Generali wants to complete the multi party deals by 30th June. As such , EGM will most likely be end May or early June.

BNM approved the disposal. The next thing will be the next big event will be the quantum of special dividend to be announced before EGM to seek shareholders’ approval. I hope the special dividend is extraordinary.

Below is what KYY wrote in 2017. He explained how crack spread determines profitability of a refinery. Now he said doubtful. That’s how cunning he can be !
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Hengyuan: Detailed explanation of its profit margin or crack spread

admin admin
4 years ago
I have written several articles recommending buy on Hengyuan which you can find on my blog. Those who have bought should be laughing and some wanted to know why I am so bullish to buy Hengyuan.

I am not asking you to buy to push up the price to make me richer because based on the huge volume traded daily, obviously big financial institutions are buying aggressively. These financial institutional investors have their experts to analyse the stock in detailed before they buy.

Let me try to give you a clearly understanding of Hengyuan’s business operation.

Hengyuan is in the oil refinery business. It buys crude oil to refine it into several types of oil products which are selling at different prices. The most expensive is high grade petroleum and the cheapest is bitumen tar for the road surface.

Its profit essentially depends on its margin of profit or crack spread.

Crack spread is a term used on the oil industry and futures trading for the differential between the price of crude oil and petroleum products extracted from it. The spread approximates the profit margin that an oil refinery can expect to make by “cracking” the long-chain hydrocarbons of crude oil into useful shorter-chain petroleum products.

In the futures markets, the “crack spread” is a specific spread trade involving simultaneously buying and selling contracts in crude oil and one or more derivative products, typically gasoline and heating oil. Oil refineries may trade a crack spread to hedge the price risk of their operations, while speculators attempt to profit from changes in the oil/gasoline price differential.

Factors affecting the crack spread

One of the most important factors affecting the crack spread is the relative proportion of various petroleum products produced by a refinery. Refineries produce many products from crude oil, including gasoline, kerosene, diesel, heating oil, aviation fuel, asphalt and others. To some degree, the proportion of each product produced can be varied in order to suit the demands of the local market. Regional differences in the demand for each refined product depend upon the relative demand for fuel for heating, cooking or transportation purposes. Within a region, there can also be seasonal differences in demand for heating fuel versus transportation fuel.

The mix of refined products is also affected by the particular blend of crude oil feedstock processed by a refinery, and by the capabilities of the refinery. Heavier crude oils contain a higher proportion of heavy hydrocarbons composed of longer carbon chains. As a result, heavy crude oil is more difficult to refine into lighter products such as gasoline. A refinery using less sophisticated processes will be constrained in its ability to optimize its mix of refined products when processing heavy oil.

The crack spread chart

The chart below shows Hengyuan’s crack spread which has been low in the 1st half year and is improving for the 2nd half year.

As a result, its 1st half year eps was only Rm 1.20, as announced its 3nd quarter was Rm 1.21 and 4th quarter should be better than the 3rd quarter. Assuming its 4th quarter eps is Rm 1.30, its total eps for the year will be Rm 3.71 per share.

Assuming it will be selling at P/E 5, the price should be Rm 18 per share, when its 4th quarter result is announced before the end of February 2018. Can you find another stock with similar quality selling P/E 5?

KYY is damn ignorant that it is the Malaysian government paying the difference between international price and local subsidized price .
It is going to cost the government over RM28 bil as crude stay well above usd 100 .
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Malaysia's 2022 petroleum subsidy to rise to RM28b from RM11b in 2021 if crude oil prices remain above US$100/barrel — Tengku Zafrul

Uncle Koon make himself looks very stvpid with his stvpid reasoning!

Uncle koon make himself look very stvpid with his stvpid reasoning!

Crack spread has gone crazy high. PetronM and Hengyuan should go crazy high soon .

2022年涨幅最大的种植股 - BPLANT:
https://youtu.be/V6HZye504TE

2022年涨幅最大的种植股 - BPLANT:
https://youtu.be/V6HZye504TE

Steel price in China has gone up from RMB4,100 per tonne in Nov 2021 to RMB5,200 now . Good sign ahead .

Steel price in China has gone up from RMB4,100 per tonne in Nov 2021 to RMB5,200 now . Good sign ahead .

Steel price in China has gone up from RMB4,100 per tonne in Nov 2021 to RMB5,200 now . Good sign ahead .

Palm oil producers and now refinery are going to make record profits this year Next shall be steel .

Supersinginvestor , I dump UP 1st thing after seeing the disastrous QR. One share of UP could exchange for 2.5 share SOP.
Between 27th and this afternoon , UP down 31sen after considering the dividend. SOP up about 50 sen the same period. Therefore we gain 2.5x 50 sen =$1.25 per UP share . And avoided the 31 sen loss in UP too.

Valueguru, could you tell us the relative potential between HY and PetronM. If I am not wrong both have about the same refining capacity. I am in both counters

Valueguru, I fully agree with you .

I concur his view

Supersinginvestor, welcome to my favorite stock. I think you will see quicker and higher capital gain from this stock than staying on with UP.

Total share issued only 270 mil unit . I think free float share is limited . May see price spike much higher when more funds and retailers rush in.

@gohku, I thin crack spread and inventory gain/loss are 2 different thing.
In 2007 , crude Brent started the year at usd55, then plunge to usd43 around middle of the year , and recover to about usd66 at the end. Refinery keep less than 1-2 months of open stock position and the hit from inventory market to market is usually manageable.

In 2017, average crack spread was usd11 per barrel. Average crack spread ytd April 2022 is usd15 per barrel.
Both hengyuan and petronM made crazy profit in 2017 ( Hengyuan’s EPS $3.0, PetronM’s EPS $1.50). Correspondingly share price reach as high as $18 for hengyuan and $15 for petronM

Refinery’s profit is very sensitive to Crack spread and sales volume. For this year, refinery will enjoy historical high crack spread and high sales volume due to economy reopening. Tight supply of oil and the sanction on Russia will most likely keep crack spread high for the rest of this year .

In 2017, average crack spread was usd11 per barrel. Average crack spread ytd April 2022 is usd15 per barrel.
Both hengyuan and petronM made crazy profit in 2017 ( Hengyuan’s EPS $3.0, PetronM’s EPS $1.50). Correspondingly share price reach as high as $17 for hengyuan and $15 for petronM.

Refinery’s profit is very sensitive to Crack spread and sales volume. For this year, refinery will enjoy historical high crack spread and high sales volume due to economy reopening. Tight supply of oil and the sanction on Russia will most likely keep crack spread high for the rest of this year .

Continue to accumulate .

@somo1, I fully share your concern. With CPO price substantially higher than as at 31st March 2022, I am sure there will be another blow to hedging loss for all the FCPO commodity sales contract remain outstanding .
The cash depletion and huge negative cash flow per latest QR should deserve all shareholders to be worrying.
(1) Per Balance sheet, Cash+short term funds drop $254 mil yoy (from $478 mil to $224 mil) - Shareholders should ask where has this $254 mil gone to especially when revenue is substantially higher .
(2) Per cashflow statement, cashflow from operations is a whopping negative ($224 mil) - this is absolutely impossible for plantation company enjoying record high CPO price !
(3) Operating payment of $656 mil is a whopping 142 % increase yoy - very strange , pay for what operating expenses ?
(4) Contributing to negative cashflow is the placement of deposit for derivative or hedges amounting to $167 mil - this is margin call and /or loss from squaring off some of the derivative sales contract ?

@sardin, I share my understanding of the events with you and others who are eager to know more with open mind. This is not aimed at running down any UP shareholders. We should promote more intellectual sharing and discussion in i3 so that public listed companies management do not get away so easily with their failures or wrong doing.

@sardin, I afraid my understanding is very different from your illustration above, Plantations do not oversell what they can possibly produced.
To get a bit more clarity we should dissect the 2 main segments of UP's business ie Plantation segment (producing CPO) and refining segment ( buying CPO to convert to refined products)

(a) Plantation segment
I want to draw you to page 9 of the latest qtr report (QR) where it showed the average selling price of CPO for Q1 2022 as $3,798. The average spot month price for Q1 2022 was $6,050. That means the plantation segment contracted forward sales at prevailing price then too far ahead. At $3,798, the plantation is still making healthy profit as reported. However, the theoritical opportunity loss is huge ie $2,252 pmt CPO ($60,50 -$3,798) . In comparision, if the Management decide to do spot or near spot month sales, the realised price would be closer to $6,000 as most small and midsize plantation would achieved and earning would soar.
Please note that the plantation segment sell CPO to external parties (55-60%) and also satisfying own refinaries feedstocks (40-45%). Rightly, UP's refinaries should generate very good profit due to well below market price CPO received from in house supplier. Unfortunately this was not the case.

(b) refining segment
Page 9 of the QR explained the hedge losses in a sketchy manner that non accountant usually have problem to fully comprehend (anyway, financial account are fond to write in words that confuse the ordinary public so as to avoid scrutiny).
In the nutshell, the 2 refinaries of UP contracted with the plantation segment some time ago forward supply contracts of CPO at much lower price than the price in the month the cargo due for delivery (say price X).
Correspondingly, the refinaries enter into Bursa Malaysia Derivative Commodity future market to sell forward the same CPO at certain predetermined price (say price XY). This is hedging against CPO price falling (it is like betting against CPO price dropping).
unfortunately CPO trends up substantially, the refinaries ended up square off (or buy back ) the outstanding commodity future contract at prevailing price (say XYZ).
When that was done, refineries suffered loss amounting to (XYZ) - XY = Z.
into next qtr, the refineries will still receive the physical stock at pre-contracted low price CPO following the schedule contracted. As such, the future qtr profit of the refineries is secured if there is no further loss from any outstanding CPO hedge not squared off.
In summary, the loss in squaring off the commodity future contract is a real loss the reduce the potential robust earning for FY 2022.

When it rains it pours.

@golf123, it is reported in the qtrly results.

Hi Sardin, may be let the KClown tell us his number first.

Posted by Sardin > 22 minutes ago | Report Abuse

@Johnzhang, what's your EPS prediction based on known information acquired from the recent annual report and Q1 report?

China is going all out on infrastructure . Steel demand will surge!
https://newswav.com/A2204_zP3dDa?s=A_Wk6LirO

Steel demand will be high as China going for all out infrastructure push to ramp up economy.

https://newswav.com/A2204_zP3dDa?s=A_Wk6LirO

@Sardin, The hedging loss in Q1 2022 are marking the outstanding forward hedges/contracts to the FCPO prices as at 31st March 2022. If the FCPO prices throughout the contract period remain unchaged, there will be no further gain/loss in hedging and UP will then realised the financial performance of future qtr based on prices as at 31st March 2022. If FCPO prices go higher than 31t March level, there will be further hedging loss for the portion of the hedge/contract that remain outstanding by 30/6/2022. If FCPO go below the 31st March level, there will be hedging gain.
As it stand now , current CPO/FCPO price level is about $700 higher than what it were on 31/3/2022. Also, the hedging impact also depend on what further forward contract the company takes on and the FCPO price development into the next 3 qtrs.
That's my simplistic explanation.

Hi Thomas, It's a reporting standard to declare the amount of hedges or forward contract in QR and annual report. I don't see that in Taann.
Taann does not explicitly declare the realised CPO price.
Taann's associate company, Swkpltn declared the average realised CPO price (FY 2021 was $4,389) which has been in line with the spot month prices. I must note that Swkplant is managed by Taann and therefore safe to take that same policy apply. Taann's qtrly profit growth for the plantation segment is in line with the CPO trend. I come to the conclusion this way.

Refining margin for Asian refiners is also jump about 100% for 4 months average of 2022 compared to the average in 2021. Good chance that FY2022 earning for Hengyuan and PetronM may even surpass the record achieved in 2017 .

Refining margin for Asian refiners is also jump about 100% for 4 months average of 2022 compared to the average in 2021. Good chance that FY2022 earning for Hengyuan and PetronM may even surpass the record achieved in 2017 .

The dismal performance of UP is due to more than $150 mil hedging loss and sold too much crop forward at about $3,800 as compared to average spot price of $6,050 for Q1 2022) . It has nothing to do with cukai Makmur at all . Without the huge hedging loss , UP would have make many folds increase in Q1 2022 profit. As such , plantation that sell their produce on spot month basis will report huge yoy increase of earnings.

Bplant has strong assets and strong operating cashflow to secure bank financing to fund the SCR.

It is political very sensitive for any non bumi companies to fully acquire Bplant or THplant . I think that won’t happen unless a bumi entity come along . Bear in mind of Bplant’s intention to sell off all the Sarawak estate and that will turn Bplant a debt free company once completed. The privatization will be by SCR . I will not require financing from Bstead or LTAT.

@Titan, plantation stock is not gambleable. It is investable. Hahaha

KClown, it’s up to you for what you do. Keep up to your denial mode .

With crack spread at historic , I think you won’t go wrong to hold oil refiners like Hengyuan and petronM for the next 6 months. Crack spreads indicate the refinery’s profit margin.

KClow, wake up and grow up ! Just look at all the facts presented in the QR. Figures can not lie. In denial mode won’t help you.

Patience is the key.

DJ and Nasdaq collapse , but FCPO overnight UP. FCPO May $7,100, Jun $6,848, Jul $6,477 despite we are in high production season now.
CPO will stay high at least until 2023

DJ and Nasdaq collapse , but FCPO overnight UP. FCPO May $7,100, Jun $6,848, Jul $6,477 despite we are in high production season now.
CPO will stay high at least until 2023.

DJ and Nasdaq collapse , but FCPO overnight UP. FCPO May $7,100, Jun $6,848, Jul $6,477 despite we are in high production season now.
CPO will stay high at least until 2023

Food shortage will last for 2 years at least :
1. Huge amount of food is taken off from Ukraine as the war raging on and the Apr/May 2022 planting season will be missed.
2. Next planting season is Apr/may 2023 for harvest in July/Aug 2023. Uncertainty around.
3. Russia is bombing the railway connecting to Europe as it is used to deliver western weapon. No inland logistic capability to enable export .
4. Russia will permanently occupy southern ukraine and black sea . Ukraine has no access to shipping route.
5. Limited capability to boost production elsewhere due to shortage of fertilizers, wild weather swing etc.

Hold on to your Bplant to reap the full gain to come.