TeoCT
Hengyuan vs Petronm
Hengyuan vs Petronm
To all the readers of my blog, many thanks.
Thank you also for the many complimentary comments, these really made my day.
Questions / alternative views raised, I will try to answer / comment as best as I can.
I have never written before and this is my first try. It has been exciting and strenuous at the same time. Strenuous to ensure all statement are factual, again my apology for error and omission; exciting, first time is always exciting. And there is apprehension also – whether it will turn out ok or not (just like making love).
Right, lets get down to business:
I must thank all the other bloggers that highlighted the potential value of refineries counter and as they said, the rest is history…..
1) Hengyuan better than Petronm? petronm better than hengyuan?
- First I must declare I also hold Petronm and Hengyuan is by far the larger of the two.
- Why Hengyuan (HY), because I am too lazy to analyze four companies, four? Yes, there is Petronas (owner of refineries, yes they also issue Annual Reports), Petronas Dagangan (retail) and Petronm and possibly Petron Philippine (refinery and retail)
- I have made comment that fundamentally retail make money regardless of crack spread or oil price movement. Buy marked up and sell, easy. PetD is much like 7-11, Aeon, etc. profit growth is growing the number of outlets and be more efficient in logistic, financial management and finally continuous MARKETING. Petronm in this (marketing) sphere loses out to PetD, Shell – think F1. So it is a big challenge just to maintain awareness what more to increase sales (same store/station sale, not growing stations).
- And, Petronm refinery is small and simple (I need to verify this later). Even in this good time will not make much money compare to HY, also massive upgrade required to meet Euro4 and later Euro5
- Whether a refinery should have petrol stations or not, I think it is not important. The refined product is "liquid", easy to turn to cash and they are many buyers. Also easy to buy feedstock too. Of course nice to have upstream as well as petrol stations but they all requires different management skill set. Beside most upstream companies hold these as separate companies. Maybe I go do a postgraduate degree on this on who make the most money and how risk (very different for these different sectors) is managed.
- HY better than Petronm or Petronm better than HY, depending on your risk profile, etc, I really do not know.
- One thing I know, do not mix – retail just retail, manufacturing just manufacturing; once mix, the valuation become more difficult and blur. This is one of the reason conglomerate always trade at a discount (jack of all trade master of none).
- HY cannot grow its profit by growing refineries. Its profit is dictated by the crack spread!
- It is risky, yes, but there is a “valuation gap” i.e. perception is pessimistic and further upside is potentially there – part of investing is to capture this mis-pricing.
2) Be careful if counters were purchased heavily with margin accounts – yes indeed, how much is moot.
3) Do you know how much hedging is done by Hengyuan? – I am sorry I do not know, anyone out there knows, please share, thank you.
4) and what if all the money that is made goes to China and none for you miserable minorities in Malaysia? – I think my discussion on the Directors make-up and loan 1's terms should dismiss this concern. But if you are still uneasy, OK fair enough.
5) plus the fact this is an old plant without depreciation........low PE during cyclical high earnings is to be expected. – Yes (to the cyclical part) and no, depreciation is still running at about RM 150 + million yearly. And need to invest RM 750m for upkeep and Euro4 and Euro5 later, so more depreciation going forward.
6) Thus fair PE for hengyuan should be 7.5x loh....!! EPS rm 3.10 loh...!! – as I said, there is no right and wrong, but do provide the rational why 7.5 and not 8. EPS RM3.10 – why?
7) JUST HANG ON HENGYUAN FOR ANOTHER 6 TO 12 MTHS....SHARE PRICE SHOULD EXCEED RM 20.00 LOH...!! – why should I beieve you (you are not god), please provide reasons to support your statement that it will exceed RM20. I love to know and if I find your reasons reasonable, I might invest more or follow the “rich” to get margin too.
Thank you anywhere for your effort to highlight this undervalued company since 2016.
But allow me to say this – not everyone is as clever / smart as you, please allow some leeway for our slowness, especially mine. I am old and my brain is no longer as sharp as before and everyone is entitle to his / her opinion and let’s share (politely) and be HAPPY.
On electric vehicles here are some other considerations:
a) Manufacturing EV – notorious example is Telsa 3
b) Recharging infrastructure (like Petrol Stations all over the world)
c) The need to increase electricity supply to recharge all the EVs’ batteries - the last I checked, USD 12,000 each
I am not trying to belittle EV but being practical / realistic.
And to this comment “Although I will never buy hengyuan due to the China parent company is the pollution king of the universe.”
Fair enough, this is your principal, very noble, I respect that.
Finally, Merry X’mas and a Happy New Year to all readers.
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1 person likes this. Showing 15 of 15 comments
Those who speculated in Bitcoin and Heng Yuan (4324) should be prepared to lose half of your investment.
2017-12-23 12:08
3) Do you know how much hedging is done by Hengyuan? – I am sorry I do not know, anyone out there knows, please share, thank you. HEDGING IS REQUIRED IF U WANT TO SMOOTHEN THE EARNINGS LOH...!! DURING SHELL ERA THEY ARE NOT ALLOWED TO HEDGE, THUS THE EARNINGS MORE VOLATILE LOH...!!
4) and what if all the money that is made goes to China and none for you miserable minorities in Malaysia? – I think my discussion on the Directors make-up and loan 1's terms should dismiss this concern. But if you are still uneasy, OK fair enough. HOW CAN THIS BE HENGYUAN, AS ITS OPERATIONS IS IN MALAYSIA AND NOT CHINA LOH ?
IN FACT THE BANK ALREADY DONE ASSESSMENT FOR US THEY HAVE LEND AN EXPOSURE LOAN OF RM 1.6 BILLION...IF THEY ARE NOT COMFORTABLE WITH CHINESE PARTY, DO U THINK THEY WILLING TO GRANT THIS RM 1.6B FACILITY AH ??
5) plus the fact this is an old plant without depreciation........low PE during cyclical high earnings is to be expected. – Yes (to the cyclical part) and no, depreciation is still running at about RM 150 + million yearly. And need to invest RM 750m for upkeep and Euro4 and Euro5 later, so more depreciation going forward. BUT U CHECK THE COMPETITOR PETRONAS RM 64B AND PETRON RM 6.4B INVESTMENT, U THINK THEY ARE SO STUPID TO SPEND SO MUCH ON REFINERY AH?
SURELY HENGYUAN GOT COMPETITIVE ADVANTAGE AS THEY SPEND MUCH LESS AND THE LEAST AT RM 700M COMPARATIVELY TO DO THE JOB MAH....!!
6) Thus fair PE for hengyuan should be 7.5x loh....!! EPS rm 3.10 loh...!! – as I said, there is no right and wrong, but do provide the rational why 7.5 and not 8. EPS RM3.10 – why?
ALREADY EXPLAIN MAH...REFINERY USA PE 20X, ASIA 12.5X AND EUROPE 9.5X AND WARREN BUFFET REFINERY 24X...HENGYUAN TP PE 7.5X VERY CONSERVATIVE LOH....!!
7) JUST HANG ON UR HENGYUAN FOR ANOTHER 6 TO 12 MTHS....SHARE PRICE SHOULD EXCEED RM 20.00 LOH...!! – why should I beieve you (you are not god), please provide reasons to support your statement that it will exceed RM20. I love to know and if I find your reasons reasonable, I might invest more or follow the “rich” to get margin too.
U DON HAVE TO BELIEVE AND BE SCEPTICAL AND JUST SELL UR SHARE TO THE FUND MANAGER AT ABOVE RM 14.00 LOH...!!
LET THE BELIEVER HANG ON, AND GO FOR TP ABOVE RM 20.00 A STRONG Q4 IS JUST 2 MTHS AWAY MAH....!!
2017-12-23 12:20
promotion of hrc in i3 is no longer relevant and effective lo. retailer who want to buy already bought. now is for those heavy weights to it bring to the sphere of institution and foreign. Perhaps more china funds...hahaha
2017-12-23 15:02
Yes they maybe conman around....but with so many sifu around...u think, people will get conned on the undervalue hengyuan ??
The sifu like probability, alex, kyy, icon, jelas, otb, paper will sure alert the readers if they try to con anyone here loh...!!
Warning;
If U ARE A CONMAN IT IS BETTER TO AVOID HENGYUAN and TO PLY YOUR BUSINESS SOMEWHERE LOH....!! IT IS LESS A HEADACHE IF U CHOSE A PENNY STOCK AND START YOUR CON GAME PLAN MAH....!!
THOSE WHO STAY WITH HENGYUAN ARE GENUINE INVESTOR WHO BELIEVE THE STOCK IS UNDERVALUE AND PREPARE TO RIDE THE WAVE LOH...!!
MOST CONMAN, CANNOT PROFIT MUCH....BCOS EVEN...HE CONVINCE PEOPLE TO SELL TO PRESS DOWN A LITTLE, FUND WILL BUY AT THE END PUSH UP THE PRICE AGAIN MAH....!! FURTHERMORE HENGYUAN IS A HEAVY WEIGHT.
LATELY RAIDER NO NEED TO PROMOTE MUCH....OUR FIGHT NOW IS BETWEEN THE INDIVIDUAL INVESTORS AND FUND MANAGERS NOW LOH....!!
THE FUND MANAGERS NEED TO COLLECT STOCK AT UNDERVALUE PRICE, IN ORDER TO MAKE THEIR EFFORT WORTHWHILE MAH....!!
THATS WHY WHEN JELAS UNTUNG SOLD ALOT OF HIS HENGYUAN SHARE, RAIDER NO LONGER SCOLD HIM MAH AT LEAST SOMEONE NEED TO DISPOSE TO THE FUND MANAGER AND RAIDER AND KYY NOT GOING TO DO IT AS OUR TARGET IS ABOVE RM 20.00.
SO IF JELAS IS WILLING TO SELL, RAIDER IS HAPPY FOR HIM...BCOS HE ACHIEVE HIS OBJECTIVE OF MAKING MONIES, MANAGE HIS RISK AND AT THE SAME TIME STILL CAN PARTICIPATE ON THE FUTURE PROSPECT OF HENGYUAN WITH HIS BALANCE HOLDING.
JELAS ACT OF SELLING FUND MANAGER TO ACCELERATE THEIR ACCUMULATION, WHICH IS A WIN WIN NOBLE ACT MAH..!!
OF COURSE RAIDER BEING HONEST, WILL NOT ENCOURAGE U TO SELL WHEN THE TP IS ABOVE RM 20.00 AND Q4 IS LESS THAN 2 MTHS AWAY LOH...!!
2017-12-23 16:01
ATTENTION: Will this stock hit LIMIT UP soon?
https://klse.i3investor.com/blogs/smartrading/142222.jsp
2017-12-23 17:06
HOW DO WE KNOW WHICH COUNTER GOT MARGIN INVESTOR AND WHICH DO NOT ? THE ANSWER IS THAT WE DO NOT LOH...!!
http://klse.i3investor.com/blogs/koonyewyinblog/142099.jsp
2017-12-24 09:24
REMEMBER THOSE WHO USE MARGIN IS NOT ONLY KYY MAH....!!
BUT I LOOK AT HENGYUAN SHAREHOLDERS LIST, THE MAJORITY IS CASH BUYERS LOH..!!
SO DO NOT GET CONFUSE WITH JUST A SINGLE INVESTOR LOH...!!
Posted by limml > Dec 24, 2017 09:24 AM | Report Abuse
HOW DO WE KNOW WHICH COUNTER GOT MARGIN INVESTOR AND WHICH DO NOT ? THE ANSWER IS THAT WE DO NOT LOH...!!
http://klse.i3investor.com/blogs/koonyewyinblog/142099.jsp
2017-12-25 13:07
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Right, lets get down to business:
I must thank all the other bloggers that highlighted the potential value of refineries counter and as they said, the rest is history…..
1) Hengyuan better than Petronm? petronm better than hengyuan?
- First I must declare I also hold Petronm and Hengyuan is by far the larger of the two.
- Why Hengyuan (HY), because I am too lazy to analyze four companies, four? Yes, there is Petronas (owner of refineries, yes they also issue Annual Reports), Petronas Dagangan (retail) and Petronm and possibly Petron Philippine (refinery and retail)
- I have made comment that fundamentally retail make money regardless of crack spread or oil price movement. Buy marked up and sell, easy. PetD is much like 7-11, Aeon, etc. profit growth is growing the number of outlets and be more efficient in logistic, financial management and finally continuous MARKETING. Petronm in this (marketing) sphere loses out to PetD, Shell – think F1. So it is a big challenge just to maintain awareness what more to increase sales (same store/station sale, not growing stations).
U MUST UNDERSTAND THE CURRENT STRENGTH IS REFINERY AND NOT RETAIL LOH..!! THATS WHY LATELY, U SEE HENGYUAN PROFIT FAR EXCEED PETDAG AND PETRON MAH...!!
WITH THE STRONG CRACK SPREAD IS GOING TO CONTINUE LOH...!!
- And, Petronm refinery is small and simple (I need to verify this later). Even in this good time will not make much money compare to HY, also massive upgrade required to meet Euro4 and later Euro5. ALL REFINERY NEED TO MEET THIS STATUTORY REGULATION PETRON, HENGYUAN AND PETRONAS BUT HENGYUAN REMAIN THE CHEAPEST UPGRADE TO COMPLY...COSTING A SMALL FRACTION OF COST PETRON AND PETDAG IS INCURRING MAH...!! THIS IS THE STRENGTH OF CHINESE OWNER LOH..!!
- Whether a refinery should have petrol stations or not, I think it is not important. The refined product is "liquid", easy to turn to cash and they are many buyers. Also easy to buy feedstock too. Of course nice to have upstream as well as petrol stations but they all requires different management skill set. Beside most upstream companies hold these as separate companies. Maybe I go do a postgraduate degree on this on who make the most money and how risk (very different for these different sectors) is managed.
- HY better than Petronm or Petronm better than HY, depending on your risk profile, etc, I really do not know.
- One thing I know, do not mix – retail just retail, manufacturing just manufacturing; once mix, the valuation become more difficult and blur. This is one of the reason conglomerate always trade at a discount (jack of all trade master of none). SOMETIME BETTING BOTH SIDE HAD ITS ADVANTAGE LOH..!! PETDAG HAD ITS ADVANTAGE BUT LATELY ITS SHARE PRICE STAGNANT FOR FEW YRS BCOS THE NEW ERA IS REFINERY LOH..!! THATS WHY HENGYUAN UP SO MUCH LOH..!! BUT PETRON IS DOING WELL TOO...BCOS IT HAS REFINERY AND RETAIL IT IS INTEGRATED LOH...!!
- HY cannot grow its profit by growing refineries. Its profit is dictated by the crack spread! YES HENGYUAN CAN GROW ITS PROFIT BY IMPROVING ITS PROCESS SINCE TAKING OVER THE CHINESE OUT BEAT THE MATSALLEH LOH...!!
- It is risky, yes, but there is a “valuation gap” i.e. perception is pessimistic and further upside is potentially there – part of investing is to capture this mis-pricing. IT IS NOT RISKY...BCOS HENGYUAN IS THE OEM OF SHELL...ALL BARANG IS SOLD TO SHELL STATION MAH...NOT SO MUCH HEADACHE JUST CONCENTRATE ON REFINERY LOH...!!
2) Be careful if counters were purchased heavily with margin accounts – yes indeed, how much is moot. HOW DO WE KNOW WHICH COUNTER GOT MARGIN INVESTOR AND WHICH DO NOT ? THE ANSWER IS THAT WE DO NOT LOH...!!
SO IT IS BEST TO ASSESSS ON INDIVIDUAL STOCK FUNDAMENTAL LOH...!!
MOST FUND MANAGER U CASH TO BUY UNLESS IT IS HEDGE FUND LOH...!!
BUT STILL MOST FUNDS ARE CASH INVESTMENT FUND LOH...!!
2017-12-23 12:06