Posted by Choivo Capital > 2019-10-18 10:26 | Report Abuse

Haha. My name is not KYY. My whole portfolio only few hundred thousand.

This is a 15% position for me, so when i buy 10% more, i'm only putting an additional 1.5% of my portfolio to it. The first few purchases today is mine.

Flying cars, well that's going to be a complete game changes, when our Malaysian prototype is complete next year, i predict by 2021 at least half of car sales will be flying cars!

Posted by sheldon > 2019-10-19 14:51 | Report Abuse

Haha Choivo Capital - a sarcastic remark on flying cars.

I agree to the carbon emission. My take on electric cars is that there are too people here who cannot afford a new car. So they will still be moving around in their old IC vehicles.

So looks like for Choivo, it's do or die. Either you're going to become extremely rich or PN17 case.

Posted by EVO118 > 2019-10-20 13:19 | Report Abuse

Dreaming!!!
Flying cars? Are you kidding!!! The Harapan govt can't even control the market slump, fix FGV or even get the highways running smoothly, & they want to be in FLYING cars. You need more then flying cars. You need air space infrastructure. There is a lot more things to do before everyone of us can fly around. Flying car air traffic control. Rehash insurance for flying cars & air tax + maybe road tax if they are going to land & possibly drive around & designated landing sites.

Posted by EVO118 > 2019-10-20 13:27 | Report Abuse

Don't get carried away. It was just a public relation exercise. The design of that prototype looks more like larger version of a drone. Absolutely waste of money for a government who keeps complaining it has got no money& willing to spend billions on free breakfast in school. Get on with the real job.

Posted by apple168 > 2019-10-22 18:50 | Report Abuse

恒远(HENGYUAN，4234)与佩特仑企业(PETRONM ，3042)因油轮无法卸油，两家公司位于森美兰波德申的炼油厂双双受影响，估计要在11月初才可解决。

两家公司今日(22日)都向交易所呈报这个消息。暂时不晓得国内汽油站的供油量会否受到影响。

恒远表示，由于负责从油轮卸油的单一浮筒岸外驳系台(single buoy mooring简称SBM)发生故障，公司进口的原油无法输送至炼油厂，进油量减半。

但是，该公司没有说明有多少炼成品(如汽油与柴油等)会受影响，只说会采取应对措施这问题。

另一方面，佩特仑企业则没有说明进油量受影响程度，只表示公司供应本地的炼成品(汽油、柴油等)部份进口部份从海外进口，因此，会增加进口量以确保本地供应不受影响。

所谓的单一浮筒岸外驳系台(图中黄色的浮台，示意图，非影响到两家公司的实图)，是一个负责从油轮卸油到炼油厂储油库的浮台。这类服务多半是外判给经营SBM的公司 。

Posted by Ncm88 > 2019-10-22 19:22 | Report Abuse

Bad news factored in liao

Posted by Vulture123 > 2019-10-23 20:46 | Report Abuse

At current level & below 5, I think this stock is worth to invest in based on “bottom fishing” strategy. Vulture will swoop in soon. Too many fundamentally strong stocks and choices to invest in under current market environment :)

Posted by ivanlau > 2019-10-28 19:56 | Report Abuse

current price very safe to go in , it is time to collect and wait for 1 year it will back to the fair value around rm 6 .

Posted by damiantreez > 2019-10-30 11:33 | Report Abuse

good price to enter. strong support. upside is big.

Posted by Vulture123 > 2019-10-31 16:42 | Report Abuse

Happily accumulating @ 5 & below :)

Posted by bose00 > 2019-11-04 14:54 | Report Abuse

Moved already

Posted by enigmatic ¯\_(ツ)_/¯ > 2019-11-04 15:00 | Report Abuse

Finally, some recovery

Posted by meistsk3134 > 2019-11-04 18:19 | Report Abuse

main move ofcos small move

Posted by Choivo Capital > 2019-11-04 18:50 | Report Abuse

Haha quite happy i topped up then, i actually think of buying more. Its still very close to my cheapest top up. Personally, i think the shares are worth RM10 - RM12.

If people go crazy, well, we know how much it shot up back then, but im not banking on that.

Posted by mf > 2019-11-05 02:25 | Report Abuse

Golden

Posted by Vulture123 > 2019-11-05 11:10 | Report Abuse

A clear indicator that it is an absolutely Value Buy @ 5 if we observe and notice the number of Petron stations sprouting all over Malaysia. Last Call & Watch it move !

Posted by sheldon > 2019-11-05 15:41 | Report Abuse

Calling john0909 (& anyone else) ... what's your prediction of profit for the 3rd quarter?

A. Loss (urgh!)
B. 0 - 50m
C. 51 - 100m
D. >100m (wishful thinking)

Posted by Choivo Capital > 2019-11-05 16:24 | Report Abuse

C/D.

Posted by sheldon > 2019-11-06 09:30 | Report Abuse

Choivo Capital C/D - you're pretty optimistic.

I say B

Posted by hock007 > 2019-11-06 10:03 | Report Abuse

C

Posted by Choivo Capital > 2019-11-06 15:28 | Report Abuse

Haha, lets make a fun bet sheldon.

And this is despite the announcement below, petron corp owns petron malaysia, and consolidates the earnings in, so its a proxy to the malaysian results. ;)

https://www.gmanetwork.com/news/money/companies/714256/petron-corp-reports-70-bottom-line-drop-in-jan-sept/story/

Posted by sheldon > 2019-11-06 20:50 | Report Abuse

This co has quite a bit of headwinds going forward - Petronas Pengerang for one.

Posted by john0909 > 2019-11-06 22:17 | Report Abuse

well if that's the case, i would guess B... eps between 16 to 19 cents... and again i do sincerely hope that i am wrong on this...

Posted by damiantreez > 2019-11-07 09:32 | Report Abuse

https://www.rappler.com/business/244214-petron-earnings-report-january-september-2019

Posted by damiantreez > 2019-11-07 09:34 | Report Abuse

From another source,

The company said it managed to book a “modest” profit during the period “with Petron Malaysia’s contributions and its parent company’s extensive efforts to manage costs and keep the business viable under the current volatile market condition.”

https://www.bworldonline.com/shrinking-refining-margins-pull-down-petrons-income/

Posted by damiantreez > 2019-11-07 09:35 | Report Abuse

As of September, Petron opened 38 new stations in Malaysia. :)

Posted by damiantreez > 2019-11-07 09:36 | Report Abuse

I say B/C.

Posted by sheldon > 2019-11-07 09:56 | Report Abuse

Noted john0909 - i believe that's what your model is saying.

Chiovo Capital & damiantreez - The alternatives given are very broad range of earnings. You should stick your neck out and choose one or else it's as good as guessing between negative to positive infinity.

Posted by damiantreez > 2019-11-07 09:58 | Report Abuse

i say C then. EPS around 21.2

Posted by sheldon > 2019-11-07 11:27 | Report Abuse

The score to date :

A Loss : 0
B 0 - 50m - 2 (Sheldon, john 0909)
C 51 - 100m : 2.5 (hock007, damiantreez, Chiovo Capital)
D - > 100m 0.5 (Chiovo Capital)

I hope we won't be rudely shocked with a loss like a few quarters ago.

Posted by Choivo Capital > 2019-11-07 13:25 | Report Abuse

Here's the basic understanding to Petron.

They make about 200m a year net from the petrol stations.

So each Q, you can expect 50m from that.

Refinery, makes either 200m in a good year, 100m normal, and -50m to 50m in bad times. This depends a lot on spread.

So the thing you need to know now is, you're paying 7 times earnings for a very stable and well run petrol station business, and you get a refinery for free.


Only question you need to ask in this case is,

1) How efficient are they compared to the competitors in the refinery business? Pretty good.

2) Is there a structural decline or slowdown in demand for fuel related products? Nope.

3) Can you handle volatility in earnings? Yes.

Posted by Choivo Capital > 2019-11-07 13:29 | Report Abuse

I only have a few qualms for PETRONM,

1) Do not do pension plans for employees, EPF only. Its only 50m but id rather it not even appear in the books.

2) I would rather the petrol stations be a separate business and the refinery another. Alot of the cash goes to upgrading the refineries etc. I suppose we can see it as one whole integrated package, but i'd really rather just own the petrol stations only.

Posted by Philip Greta > 2019-11-07 14:28 | Report Abuse

Actually there are far more questions to ask than that.
1. Why are investors only willing to pay 6.24 PE for petronm? This is a very interesting question indeed. the next few questions are followups that will be very pertinent.
1a. What is the possibility of Petronm increasing their profit margins above 5%? If they could do it, how would they do it and would it be feasible? (this includes things like increasing efficiency, buying organically integrated businesses and investing in new products or systems that competitors are unable to have access to)
1b. What is the possibility of users to choose petronm above other competitors like petronas, shell etc even if the prices were fixed nationwide.
1c. what is petronm gameplan to hit 4 billion a quarter? do they have enough resources (without cutting the 3% dividend), and is it likely that they will do so?
1d. was 2017 an anomaly with the crack spread or is it something that can repeated sustainably?

All of these questions tie into one simple answer. petronm has been doing below 3 billion in revenue a quarter since forever, and it is very very likely that this will continue. Petronm has been doing below 5% net profit margins a quarter since forever, and it is very very likely that this will continue. There is no differentiating factor from petronm versus its other competitors, and there is no catalyst or guidance from the management that petronm will overperform in the future or give bigger dividends above its 20 cents per year.

knowing this fact and the fact that you will only be a minority investor in petronm business (with no ability to change anything),

all you get for your 6.24PE is 3% dividend a year, so why pay more for such volatile earnings?
you can also choose to pay 1 PE for your RHB fixed deposit at 4.5%, which amounts to the same thing.

Do you see Petronm growing and growing and taking market share and expanding to other countries? I dont. What I do see is a business that has maximized its local market share and is content to keep to its corner.

A safe, efficient and boring 3% a year with minimal growth of revenue and earnings. slowly building up its cash hoard to buy its next refinery to keep things going.

Nothing wrong with investing in petronm. you just need to know what kind of business you are putting your hands into. dont expect 20PE or growing earnings or increased dividend for a long long time yet.

Just because something is low PE does not make it necessarily good. It just means investors will not overpay for something that will not overperform.


>>>>>>>>

Posted by Choivo Capital > Nov 7, 2019 1:25 PM | Report Abuse

Here's the basic understanding to Petron.

They make about 200m a year net from the petrol stations.

So each Q, you can expect 50m from that.

Refinery, makes either 200m in a good year, 100m normal, and -50m to 50m in bad times. This depends a lot on spread.

So the thing you need to know now is, you're paying 7 times earnings for a very stable and well run petrol station business, and you get a refinery for free.


Only question you need to ask in this case is,

1) How efficient are they compared to the competitors in the refinery business? Pretty good.

2) Is there a structural decline or slowdown in demand for fuel related products? Nope.

3) Can you handle volatility in earnings? Yes.

Posted by sheldon > 2019-11-07 14:32 | Report Abuse

I don't like pension plans either. Even worse are companies with ESOS plans. I avoid such companies.

My biggest reservation of Petron is its group structure - what goes into the listed entity and the unlisted entity is not transparent.

Posted by Choivo Capital > 2019-11-07 15:22 | Report Abuse

Phillip,

Long time no see.

Correct questions, just more long winded. Its only a basic understanding post, i'm too busy to do a full write up to share.

This is a volume business, not luxury goods, 5% is pretty damn good. Go and buy the PFI accounts, and you can see the ROE for the retail division of the unlisted entity. Its a good proxy.

Anyway, QL is 6% margin. Haha.

Posted by Choivo Capital > 2019-11-07 15:26 | Report Abuse

I don't think you actually understand the business or its history to be honest. Take a look at the accounts from 2013 to 2018 at least, and let me know what you think.

Posted by untong > 2019-11-07 18:36 | Report Abuse

I am more interested to know
1) why PETDAG command PE of more than 25 with lower DY but PETRONM is only 7ish with higher DY, maybe they will get PE15-20 if they split their refinery business out? Is it the intention of their major shareholders in PH to combine the refinery and retail entity
2) Given the limited revenue upside, is there a chance PETRONM hit a significant lower cost base in future when they reach certain number of petrol stations or critical mass etc. is the opening of RAPID pengerang net beneficial to PETRONM? or only good for PETDAG
3) How much/how long they need to spend cash on upgrading the refinery plant to make it whatever EURO 4/5/6/7... compliance? i am not too sure the ROI of the CAPEX they spent worthwhile or they should just import more refined petrol from other countries

Posted by sheldon > 2019-11-07 22:46 | Report Abuse

Yes untong PetronM is definitely a very much unsung hero and underappreciated by investors compared to Petdag.

Philip Greta - noted your views - a fresh perspective TQ.

Posted by Vulture123 > 2019-11-08 10:49 | Report Abuse

It is strange that when I started to accumulate at 4.95 plus level, there were only sellers and limited buyers. It has since been inching up and currently against my “bottom fishing” strategy to average upwards. Fundamentally, this stock should be much higher from current level.

Posted by Philip Greta > 2019-11-08 12:08 | Report Abuse

I don't think you have been to their AGM before to be honest. I always go through all financial reports, AGM transcripts and shareholders discussions before I comment. Those I don't have much interest in I rarely comment.

I repeat, is there any way for them to raise their revenues to 4 billion a quarter and increase margins without losing market share? Is it a business that can grow over it's peers? Or are we just buying something because it is cheap? The entire industry is cheap.

I prefer quality buying above all else, if I had to choose.

QL on the other hand, if you want to keep comparing has been growing revenues unlike anything seen in the simple chicken and egg industry before. I will take 6% margins any day for a yoy growth as spectacular as that.

>>>>>>

Posted by Choivo Capital > Nov 7, 2019 3:26 PM | Report Abuse

I don't think you actually understand the business or its history to be honest. Take a look at the accounts from 2013 to 2018 at least, and let me know what you think.

Posted by hock007 > 2019-11-08 12:46 | Report Abuse

Their revenue highly depend on the oil price, not much meaning. Crack spread and the volume of petrol sold is the factors determined the profit

Posted by Choivo Capital > 2019-11-08 13:25 | Report Abuse

"All of these questions tie into one simple answer. petronm has been doing below 3 billion in revenue a quarter since forever, and it is very very likely that this will continue. Petronm has been doing below 5% net profit margins a quarter since forever, and it is very very likely that this will continue. "

Are you sure you read the accounts etc? Last year Q2 and Q3 above 3bil. This year Q2 above 3 bil and i bet Q3 will be as well.

I'm not sure how you would make a factually incorrect statement like that if you have read the accounts.

And if you get the facts wrong, the probability of the "opinion" being wrong as well becomes much higher, as this is much more subjective.

In any event, ill just take your word for it. In that case, explain to me the fuel retailing industry in Malaysia and how its different with those globally.

This is key.

In any event, the revenue don't matter as much, the thing that matters is fuel sales volume. For the retail division at least. Have you seen the growth rates for fuel volume sold? Have you seen the market share trend for retail fuel in Malaysia for the last 5 years?

=====
Philip Greta I don't think you have been to their AGM before to be honest. I always go through all financial reports, AGM transcripts and shareholders discussions before I comment. Those I don't have much interest in I rarely comment.

Posted by Outliar > 2019-11-08 14:51 | Report Abuse

I find great value in Phillip and Choivo's comments in the forum and particularly so in this topic. However, I can't help but feel that Phillip's analysis into each stock does not factor in the price the stock is being traded. Phillip justifies Petron's low PE with his reasons, right though as he may be. But what if Petron was trading at RM1? Phillip's questions about Petron's growth and ability to expand in an already saturated industry let alone its ability (or lack thereof) to differentiate itself from Shell and Petronas still rings true. In other words, the price of a stock is an immaterial consideration to Phillip and even if it is, Petron's low PE is justified given its comparable quality compared to others. My question to Phillip is if Petron was trading at RM1, would you buy the stock? I doubt it. Your reasons for justifying Petron to be selling at such a low PE still holds true, nothing changes.

Choivo on the other hand from what I have read loves Petron. And I feel this has alot to do with the price at which it is being traded at as compared to PetDag 20+ PE. Margin of Safety is important and at this price point, it's difficult to argue against Choivo. From my shallow understanding of the company, it's one of a few B2C companies on Bursa in an industry where it is being subsidised by the government for the most part. The refinery is an immaterial consideration as it earns most of its money from its stations. Most people including myself is indifferent about pumping in Petron or Shell etc.. and this is where Phillip comes from. Why invest in a company where its moat is questionable, its chances of usurping Shell and Petronas in terms of market share is doubtful, with little likelihood of increasing efficiency and profit/profit margins besides its strategy of increasing petrol stations every year? Im sure Choivo knows this, but paying 7/8 times earnings of about 200m a year is still worth the investment, the downside is limited, what can really go wrong?

Ultimately as I see it, its a Qualitative vs Quantitative assessment. That's not to say that Choivo doesnt do a qualitative assessment on Petron, Im sure he has. But the quantitative aspect of it plays a bigger part in Choivo's mind than Phillip's. In the end, it is the price at which you are willing to pay for a company. Phillip doesn't think its worth it even at 7 PE for the reasons aforesaid in his posts. Choivo thinks its an absolute bargain at 7 PE, 200m a year earned back in 7 years, the downside is extremely limited. After all, 2 rules in investing, 1 is not to lose money, 2 is not to forget rule 1. Who's to say who's right and who's wrong?

Just my 2 cents.

Posted by Vulture123 > 2019-11-08 15:28 | Report Abuse

Interesting, wise and knowledgeable arguments in this forum. There will always be differing views and that applies even for Research Houses. Otherwise, the share price will not fluctuate. An old man like me like to invest based on “bottom fishing” strategy once I think there is limited downside to a stock and greater probability of upside in the short/medium or even long term ;-)

Posted by Choivo Capital > 2019-11-08 16:05 | Report Abuse

The value of an investment is ultimately, all future cashflows discounted back to current value.

Low PE can be expensive, high PE or even loss making can be cheap.

Having said that, balance of probabilities. Chances higher that if you pay a low pe, you are getting it cheap, compared to if you were to pay a high one.

Case in point, i'm looking at ELKDESA (other than MBSB, its the most exp by quantitative) , MYNEWS as well.

And i also think companies like Mulpha etc may be expensive.

And if you buy the bottom of a cyclical co, chances are the PE then is high. And when you sell at the top of a cyclical co, PE is low.

I don't want to make any comments on Phillip, god knows we will probably end up arguing and wasting each others time.

I actually don't have much criticism when it comes to his picks, other than QL, and maybe Yinson at this price.

He does have alot of comments on mine though. I welcome any comments, especially criticism, but when you start by making broad statements that get the facts wrong, i can't help but think the criticism is not constructive.

A real masterpiece of his, is his article criticizing TIMECOM, it actually inspired me to buy more.

Posted by Philip Greta > 2019-11-08 16:37 | Report Abuse

Hi outlier,

I totally agree: thus I post with my remark
"
Nothing wrong with investing in petronm. you just need to know what kind of business you are putting your hands into. dont expect 20PE or growing earnings or increased dividend for a long long time yet.
"

The main point I am trying to make is that the fuel service industry is very saturated ( similar to condo development construction industry).

Very hard to make money. Like I said, those who buy petronm based on last year results of crack spread and expecting it to be reoccurring and sustainable will be in for a rude Awakening.

As the market value increases, so will the share of petronas, shell and others. In fact, refinery wise, petronas will be taking a huge step forward next year compared to it's peers. Petronm will definitely make money, but so will pouring money in the fixed deposit.

I don't believe in buying petronm or any stock based on past performances. I buy it based on the quality of the revenue and earnings, and the possibility and feasibility of future growth expectations.

As young choivo so succinctly explained, he expects 200 million in a good year, 100 million in a normal and 50 million in a bad year.

My question is why invest in average companies at all?

Of course, you can question yinson results this year, ql and topglov results last year, and gkent results next year. I may be wrong, but so far my results are still ok for me.

Maybe it's just me, I much prefer a company with clear earnings and revenues coming in the future, and a well managed and resourceful one.

And speaking of shareholder value, how is petronm rewarding shareholders with share buybacks dividends?

I give a simple example, choivo is getting 4.5% for his margin collateralization. Very high, but understandable.

Using the same ideas, take for example GKENT. Today it is 1.02, paying a 6.42% dividend yield or 6.5 cents since last year. The management is doing a lot of share buybacks, it is cash positive and guaranteed earnings and revenue increase with lrt3 and mrt2 and water meter increase of 26 export territories. Management has guided to increased revenue by Q1 2020. If you took a million dollar loan, the dividend alone would have paid for the margin, as well as the constant buyback from the management. You are assured double revenues and earnings next year ( by Malaysia government claim for lrt3). Historically before changing of government their share price was 2+. It is a net cash company with a market leadership in water meter and a niche specially is railway automation and control( how many Malaysian companies can claim that?)

Choivo seems to think petronm can consistently do 3b every quarter and grow and grow, but he doesn't have a confident set of ideas how and why it could do so. How can he? When management itself has not guided towards growth but preaches safety and cost reductions instead of growth.

For me like you said I practice qualitative analysis. I will consider investment into petronm only if one of the following occur,

1. A change in CEO and hire vig knudstorp.
2. They become the first to have a biodiesel refinery and produce b20+ grade and Palm oil high grade biodisel product conversion for diesel pump station. ( If Europe has 50% diesel from bio sources, I'm sure it can be done in Malaysia).
3. They suddenly have a more efficient and cheap source of oil compared to petronas, Shell and friends.
4. They become the first supercharger compliant network in Malaysia. Not because this will earn money, but more because they are starting to look to grow the company instead of resting on laurels.
5. They somehow hit petronas level net profit margins quarterly. There are those who buy lctitan for the 5% np, and those who buy pchem for the 25% np. I prefer companies with either high earnings, or willing to sacrifice short term earnings for huge growth. Low earnings and low growth, not so much.
6. They start to fully embrace the concept of the fuel station as a mini 7-11, where customers buy more than just fuel. I loved that shell and petronas led the way with this, and others began to fall suit. Nothing like buying fuel and claiming the voucher for a bag of rice to build customer loyalty.

Posted by Vulture123 > 2019-11-08 17:20 | Report Abuse

https://www.klsescreener.com/v2/news/view/599538
Good news for Malaysia Equity market next Monday :-)

Posted by Choivo Capital > 2019-11-08 21:56 | Report Abuse

Statutory reserve requirement, not interest. Scare me like crazy when i first saw the number

Posted by Choivo Capital > 2019-11-08 22:08 | Report Abuse

Phillip,

400m in a good year, 300 in a normal one, and 150-250 in a bad one. With 200m a year being basically fixed deposit earnings (retail earnings).

I too like a company with clear earnings and revenues coming in the future, and a well managed and resourceful one.

Maybe you were just talking about the refinery then, and not including the retail division.

Yes, you are correct, fuel retail industry is relatively saturated, but not so much so that Petronm cannot grow the business at high-ish single digits the last few years.

Are you by extension saying that the refinery business is not saturated? Or the Chicken Egg industry is not saturated, or the surimi business is not saturated?

===

Now i have margin at 4.5% (do note its barely used), lets say i use it. In exchange for the 4.5%, i am getting a company yielding me 13%, of which about 30% is paid out, with the remaining 70% reinvested at 10-20% returns. Sounds good to me.

===

On GKENT, i dont deny the management is fairly decent, but at that price, you are getting a water meter business at 16 times earnings (lets assume they are good at water meters). Not much of a deal to be honest, though when compared to QL, it may very well be a bargain.

Kidding aside, The key part here is how good is the construction division.

How good are they at their rail works etc. Is that company more than just a golfing buddy of najib? How do they compare against GAMUDA etc?

How badly will they get chopped on the MRT contracts?

Well, i don't see them getting any overseas rail projects, so we can at best think they are a jaguh kampung, except with GAMUDA around, i don't see them being even that.

Whether they will get chopped on the rail projects, i have no idea.

Does not mean its a bad buy, i was thinking about it for abit, but its by no means better than the petronm you so keenly deride.

Posted by Choivo Capital > 2019-11-08 22:12 | Report Abuse

Phillip, before you comment more on Petronm, go and buy the PFI accounts from 2014 to 2018. Lets talk then.