I agreed with Halite that the article by Future Eye is biased . WHile he wrote many paragraphs and used mathematical justication to predict Hengyuan Q4 eps of 138 sen , he did not do the same for Petronm . He just wrote 4 lines and used his " gut feel" to predict Petronm's eps of 28 sen without any basis . WHile he did not do the same calculation as what he did for HY , he intentionall omitted the retail portion of Petronm business which account for more than half of total earnings . The eps of Petronm for the last 4 rolling qtrs were 39.3 sen, 33,70 sen , 40.20 sen and 41.71 sen . What make him put such a low eps of only 28 sen when everyone knows that Petronm will have similar inventory gain and better crack spreads than the previous 4 qtrs even we use Mogas 92 .

For Petronm , Future Eyes did not analyse Petronm retail business earning . He only briefly talked about refinery earning . His estimate was 28 sen . If you add Petronm's retail earning , I think the total EPS for Q4 should be more than 45 sen which is higher than Q3's 39 sen although FUture Eye predicted 30s sen .

Petronm has the retailed business which is not assessed in this topic .
Its 580 petron stations earned more than half of the total earnings ( refinery + retail) .

As what I have commented earlier , a return of US 600 million or RM 2400 million per year from an investment of RM 14 billion is worth it . Based on Petronm's announcement ,the RM 14 billion upgrade will enable petronm to have a total capacity of 178 kbpd ( 88+90) . Whether HY ( current capacity of 112kbpd) is worth RM 14 billion with its planned upgrade by borrowing another RM 1.7 billion recently is not clear to us . HY do has a licenced capacity of 156 kbpd but no one know how much is required to upgrade to this 156 kbpd capacity .

In stock investment , you have to do your homework and make your own judgements on what to buy, when to buy and when to sell . Markets are full of informations , some are truthful , many are mere opinions . Margin financing is a no no for me . You take your own risk when you invest . As an example ,Hengyuan ,many made money and many lost money although these peoples read the same articles in i3.

Shpg22
Uchitec used to be a great stock 10 years ago .its prices were more than
Rm 3 . When its earnings started to go down , its prices dropped to about 1.30 for many many years. Those invested with more than rm 3.00 lost money. It was only one and a half years ago uchitec started to grow its profits which were mainly due to the depreciation of the ringgit by as much as 30 % .Uchitec prices had gone down from the tecent high of 3.50 to rm 2.76 when ringgit strengthen to 3.88 today

Shpg22
Uchitec used to be a great stock 10 years ago .its prices were more than
Rm 3 . When its earnings started to go down , its prices dropped to about 1.30 for many many years. Those invested with more than rm 3.00 lost money. It was only one and a half years ago uchitec started to grow its profits which were mainly due to the depreciation of the ringgit by as much as 30 % .Uchitec prices had gone down from the tecent high of 3.50 to rm 2.76 when ringgit strengthen to 3.88 today

I started buying Airasia more than a year ago after reading ICON888 detailed analysis . I remembered he predicted Airasia price can reach RM 5 . I have top up along the way and benefited so much now .I think RM 5 is achievable with the strong growth and great results in the last few qtrs . appreciated ICON 888 's sharing with i3 subscribers . Richard and BWC suffered from chronic depression and has been nagging ICON nonstop like a depressed grandmother nagging at everyone everyday . THese two depressed persons even rally FGV in this airasia forum despite numerous reminders to them .

Roe is return of equity . It measures how much return you get versus how much investment you put in. The higher the better.

Coldeye 's five important criteria for stock selection in order of importance

1. Earning Growth ( THe most important )
Its earnings has been growing since 2015 . Expect 2017 earnings to double that of 2016 . THe announcement that Petron will invest further to more than double its earnings within 3 years is another testimony that management will continue to growth the company .Besides , Petronm will be growing its retailed business from 550 stations to more than 580 .

2. Good Cash Flow
It has successfully paid off its debt and become a net cash company since last qtr .

3. PER
It is at an undemanding PER of 8 with today's price .

4. ROE
The current ROE stand at 30

5. Dividend Yield ( The least important )

DY of 1.78 is better than many high growth companies with high PE .

Earning growth is the most important criteria . If a company has no growth or negative growth , do not invest even though its PE is super low and with good dividend . A good example is Tambun . Its share prices were more than 2.00 a few years ago with below 10 PE and dividend yield of more than 7 % . The property sector has negative growth since 3 years ago .Tambun 's earning also dropped since then . Its price become half of RM 2.00 although its PE is less than 5 and its DY is more than 9 % now .

See my comment on Hengyuan part 8 by Davidtslim.
I had my doubt earlier that while the rest of other refineries
need to spent billions for upgrade whereas HY need only a fraction of that. We need to use common sense and deduce with logicical thinking.

I am not surprised that Hengyuan need more money for upgrades and to expand its capacity from the current 112kbpd to 156kbpd. Many sifus had overestimated HY technological capabilty to use only rm 700 million for upgrade. In last quarter financial report the management informed the share holders that the euro 4 and 5 upgrades will be delayed. I think hy need much more money for the upgrades.

Let's not quarrel but to make money together . Both HY and Petronm has its strength and weakness . The fact is that whenever HY goes up ,PEtronm will move in sync and vice versa . Based on past records , both PEtron and HY acquired Esso and Shell with good prices . I supposed the management of both companies are not stupid .THey made good judgements. Petronm was covered by three analysts who recommend a buy with target prices of RM14.50 to RM 16.50 . THe analysts had access to Petronm management and gathered sufficient information . As for HY , I hope the stock analysts will start gathering information from HY management and provide a more accurate information plus able to put a target price so that the sifus can compare notes . To value a stock , there are a few aspects to consider instead of PER ,DCF ,ROE , cash flow alone.

David ,thanks so much for your clarification . I would like to say that I benefited a lot from your numerous write ups on Hengyuan . The big disparity on the cost for upgrades between HY and other refineries had puzzled me in the last few weeks . Based on what I read in Stock Performance Guide by Dynaquest , Shell spent RM 1 billion in 1999 to transform from a simple refinery of 105kbpd into a 156kbpd complex refinery . In Feb 2013, Shell also spent another 810 million for the additional 6000 tons per day diesel processing unit . Petronm or previously Esso had also transformed from a 75kbpd capacity into a 88kbpd refinery producing a range of products such as motor gasoline, diesel , LPG.jet fuel ,kerosene etc. Based on my logical thinking ,with today's easy accessible information technology and know how ,PEtron should be able to spend similar and proportionate amount to upgrade its 88kpd capacity into similar state of the art refinery meeting the new Euro 4 and 5 standards .

In any tender process , if I receive 5 tender quotations for an upgrade , 4 of them have +/ 10 to 20 % price differences and there is one with 50 % or 90 % lower than the other 4 , I will not award the project to such vendor even though it is the cheapest but is ridiculously lower . Chances are this vendor will lose money , run away and unable to complete the project because his quote does not make sense .
Common sense tell me to believe the 4 ( price differential is acceptable ) than the one with ridiculously lower price .

Probability and other refinery sifus ,
I have more than 30 years of manufacturing experience in semicon industries and I am trying to use some logical thinking and common sense on Hengyuan 's expenditure on upgrades versus the others . The sifus has been telling us that Hengyuan need to spend only RM 700 million to upgrade its old refinery to become the state of the art refinery meeting new standards plus making higher premium products . Why others are so stupid and do not know how to copy Hengyuan 's cheaper methods ( one fifth or one tenth the cost ) rather than spending multibillions . Does Hengyuan has its trade secret in upgrading the cheaper ways which no other refineries can do ? Are such upgrade patented by Hengyuan that others cannot copy? If ten others need to do the expensive ways and Hengyuan is the only one who can do the much cheaper way , who do you think will be doing the "right " way. Is my common sense common ?

Jon , I have the same puzzle as you on what is the difference between Hengyuan and Petron in terms of refinery upgrades . Based on a few i3 sifus , Hengyuan management and technical teams are the smartest in the world . They just need to spend RM 700 million to upgrade to the latest state of the art refinery whereas others ( Petronas , Petron, Aramco and other top notch refineries ) need to spend more than 10 times the amount to get similar upgrades . Why cant others copy what Hengyuan did and save the billions ? The equipment and instrument companies which do the upgrade can surely recommend the same methods to others unless only Hengyuan knows the cheapest ways . I hope it doesnt turn out that the RM 700 million upgrade will not work at all . Hengyuan may end up the need to do the same ways as others and spend billions . THis is the risks which Davidts lim did mentioned in his number 8 write up.

Thanks Tneoh for your opinion.

Assuming the current Petronm do not want to borrow to fund such a huge upgrade and expansion but offer 1 billion new shares at RM 14 per share .
The total number of shares will be 270 million + 1 billion = 1.270 billion shares . With the earning of $ 600 million or 2.4 billion ringgit per year , the eps is 189 s . By then Petronm has the state of the art refinery + more than 600 petrol kiosks which sells the highest grade premium products . With a PE of 12.5 , this translates into RM 23.6 per share , an upside of more than RM 10 from yesterday price . The assumption is that there will be re investment tax allowances for many years .

Ebita of $ 600 million per year with $ 3.5 billion investment give a return of 17 % . For those funds which only gets a return of less than 10 % per year might be interested to invest . 17 % is equivalent to a PE of 5.88 which is even lower than the current Petronm PE of 8.5 at yesterday price of RM 13.20 . If the Analysts felt that Petronm business deserved a PE of 12.5x , the investment of $ 3.5 billion to generate future income
of $ 600 million per year is worth the money .

George Leong I agree with you a fair PE should be about 12 . With estimated earning after tax of RM 1.60 for 2017 , the target price should be about 19.20 . There is still upside of RM 6 with the current price of RM 13.20 .

These two stocks HengYuan and Petronm are really like brother and sister . We had a good roller coaster rides the last few days .Heartbeat really fast . Record downturn and record rebound with record volumes . RM 2 ringgit gain just one day .When peoples are the most fearful yesterday and before , I am greedy because I know Petromn are good stocks fundamentally .

Nestle and PetDag has never lose money in the past 20 years . Although more than half of Petron earnings comes from Retail which is similar to PetDag , Petron do have the refinery business which have more volatile earnings . In fact Petron lose money in both 2013 and 2014 contributed mainly by the refinery . In view of the high capital expenditure ( 14 billion ) announced by Petron to upgrade and expand its capacity to 178kbpd , in my opinion it is better for Petronm Malaysia to sell off its refinery to a new company which focus 100 % in Refinery . Petronm can focus 100 % on its retail and distribution business exactly like PEtDag while owning a certain percentage of the new refinery business from the fair valuation of its refinery assets " sold " to the new refinery company . The new company can be owned and funded mainly by the parent company with some other partnership from China or with new public issues . WIth such restructuring ,then Petronm can be valued with a higher PE ( 20 to 25 ?) similar to PEtDag .

Do not know who to listen to . Chinese saying " Lang also him , Kwee also him ".

With the high votality of HY share prices in the last few days , I tried to play some contras . Unfortunately , I got burnt badly . Really heartache .

George Leong , your analysis really helps shareholders of Petron to understand the potential eps better . Your estimation of 161 s for 2017 is realistic . Q4 17 is typically a better quarter . My estimation is slightly higher than 161 s . Let's hope Petronm deliver such result .

APM pricing consists of

Cost of Refined PRoducts ( MOPS)
Alpha
Retailer Margin ( 5 sen for gasoline and 2.25 sen for Diesel)
Dealer margin
Operational Cost
Sales tax

Petronm Stations will make about 2 to 3 % margin from the sales . Assuming 10 billion sales per year . A margin of 2 to 3 % is already RM 200m to 300 m . The operational costs are fixed by the goverment ,If PEtronm can do some cost savings , they can also make some money from there . With 270 million shares . THis earning is about 80 s to RM 1 per share per year . Half of the stations also has convenience stores " Treats ". This part of the business is the same as PetDag. Assuming an eps of 80s for this business . If a PE of 16 is given to this business alone , it is already RM 12.80 . This exclude the refinery business . This year eps is expected to be RM 1.60 due to record earning from Refinery business . The analysts gave target prices between 14.60 to 16.50 by using both PER ( 12.5 ) method and DCF method .

The difference between HY and Petronm share price is less than RM 1 now .
At one point HY lead Petronm by as much as RM 4 .I think Petronm share price will be higher than HY very soon when more and more peoples realised that Petronm had a " sure make money " retailed business like PetDag. The APM pricing determined by the government is a sure win business irrespevtive of crude oil price and crack spreads .

Ya , I did mentioned I switched to Petronm a week ago when HY price was still around RM 17 . I am glad I sold all HY shares 2 weeks ago . I did explain why I liked Petronm . We just had to be patient .

Uncle Mau , I sold my HY early early at 17.00 and switched to Petronm
because I cannot sleep when HY drop from 19,20 to 16.10 within one day .
Mana tau , Petron also roller coaster but not like HY swing everyone upside down . If I still hold HY , I kena heart attack liao .

mamatede , I bought another 20 lots just 20 minutes ago at 11.11 . I have
60 lots now .

Hengyuan Tsunami

Warren Buffet 's contrarian thinking in stock investment . When everyone is greedy, you must be fearful . When everyone is fearful , you must be greedy. In early August last year , Petronm price is slightly above HengYuan by about one ringgit . When Q2 result was announced when HY delivered only 28s versus Petronm 33 sen, Petronm's lead HY by as much as RM 3.50 . It was when Q3 result was annouced with HY making record EPS of 120 sen vs PEtron 's 39 sen that make HY share prices skyrocked from RM 10 to RM 19 overtaking Petronm by more than RM 4 . When HY's price collapsed on 29th Dec and stabilise at about 17 with such correction , I sold my HY shares and switch to the cheaper Petronm at about RM 13 . Sell high and buy low is my strategy . At the moment , many are fearful .

BWC and Richard , are both of you suffering from Chronic depression ?
Both of you are worst than my grandmother . Keep nagging everyday at Icon888 who did not even post a single comment for so long . Do you need Lovac or Paracetine ?

With the estimated Petronm eps of 160s for 2017 , the PE is less than 8 with the current price of RM 12.48 . This PE is half of PetDag which is 100 % from retailing . Petronm 580 petrol stations plus other retailing businesses are similar to PetDag . I bought Petronm shares yesterday at 12.16 . Will buy more if it drops further . Buy at weakness .

With the estimated Petronm eps of 160s for 2017 , the PE is less than 8 with the current price of RM 12.48 . This PE is half of PetDag which is 100 % from retailing . Petronm 580 petrol stations plus other retailing businesses are similar to PetDag . I bought Petronm shares yesterday at 12.16 . Will buy more if it drops further . Buy at weakness .

Petronm Parent Company in Philippines already started producing Euro4 gasoline in 2016. Petronm is the first to sell Euro4 standard gasoline in 2016 . Petronm retailing made more than half of the total profits . In Q2 2017 , when there was inventory loss plus low crack spread , Petronm can still deliver 33 sen eps . With better crack spread in Q3 plus some inventory gain , it delivered 39 sen eps . We expect Petronm to deliver record profit in Q4 of more than 40s eps due to higher crack spread . This will make Petronm 2017 total eps at 160 sen . This profit is even higher than PEtDag.

Both HY and Petronm turn green already . Cheers

It is crystal clear that Lim Sin Keat of RHB gave wrong info on Q4 17 crack spread drop by 20 %. It is a very gross error which should not be made by him. This error cause panic selling although there are other factors like Star report which also contributed to the huge sell down.

Airasia has been trending up since the beginning of 2018 from 3.35 to 2.93 yesterday . More than 15 % gain in less than a month . It will touch 4.00 today .

Tai KT , both US 3.5 billion investment and US 600 million earning per year were quoted in the article . THe figures do not come from me . You are right in your reality check . Let me gives my two cts worth of opinion.
1. The US 3.5 billion is not only used to build new additional 90kbpd capacity but also to upgrade the existing 88 kbpd facility which will soon be obsoleted because of new requirements .
2. When this 3.5 billion is spent , the total capacities of 178 kbpd will be able to produce higher premium products with higher crack spreads ( avearge $11) which are more than US 10 dollar per barrel . Read Davidtslim article .
3. If you take 178 x 365 x 11 x 0.9 = $ 643 million .

If HY is able to upgrade its current capacity of 125kbpd to the same latest standard requirements with its RM 700 million upgrade then HY refinery should be worth RM 14 billion x 125/178 = 9.83 billion .
With 300 million shares , then the per share value should be more than RM 30 . Just my 2 cts opinion .

Dear Probability , Raider and other i3 friends
Regarding the concern of Petronm 's investment of US 3.5 billion for the additional 90kbpd capacity expansion to generate an additional income of US 600 million per year , I supposed the Petronm management team had done sufficient due diligence . The EY for such investment is 17 % or a PER of 5.88 which is quite lucrative . As a simple analogy , if you put in 3.5 billion into a bank and the bank gives you an interest of 600 million a year , will you do it ? I will borrow from another bank with interest rate of 6 % or do a private placement or get another Chinaman to invest or do a public right issue .

When HY dropped RM 2 at one point this morning , Petronm lost only 20s .
I just wrote yesterday and a few days ago , I sold HY at RM 17.00 and switched to Petronm because Petronm has the retailed businees like PEtDag which has much more stable earnings to cushion the more volatile refining earnings . This morning big drop of HY share price is in response to the online news in Star that the crack spread drop to US 6 . Petron earnings in Q4 16 and Q1 17 were more than 40 sen despite the fact that the crack spreads were only 5 to 6 dollars during that time . HY is not for the faint hearted whereas Petron earnings are more consistent. You can sleep better if you invest in PEtron compared with HY . OF course , if HY share price shot up suddenly due to a big spike in crack spread to more than 10 dollar , dont feel jealous . Just Be contented with a more slow and steady rise while you enjoy your good night sleep every night .

When HY dropped RM 2 at one point this morning , Petronm lost only 20s .
I just wrote yesterday and a few days ago , I sold HY at RM 17.00 and switched to Petronm because Petronm has the retailed businees like PEtDag which has much more stable earnings to cushion the more volatile refining earnings . This morning big drop of HY share price is in response to the online news in Star that the crack spread drop to US 6 . Petron earnings in Q4 16 and Q1 17 were more than 40 sen despite the fact that the crack spreads were only 5 to 6 dollars during that time . HY is not for the faint hearted whereas Petron earnings are more consistent. You can sleep better if you invest in PEtron compared with HY . OF course , if HY share price shot up suddenly due to a big spike in crack spread to more than 10 dollar , dont feel jealous . Just Be contented with a more slow and steady rise while you enjoy your good night sleep every night .

Halite , I agree with you that Petron 's parent company is smarter in funding the new refinery which cost US 3.5 billion or RM 14 billion if they decided to go ahead with the plan . Petronm will not have enough money to fund such a huge investment through internal borrowing or from the profits . The parent company is committed to invest in such plan .
In my opinion , it is better for Petronm to focus on the retailing business ( like PetDag) and carve out the refinery portion and combined with the new refinery investment by owning 30 to 40 % of that new refinery company without paying a sen . With such restructuring , Petronm will be awarded a higher PE since it is 100 % like PetDag . At the same time , Petronm still own a big percentage of the new refinery company which will be like HY . The eps of Petronm may drop by half and assuming it still make between 80s to 100 s a year which is what PetDag is earning now . The share prices of Petronm will then be comparable to PetDag . Haha , my opinion only .

With coverage from RHB and Public bank on Petronm, I liked Petronm's consistent and growing earnings in the last 3 years despite the huge swings in crack spreads between US 5 to 9.5 dollars . Owning Petron is like owning half of PetDag with 50 % discount . PetDag has been growing for the last 20 years with consistent profit growth . Owning Petron is also like owning half of HY . IF HY earn big money in the comming few qtrs with good crack spreads and inventory gain , Petronm will also gain correspondingly in tandem with HY . Although there is a possibility that those who bet on HY will get 100 % profit in one or two years time , I am contented with just a 50 % profit from Petron because I can sleep better with a more predictable and consistent earnings from Petron .

Petron has the stable quality of PetDagangan with its retail business .
There is a Chinese saying " when the winds are strong , then you can see which grass will start to move . During the time of turbulent , you can see who are the heroes " . Another proverb : When you are in comfort zone , always think of the danger . These proverbs are applicable in stock investment .

CK liew , please see my comment in Petronm forum . Petronm eps in the last 4 qtrs are very stable although the crack spreads were in the range of 5 to 9 dollars . Petronm should not crash at all . If indeed it crash due to emotions by not looking at the facts , I will sailang and sapu .

sorry , correction : I meant the eps of Q4 16 and Q1 17 are the highest despite their respective crack spreads are the lowest among the 4 qtrs at between 5 to 6 dollars .

If you look at the eps for the last 4 qtrs of Petron , the eps seems to be quite " immuned " to the wild swings of crack spreads .



Q4 2016 41.71 sen
Q1 2017 40.2 sen
Q2 2017 33.7 sen
Q3 2017 39.3 sen

The crack spreads for Q4 16 and Q1 17 are the highest despite the facts that the crack spreads are the lowest of the 4 qtrs at between 5 to 6 dollars . Q3 17 crack spreads was more than 8 but the eps was 39.3 sen.
The stability of Petron 's eps is one of the plus point for such stock.
If Petron share was to drop tremendously , I will sapu .