soo Jin Hou , I think you are right . HY has tax losses of RM 763 million in end 2016 which can be carried forward to 2017 , 2018 and 2019 until it was fully utilised . Even in the whole of 2017 , HY made an eps of RM 3.60 or a profit of RM 1.080 billion , the 24 % tax is only about RM 250 million which can be offset from the RM 763 million. THere is still substantial leftover for 2018 and 2019 . In such scenario , we can still expect HY to make about RM 2.70 in 2018 .

Posted by Investee > 2017-12-31 18:34 | Report Abuse

I read it differently. The 763m is states gross, not at 24%. The credit amount charged into p&l is @ effective tax rate.

Posted by spiderman49 > 2017-12-31 19:20 | Report Abuse

good write up , much much better than 1 of the top promoter in Hy , day day repeat the same day day copy paste

Posted by Alex™ > 2017-12-31 19:27 | Report Abuse

Hehe... Good article... Alex like... Now we are back to stage 2.

Posted by Superb99 > 2017-12-31 21:57 | Report Abuse

good article, hope the bearish engulfing signal is just to shack out those weak holders or traders started cabut from this counter, frankly, i myself felt it was over sold on Friday. If the price continues dropping on next Tuesday, i will slowly average it down.

Posted by HENGYUAN TP $30 (ilovehits) > 2017-12-31 22:02 | Report Abuse

Good article, indeed. We all have different views. That's OK.

Posted by stockraider > 2018-01-01 11:32 | Report Abuse

Hengyuan: My Understanding - Koon Yew Yin
Author: Koon Yew Yin | Publish date: Mon, 1 Jan 2018, 10:10 AM

On the last trading day of the year, Friday morning the price of Hengyuan shot up to Rm 19.20 from Rm 17.96, the closing price of the day before. Many people believed fund managers would push the price higher for window dressing.
The price has risen from Rm 3.00 to Rm 19.20, an increase of 640% within 12 months. This phenomenal rise has created history in our local stock market.

Let us look at last Friday’s figures:
The closing price of Thursday Rm 17.96
Opening price on Friday Rm 18.42

Day’s high Rm 19.20
Day’s low Rm 15,94’
Closed at Rm 16.30.

Total volume traded 127 million shares.
Estimated value 127 million shares X say Rm17 = Rm 216 million.

Obviously, there were more sellers than buyers on Friday. As a result, the price fell.

As I said many a time, no share can go up or come down continuously for whatever reason. Sooner or later, there will be a price correction. After about 2 hours of trading, the price suddenly dropped more than Rm 3 within 30 minutes.

There are various types of shareholders. Some are day traders who buy and sell frequently. Some are short term investors who will sell when the price achieves its target. Some are serious long-term investors who would buy based on good fundamentals and hold for a long time.

Statistics shows that long term investors make more money than the other types of investors and there are more losers than winners in day trading.

On Friday, obviously there was panic selling. I think even the long term investors were also selling.
Many of my friends who have followed me to buy Hengyuan asked me for my opinion. What should they do?

It is a matter of human psychology. Sellers are fearful that the price will continue to drop and buyers believe the price will soon recover and will continue its climb.

Its fundamentals have not basically changed.

Based on the unusually high volume traded daily, I believe many institutional investors from China are buying aggressively. They are so bullish because they can see that both its revenue and profit are increasing. Its 1st half year EPS was Rm 1.20. Its 3rd quarter EPS was Rm 1.21 and they expect its 4th quarter EPS to be more than its 3rd quarter because its crack spread or profit margin has been better during the 4th quarter as shown in the Crack Spread chart below.

Hengyuan’s profit essentially depends on its margin of profit or crack spread, EXCHANGE RATE AND CRUDE OIL.

Petron Refining in comparison with Hengyuan

Its half year EPS was 73.9 sen. Its 3rd quarter EPS was 39.3 sen. The total EPS for 3 quarters was 113.2 sen.
On Friday it dropped Rm 1.06 to close at Rm 13.54 per share.

Hengyuan is very much cheaper in terms of P/E ratio.

My opinion:
Looking at the huge volume of 127 million shares traded last Friday, I believe there were many institutional investors who have been buying aggressively, took advantage of the cheaper prices to buy more than usual.
I strongly believe its share price will continue to rise especially when its annual result is announced before the end of February 2018.

RAIDER OPINION:
U NEED TO KNOW HENGYUAN PE 5X IS CONSIDER A SMALLCAP COMPARE TO PETDAG PE 20X, WITH ONLY 300 MILLION SHARE V PETDAG 1000 MILLION SHARE.

IN TERMS OF EPS AND ABSOLUTE EARNINGS HENGYUAN ACTUALLY EXCEED PETDAG BUT HENGYUAN MKT CAP IS RM 5 BILLION V PETDAG RM 24.5 BILLION, USING COMMON SENSE AND JUST BASIC MATHS, U NOTICE THE GAP BETWEEN HENGYUAN & PETDAG IS VERY WIDE, THERE IS A BIG LEG ROOM FOR HENGYUAN TO FURTHER ADVANCE TO CATCH UP WITH PETDAG VALUATION LOH....!!

THE CHINESE FUND IS VERY HAPPY WITH HENGYUAN PE 5X, WHEN THEY COMPARE TO THE VALUATION OF THEIR OWN REFINERY LIKE SINOPEC PE 13.5X AND WARREN BUFFET REFINERY PHILIP 66 PE 22X LOH....!!

Posted by stockraider > 2018-01-01 11:57 | Report Abuse

Posted by Vince Sinclair > Jan 1, 2018 10:44 AM | Report Abuse

I refer to Felicity's articles posted on 29/12/2017, the day when Hengyuan's share price fell 9.24%. She started by "reminding" readers "not to be misled". She then confidently concluded that "Hengyuan is no Nestle, Dutch Lady, BAT. Not even Oldtown. It is not even Top Glove or Hartalega or Airasia. Hengyuan is Not near".

First, Hengyuan supplies most of its petroleum products to Shell. In the same way, how many consumers do you think will ask "eh, who's the major supplier that supplies the parts in this DYSON vacuum cleaner that we're using?" Or, "hey, which is the semiconductor company that supplies the parts on this iphone that we're using?" I guarantee less than 10% of consumers worldwide would bother to ask such questions. Yet, an investor who had the foresight to invest in SKP Resources (major supplier for DYSON) back in 2012/2013 would have made multi-fold returns on their investment. My point is, it's not necessarily companies with strong brands that will make you money in the stock market. In this respect, Felicity's "brand" talk is just shallow and superficial to be taken seriously. How many people knew SKP Resources compared to DYSON? How many people knew Foxconn compared to Apple?

Second, the present Mgmt officially took over the business on 22/12/2016. In just 1 year,. what kind of "miracle" do you expect them to produce? Did Nestle, D Lady & AirAsia become the successful companies and "safe" investments that they are today in just 1 year?
No! It took them years, if not decades. So, why be so harsh on the new Mgmt of Hengyuan?
On the high debt, please remember that the new Mgmt did not amass this debt, IN ADDITION HENGYUAN BORROW & REFINANCE THEIR SHORT TERM TRADING ADVANCES OF SHELL PARENT BEFORE THE TAKEOVER.
THUS They INHERITED it from the previous mgmt. C'mon, do you expect them to pay down this debt in just 1 year?? To divert a little, did Geely turn Volvo into a disaster after acquiring the latter?
Have you heard about how the new Proton CEO dealt with the low quality of kangkung served in Proton's cafe? Do you think these Chinese would spend hundreds of millions, even billions and let their business ventures fail?

Hengyuan's parent company in China has been in existence for close to half a decade. They are now producing Euro-6 compliant products.
In terms of technological know-how and experience in running the business, they are definitely not any inferior IN FACT BETTER IN TERMS OF COST EFFECTIVENESS compared to their Western counterparts.
In fact, the contrary is true. If not, Hengyuan won't be buying over Shell's refinery. It would be the other way around. And don't undermine the importance of technological know-how. Look at how Shale technology disrupted the whole O&G industry.

On dividends, many argue that Petron is a safer investment because it pays dividends. Really? How sustainable is their dividend payment? Petron is gonna spend USD 1.5 bil on its refinery in Msia. Hengyuan is spending RM 700M. In the case of Hengyuan, it's only a matter of time before they start paying dividend, DON FORGET HENGYUAN IS GENERATING CLOSE TO RM 1.2 BILLION FREECASHFLOW PA AND IT IS SITTING ON CASH IN THE BANK RM 900M, ALTHOUGH THEY HAVE RM 1.3 BILLION DEBT AND CAPEX REQUIREMENT RM 700M, THIS IS EXPECTED TO BE FULLY REPAID IN 2018 BASING ON THEIR EXISTING CASHFLOW .

IT IS ANTICIPATED U CAN GET YOUR DIV IN LATE 2018 OR EARLY 2019, WITH WHISPER AMOUNT OF PAYOUT RM 0.40 PER SHARE LOH...!!
THIS DIV WILL BE INCREASING TO EVENTUALLY RM 1.00 PER SHARE IN 3 YRS TIME LOH...!!

Posted by gladiator > 2018-01-01 16:59 | Report Abuse

I like stockraider comment, very logic in analyzing HY.

Posted by Leonardo12 > 2018-01-01 17:08 | Report Abuse

@Investee - could you please define state gross?
In Annual report 2016 the profit before tax = 335 mil. If you check note 10, the utilization of tax losses is 27 percent, hence around 90 mil.
On page 126, the reduction of tax losses carried forward is 380 mil, from 648 mil to 267 mil.
How to reconcile 380 mil reduction of tax losses in pg 126 to 90 mil(27 percent of profit before tax)?
Anyone here can enlighten? Thank you.

Posted by probability > 2018-01-01 19:21 |

Post removed.Why?

Posted by Mohd Fahmi Bin Jaes > 2018-01-01 19:29 | Report Abuse

Happy 2018

Posted by stockraider > 2018-01-01 21:12 | Report Abuse

The following confirm the longterm valuation of hengyuan rm 22.00 to rm 42.00 is reasonable loh....!!

1. The strong eps of Rm 3.60
2. The strong eps growth of 260%.
3. The strong free cashflow per share of Rm 3.80 and cash generation of more than rm 1.0 billion per annum.
4. High sustainable crack spread exceeding USD 9 per barrel
5. Sustainable crude oil that generate inventory gain loh...!!
6. Confirmation of high capex on refinery of Petron Rm 6.4 billion for 60k bpd and Petronas refinery capex of Rm 64 billion for 300k bpd, verify and confirmed u need at least equivalent rm 30.00 to rm 50.00 to come up with the same specification of hengyuan 120k bpd refinery loh..!!
7. Hengyuan Pe 5x eps rm 3.60 is the most profitable co in klse, compare to nestle PE 38x eps Rm 2.47 but unlike nestle hengyuan eps is growing whereas nestle eps is declining loh...!!
8. The number of share of hengyuan Pe 5x is only 300m units compare to petdag Pe 20x 1000m units, but hengyuan absolute earnings and eps far exceed Petdag loh....!!
9. the roe of hengyuan at 70% far exceed petdag loh...!!

Posted by 360Capitalist > Jan 1, 2018 09:45 AM | Report Abuse

Factors you should consider to buy during pull back or Panicking Selling:-

1) Q4 Crack Spread higher than Q3 level ( Profit Margin Increase ),
2) Oil price Higher than Q3 ( Profit Margin Increase + Inventory Gains ),
3) Malaysia Ringgit is Stronger ( Selling Price in MYR, Profit Higher, Loan in USD, Forex Gains)
4) Market is generally Bullish ( Favor Higher Valuation)
5) Price at P/E below 8 times, reasonably priced.
6) ANY BAD NEWS that affect HENGYUAN FUNDAMENTAL = NO
7) Considering the above Factors, do you think Q4 Profit is higher than Q3'17, If yes = Buy more.
8) World refinery companies stocks prices, is it in 52W high. If yes, HengYuan should follow the trend.
9) From day peak of RM19.20 to day low of RM15.94, do you think correction overdone caused by panicking selling? If yes = Buy.
10)Phillips 66 is 16% owned by Warren Buffet and is now No 7 largest in his investment portfolio.
Phillips 66 is doing exactly the same business as Hengyuan with a PE of 22 compare to Hengyuan of only 5.24. Even the richest man in the world now also bet on energy stock .

Conclusion; If an expert like Warren Buffet has faith in refinery Phillip 66 at PE 22x..!! Hengyuan with PE of 5.24 cheap enough to buy ? Is it fair value at least compare to Petronm with a PE of 8.7?<<<

Basing the above factor, I will buy Hengyuan as I believe Hengyuan should register higher profit in Q4 than Q3. And, I strongly believe Hengyuan's share price will go above RM20.00 within first half of January 2018 due to limited free float in market and strong earnings loh!!.

Posted by Lau333 > 2018-01-20 20:25 | Report Abuse

On quarter to quarter basis, Brent Crude increases 20% plus while both MOGAS and gasoil around 12%, which means refinery margin contraction.
Based on fifo (current cost of stock + stockholding gain) for Q3 is only at 10.17. Take out stockholding gain of 2.64, ccs is only 7.53. With margin contraction, I’m doubtful that Q4 earning will be higher than Q3.
My Q417 PBT estimate is RM 340m, which is close to Q32017 earning. Taking taxation into consideration, net profit estimate is RM 267.5m (or EPS RM 0.89)
What are considered: Refinery margin, Stockholding gain and Forex Gain.
What is not factored in: effect of hedging.
Above is my 2 cent worth.