Posted by investor2021trading > 2022-06-06 16:39 | Report Abuse

tomorrow morning down a bit but afternoon up a lot!

Posted by hengpetron > 2022-06-06 17:22 | Report Abuse

Stockraider is ultimate spy

Posted by hengpetron > 2022-06-06 17:23 | Report Abuse

Stockraider is most great fortune teller
Lu tau boh

Posted by Johnzhang > 2022-06-06 17:43 | Report Abuse

Regarding the inventory write down amounting to $132 mil, some of you link it to Russian oil purchase. Does anyone really have substantiated information on this ? Is this just guessing ?
It could also simply be Brent crude contracted at peak price of around USD120 in 2nd half March and written down to around USD103 which is the Brent crude price at the close of the qtr (31/3/2022). This is mark to market principle most company adopt.
Total write down was RM132 mil or USD31 mil. The mark to market of USD17/barrel (120-103) is equivalent to about 1.82 mil barrels of crude stock which is about 2.5 weeks of inventory.

Posted by Johnzhang > 2022-06-06 17:45 | Report Abuse

If my suspicion above is correct, that means HY cost of sales will be lower and GP will be higher for this batch of stock to be sold in Q2 2022.

Posted by Johnzhang > 2022-06-06 18:11 | Report Abuse

I have compared the P&Ls' of HY from 2016 to 2021 and noticed that the single item in the yearly P&L that swing the nett profit wildly is OTHER OPERATING (LOSSES)/GAIN.
Q12022 ($339 mil) - note : one qtr alone !
FY2021 ($552 mil)
FY2020 $308 mil gain
FY2019 ($61 mil)
FY2018 ($8 mil)
FY2017 $81 mil gain
FY2016 ($6 mil)
In the account, it explained this is related to net fair value losses/gain on derivative instruments.
Questions 1 : Why such wild swing starting FY2020 only ? It was a lot more stable and minimum before FY2020. Here, I am asking if there is element of imprudent hedging policy by the management ?
Question 2 : What market development in crude or refined product led to the wild swing from FY2020 and Q1 2022 in particular ?
Although hedging thru derivative instruments are meant to protect profits, there is element of taking a position with risk . The impact can be huge if hedging is excessive and in wrong position.
Would like to hear your professional view.

Posted by Johnzhang > 2022-06-06 18:14 | Report Abuse

Only when we have a fair bit of understanding on HY's hedging policy , I think it is very hard for outsider like us to project its net profit vis a vis crack spread.

Posted by Sslee > 2022-06-06 18:17 | Report Abuse

In 2020 when crack spread below USD 2, all refinery should report losses only Hengyuan report good profit because of gain from derivative. Since then Hengyuan is betting big on derivative.

Posted by hng33 > 2022-06-06 18:40 | Report Abuse

Hengyuan hedging position is limit to 25% of each month revenue. Therefore, if crack spread is leap up three time higher, its 25% hedging position will incur loss, but balance 75% revenue will reap handsome spot profit. Off course, the extend of 75% revenue gain will offset partly by 25% hedging loss, resulting hengyuan still able to reap at least 40% revenue enjoy current crack profit margin.

Posted by hng33 > 2022-06-06 18:44 | Report Abuse

The inventory loss incur in Q1 result is due to hengyuan source 17% crude oil from Russian. Hengyuan have last year renew 5 year extension to supply refine product to local Shell station. Shell have opt to cut tie to use any crude or refine produce source from Russian, these have resulted hengyuan force to written down these 17% inventory, replace with spot crude oil from other source.

Posted by johnny cash > 2022-06-06 18:52 | Report Abuse

CAREFULL WITH A STOCK LIKE HY NOT MOVING IN TANDEM WITH OIL PRICES. LEFT BEHIND PETRONM. HY WILL DO A WAITING TIME TILL AUGUST WHEN QTR RESULTS ARE OUT

Posted by johnny cash > 2022-06-06 18:54 | Report Abuse

HY WILL NOT MOVE NOW BECAUSE QTR RESULT NOT GOOD. ONLY PETRONM WILL MOVE IN TANDEM WITH OIL PRICE NOT HY

Posted by johnny cash > 2022-06-06 18:56 | Report Abuse

HY WILL ONLY MOVE AFTER THE 2ND QUARTER RESULTS IN AUGUST. IN THE MEANTIME IT MIGHT RETRACE MAYBE 5.75 TO 6

Posted by johnny cash > 2022-06-06 18:58 | Report Abuse

SINCE QTR RESULT OF PETRONM BETTER THEN HY, ONLY PETRONM WILL MOVE STRONGLY IN TANDEM WITH RISING OIL PRICES

Posted by Sslee > 2022-06-06 19:03 | Report Abuse

All refinery depend on crack spread. The high cost of crude actually result in high working capital. The best is still crack spread remain high and crude at USD 70-100.

Posted by hng33 > 2022-06-06 19:23 | Report Abuse

Shell on 3 Mar declare termination tie to use any Russian oil, but Hengyuan may already order Russian crude ahead. Since Hengyuan have 5 year supply contract with Shell, it need to write down these crude and source from other crude supplier to meet 17% shortfall. The 17% crude source from Russian can be already in store tank or on shipment, Hengyuan need to sell these crude oil outright later without refine it to process fuel/gasoline/diesel.

These is one off case, its will NO repeat in next Q.

Remark: from hengyuan last year annual report, it source about 17% crude from Russian

Posted by Johnzhang > 2022-06-06 19:46 | Report Abuse

@hng33,
You only write down if the stock value fall below realizable value . Since Russia oil is at discount upon purchase , I don’t see any valid justification to do so. Moreover , HY only supply a portion of the refined products to shell. HY has many other customers too.
—————————————/
Shell on 3 Mar declare termination tie to use any Russian oil, but Hengyuan may already order Russian crude ahead. Since Hengyuan have 5 year supply contract with Shell, it need to write down these crude and source from other crude supplier to meet 17% shortfall. The 17% crude source from Russian can be already in store tank or on shipment, Hengyuan need to sell these crude oil outright later without refine it to process fuel/gasoline/diesel.

These is one off case, its will NO repeat in next Q.

Remark: from hengyuan last year annual report, it source about 17% crude from Russian

Posted by hng33 > 2022-06-06 19:46 | Report Abuse

Hope hengyuan can seek compensation from Shell in regard to its own policy to abandon Russian oil. Afterall, sanction is not endorse by world organization.

Posted by Johnzhang > 2022-06-06 19:54 | Report Abuse

I think the 25% hedging only cap the refining margin when crack spread moved higher than the hedged rate . It is only Opportunity loss not real loss . Assuming the proportion of hedged and open position is really 25/75, the derivative loss proportion to Gross profit should rightly be smaller than 25/75. But this is not the case shown in the financial accounts. They is something else we don’t understand.
———————————
Hengyuan hedging position is limit to 25% of each month revenue. Therefore, if crack spread is leap up three time higher, its 25% hedging position will incur loss, but balance 75% revenue will reap handsome spot profit. Off course, the extend of 75% revenue gain will offset partly by 25% hedging loss, resulting hengyuan still able to reap at least 40% revenue enjoy current crack profit margin.

Posted by VTrade > 2022-06-06 20:09 | Report Abuse

Can start accumulated the stock.
Shark started play soon

Posted by OTB > 2022-06-06 20:17 |

Post removed.Why?

Posted by investor2021trading > 2022-06-06 20:26 | Report Abuse

expecting a buy/sell momentum starting tomorrow!

Posted by OTB > 2022-06-06 20:45 |

Post removed.Why?

Posted by hng33 > 2022-06-06 20:48 | Report Abuse

Hengyuan hedging mainly focus on its input crude oil cost to protect its refine end product rathet than vice versa

Posted by stockraider > 2022-06-06 20:52 | Report Abuse

Of course mah!
If the business model is to make use of derivative as one of the main business model to sapu money....surely base on analysis it appear on the surface imprudent business hedge loh!

But actually is done to kon & siphon cash thru hedging losses loh!
It is confirmed kon mah!, how come the frequency of derivative hedge has more losses occurence than gain leh ??

Usually it should be 50 ; 50 gain v losses mah!

Posted by Johnzhang > 2 hours ago | Report Abuse

I have compared the P&Ls' of HY from 2016 to 2021 and noticed that the single item in the yearly P&L that swing the nett profit wildly is OTHER OPERATING (LOSSES)/GAIN.
Q12022 ($339 mil) - note : one qtr alone !
FY2021 ($552 mil)
FY2020 $308 mil gain
FY2019 ($61 mil)
FY2018 ($8 mil)
FY2017 $81 mil gain
FY2016 ($6 mil)
In the account, it explained this is related to net fair value losses/gain on derivative instruments.
Questions 1 : Why such wild swing starting FY2020 only ? It was a lot more stable and minimum before FY2020. Here, I am asking if there is element of imprudent hedging policy by the management ?
Question 2 : What market development in crude or refined product led to the wild swing from FY2020 and Q1 2022 in particular ?
Although hedging thru derivative instruments are meant to protect profits, there is element of taking a position with risk . The impact can be huge if hedging is excessive and in wrong position.
Would like to hear your professional view.

Posted by Johnzhang > 2 hours ago | Report Abuse

Regarding the inventory write down amounting to $132 mil, some of you link it to Russian oil purchase. Does anyone really have substantiated information on this ? Is this just guessing ?
It could also simply be Brent crude contracted at peak price of around USD120 in 2nd half March and written down to around USD103 which is the Brent crude price at the close of the qtr (31/3/2022). This is mark to market principle most company adopt.
Total write down was RM132 mil or USD31 mil. The mark to market of USD17/barrel (120-103) is equivalent to about 1.82 mil barrels of crude stock which is about 2.5 weeks of inventory.

Posted by Johnzhang > 2022-06-06 20:53 | Report Abuse

@OTB, may I suggest that Ahahah should also check how far forward the derivative contracts are entered into. If 25% of revenue for 12 months forward are hedged at any one time it is equivalent to 3 months revenue hedged at any one time.

Posted by OTB > 2022-06-06 20:59 | Report Abuse

Please request, I have no problem.
I want this type of information which I cannot get it easily.
Thank you.

Posted by stockraider > 2022-06-06 21:01 | Report Abuse

The key from this Rm 132m write down of Russian crude as i say due to msia govt discourage Russian Crude & shell disallow Russian crude loh!

But the point is the big exceptional losses of Rm 132m is due to massive losses of russian crude of USD 80 purchase compare to the salvage disposal price to china parent at USD 7 mah!.

This is another major red flag investor should aware mah!

Posted by Johnzhang > 2022-06-06 21:02 | Report Abuse

@OTB, thanks for your compliment. My arguments are indeed layman . Nothing special.

Posted by stockraider > 2022-06-06 21:04 | Report Abuse

Logic mah!

If u ask from the kon man, how he kon do u think he will reply & give u the info to U genuinely & accurately leh ??

Of course not mah!

Posted by Johnzhang > 8 minutes ago | Report Abuse

@OTB, may I suggest that Ahahah should also check how far forward the derivative contracts are entered into. If 25% of revenue for 12 months forward are hedged at any one time it is equivalent to 3 months revenue hedged at any one time.

Posted by OTB > 2 minutes ago | Report Abuse

Please request, I have no problem.
I want this type of information which I cannot get it easily.
Thank you.

Posted by stockraider > 2022-06-06 21:11 | Report Abuse

Of course Raider has my own spy to feed me mah!

But raider give u this simple hint loh....HY only make Rm 47m for q1 31-3-2022 but just 1 transaction from the Russian crude can lose Rm 132m alone meh ??

Just this indication alone already point to very big hanky panky deals loh!

Lu tau boh ?

Posted by lai3bu > 1 minute ago | Report Abuse

Where is the proof sold at USD 7, you are really a stupeeedd cow that talk nonsense

Posted by Johnzhang > 2022-06-06 21:11 | Report Abuse

@Stockraider,
With due respect , this seem to be an unsubstantiated information spreading from one to another. I treat this as speculation until it is confirmed by HY . It doesn’t help at all to speculate this and that which eventually cloud the clarity every investors are looking for .
———/——————

Stock raider posted :
The key from this Rm 132m write down of Russian crude as i say due to msia govt discourage Russian Crude & shell disallow Russian crude loh!

But the point is the big exceptional losses of Rm 132m is due to massive losses of russian crude of USD 80 purchase compare to the salvage disposal price to china parent at USD 7 mah!.

This is another major red flag investor should aware mah!

Posted by stockraider > 2022-06-06 21:21 | Report Abuse

John u must understand this mah!
My spy cannot give u substantial info mah!

Just from the surface u can see how HRC kon u mah!

U yourself says....the frequency of HRC occurence losses is unbelievable mah!

Of course mah!
If the business model is to make use of derivative as one of the main business model to sapu money....surely base on analysis it appear on the surface imprudent business hedge loh!

But actually is done to kon & siphon cash thru hedging losses loh!
It is confirmed kon mah!, how come the frequency of derivative hedge has more losses occurence than gain leh ??

Usually it should be 50 ; 50 gain v losses mah!

Posted by Johnzhang > 2 hours ago | Report Abuse

I have compared the P&Ls' of HY from 2016 to 2021 and noticed that the single item in the yearly P&L that swing the nett profit wildly is OTHER OPERATING (LOSSES)/GAIN.
Q12022 ($339 mil) - note : one qtr alone !
FY2021 ($552 mil)
FY2020 $308 mil gain
FY2019 ($61 mil)
FY2018 ($8 mil)
FY2017 $81 mil gain
FY2016 ($6 mil)

Posted by Johnzhang > 5 minutes ago | Report Abuse

@Stockraider,
With due respect , this seem to be an unsubstantiated information spreading from one to another. I treat this as speculation until it is confirmed by HY . It doesn’t help at all to speculate this and that which eventually cloud the clarity every investors are looking for .
———/——————

Stock raider posted :
The key from this Rm 132m write down of Russian crude as i say due to msia govt discourage Russian Crude & shell disallow Russian crude loh!

But the point is the big exceptional losses of Rm 132m is due to massive losses of russian crude of USD 80 purchase compare to the salvage disposal price to china parent at USD 7 mah!.

This is another major red flag investor should aware mah!

Posted by hng33 > 2022-06-06 21:22 | Report Abuse

hengyuan only need hedging on its input crude oil derivative as it need few week shipment time from various crude source supply. Hengyuan only source 50% crude from local Petronas, another 50% are mainly source from Russian, Arab and Asia. Hengyuan need to protect its profit margin from erode due to volatility crude oil cost.

hengyuan didn't need to hedge its refine end product as it have long term supply taker from Msia Shell until 2026. Most if no all of its refine end product are solely supply to Shell Malaysia.

Therefore, hengyuan hedging loss/gain mainly due to volatility in crude oil. If refine end product price increase as indicate by crack spread, hengyuan will only profit higher in tandem with higher crack spread

Malaysia Shell is sole taker for hengyuan refine product. It is Shell Malaysia to hedge refine product volatility in Singapore mogas platts market.

Posted by stockraider > 2022-06-06 21:27 | Report Abuse

U need understand this loh!

During time of Shell & Esso....they never employ hedging why leh ??

This bcos msia petrol price pricing mechanism formula already has a natural hedge for crude oil volatility mah!

Why people like HRC want to use the derivative as basis of hedge leh ?

And most of the time HRC lose money from the hedge from the past record mah!

This is another red flag mah!

Posted by hng33 > 5 minutes ago | Report Abuse

hengyuan only need hedging on its input crude oil derivative as it need few week shipment time from various crude source supply. Hengyuan only source 50% crude from local Petronas, another 50% are mainly source from Russian, Arab and Asia. Hengyuan need to protect its profit margin from erode due to volatility crude oil cost.

hengyuan didn't need to hedge its refine end product as it have long term supply taker from Msia Shell until 2026. Most if no all of its refine end product are solely supply to Shell Malaysia.

Therefore, hengyuan hedging loss/gain mainly due to volatility in crude oil. If refine end product price increase as indicate by crack spread, hengyuan will only profit higher in tandem with higher crack spread

Posted by Johnzhang > 2022-06-06 21:36 | Report Abuse

@hng33,
I am not sure at all if HY only hedged it’s raw material ie crude oil as you claim. If you look at the financial account, you will notice that HY uses 4 types of derivative instruments:
1. Forward priced commodity contracts
2. Commodity swap contracts
3. Commodity options contracts
4. Refining margin swap contract .
Among them , 3 and 4 has the highest losses that put through to P&L for Q12022.
I am a layman in derivative . But I think the refining margin swap contracts are for the purposes of locking in refining margins (crack spread) . As crack spread surge month by month it give rise to huge ‘losses’ in this derivative.

Petron’s hedging is a lot more straightforward. They only have commodity swap contract which is essentially used to hedge against price swing in a given commodity like crude .

Posted by stockraider > 2022-06-06 21:40 | Report Abuse

The virtue of over excessive use of derivative of various type....point to the potential kon loh!
Making....it difficult for layman to identify and pinpoint where & what exactly is the kon model employ mah!
Lu tau boh ?
Posted by Johnzhang > 8 seconds ago | Report Abuse

@hng33,
I am not sure at all if HY only hedged it’s raw material ie crude oil as you claim. If you look at the financial account, you will notice that HY uses 4 types of derivative instruments:
1. Forward priced commodity contracts
2. Commodity swap contracts
3. Commodity options contracts
4. Refining margin swap contract .
Among them , 3 and 4 has the highest losses that put through to P&L for Q12022.
I am a layman in derivative . But I think the refining margin swap contracts are for the purposes of locking in refining margins (crack spread) . As crack spread surge month by month it give rise to huge ‘losses’ in this derivative.

Petron’s hedging is a lot more straightforward. They only have commodity swap contract which is essentially used to hedge against price swing in a given commodity like crude .

Post a Comment

Posted by hng33 > 2022-06-06 21:41 | Report Abuse

Refinary margin swap is because hengyuan only produce some euro5 dissel to meet shell demand. Hengyuan source part of dissel end product from other refiner.

By end Q2, hengyuan dissel plant should have capacity to product all euro5 dissel to meet Malaysia policy

Posted by hng33 > 2022-06-06 21:43 | Report Abuse

It is untrue to assume..... This bcos msia petrol price pricing mechanism formula already has a natural hedge for crude oil volatility mah....

One of the key variables factor in Malaysia automated price mechanism formula ia crack spread, calculated based in Sigapore mogas market, average based on weekly crack spread data.

Posted by valueguru > 2022-06-06 21:44 | Report Abuse

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.

Posted by stockraider > 2022-06-06 21:45 | Report Abuse

The problem is HRC already spend billions to upgrade its plant but it still cannot produce adequate Euro 5 petrol & diesel loh!

What has happen leh ??

Did management again siphon cash....resulting that the refinery cannot perform as original upgrade target loh!

Posted by stockraider > 2022-06-06 21:48 | Report Abuse

U need to understand this loh!

The CME crack spread is a combination of a mix products of petrol, diesel, jet fuel, base oil , naptha etc mah!

But petrol & diesel is still the main products loh!

Posted by valueguru > 2022-06-06 21:48 | Report Abuse

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

Posted by probability > 2022-06-06 21:49 | Report Abuse

hng33, pls enlighten a little more on this..

thks

Posted by hng33 > Jun 6, 2022 9:41 PM | Report Abuse

Refinary margin swap is because hengyuan only produce some euro5 dissel to meet shell demand. Hengyuan source part of dissel end product from other refiner.

By end Q2, hengyuan dissel plant should have capacity to product all euro5 dissel to meet Malaysia policy

Posted by probability > 2022-06-06 21:51 | Report Abuse

indeed verified and true

Posted by valueguru > Jun 6, 2022 9:44 PM | Report Abuse

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.

Posted by hng33 > 2022-06-06 21:53 | Report Abuse

Management alrdy indicate it euro5 will complete by Q2. So, juat wait for next Q update.

Anyhow, as so long there is no too widly volatility like what happen in fed, hengyuan hedging on crude oil will not oncur too big loss again like in Q1, crude oil volatile from Q42021 USD 70+ to Q1 2022 USD 110+

Forward looking is positive impact on crack spread which increase almost triple from USD 12 to USD 33

Posted by probability > 2022-06-06 21:57 | Report Abuse

@hng33, what do you understand by the 'refining margin swap'?

Posted by hng33 > 2022-06-06 21:58 | Report Abuse

Refinary swap margin ia for hengyuan to buy dissel euro5 form oversea presumbly from its parent china hengyuan, to supply to Msia shell.

Refinary margin swap is to based on singapore mogas in which shell malaysia payable to hengyuan against input cost source from china refinary.


Hengyuan is act as trader

Posted by probability > 2022-06-06 22:04 | Report Abuse

I see its simply hedging of margin hng33


Refinery Margin Swap
.....................

A commodity swap which allows a refiner to hedge against a narrowing spread between crude oil prices and the prices of its refined products. Therefore, the right to profit from a potential widening of the spread is given up. This swap can effectively lock in a margin (known as a crack spread) by paying the floating price of a refined oil product and receiving the floating price of a crude oil input plus the crack spread.

The refinery margin swap is also known as a crack spread swap.

Posted by stockraider > 2022-06-06 22:10 | Report Abuse

Red alert loh!

An indication of potential abuse thru related party transaction loh!

An opportunity to siphon money under this scenario loh!

Posted by hng33 > 9 minutes ago | Report Abuse

Refinary swap margin ia for hengyuan to buy dissel euro5 form oversea presumbly from its parent china hengyuan, to supply to Msia shell.

Refinary margin swap is to based on singapore mogas in which shell malaysia payable to hengyuan against input cost source from china refinary.