DCF is one of the methods to derive an intrinsic value of a company. The discount rate of 3.17% used to value HY is too low and this gives a high valuation for HY.

A 10% discount rate for investor is fairly reasonable. Even if the author does not make changes to the cashflow figures, a discount rate of 10% will value HY to a much lower value.

An investor will require a discount rate of at least 10%. In that case, the NPV for HY will be much lower than your projected figure.

Bond yields globally is expected to move higher. So will inflation rate. Has your discount rate of 3.17% factored in rising yields scenario of the FED planned rate increases for 2018 and beyond since you had made projections up to year 2027?

Your discount rate of 3.17% seemed rather low and consequently your derived NPV figure is high. If one were to factor in a higher discount rate, what will the NPV of HY be? Certainly it will be much lesser than your projected figure.

Moreover as an investor, one takes more risk by investing in securities and the discounted rate must factor in the investor risk premium over and above the revised discount rate that had factored in the planned rate increase by the FED.

Very strong reversal up today which seems to indicate that the market,for reasons best known to itself, is pricing SAPRNG UPWARD.

Today Oil & Gas stocks turned up. Why is this so?

As the Market price discounts the future, the question that begets one now is as follows:

"Is the Oil & Gas industries turning better???"

We all may have our anchored views but as an investor we must take cognizant of the market and accept the reality that the market is always right.

Short term trend for HY is still down. HY at current price is still below the 200 SMA and is bearish. There was a lot of noise this morning but the trend is still down.

DNEX found strong support at 0.40 -0.41. It will move higher

High chance UMWOG will hit its old high @ 0.48.
The target resistance to overcome is 0.61. If it can hit 0.61, it will retrace and go higher.

Consolidation is over. Resume uptrend today.

Price today closed at 8.53 with volume @6.613 mil shares vs yesterday's close at 9.04 with volume @ 3.3 mil shares.

So price dropped 51 cents today BUT vol increased by + 3.313 mil shares. This is not a good sign for HY. It indicates that selling momentum will intensify further as price further drops in the near future.

High chance price will break its old low @8.24 created with high volume of 16.4 mil shares on 7/3/2018.

Most retailers do not want to take profit or cut early when there is plenty of opportunity to do so. Instead they rather hold and wait for too long before cutting out at great losses.

Supports at 8.0, 7.0 and 6.0.

Price already reflect improving or deteriorating fundamentals whether one knows it or otherwise. In HY case, price is discounting poorer result due in May.

So better focus on price action rather than hold onto anchored views about its business and refuse to sell at higher price.

happy888, I focus only on price action. Having opinion is a disadvantage as it may deter you from making the critical decision. For instance a lot of investors here pin their hopes on a better Q4 2017 result but the price action is already signalling that Q4 2017 wont be better than Q3 2017 result.

Crude Oil was uptrending during Q3 + Q4 2017. Despite that, HY Q4 2017 was lower than its Q3 2017 results.

Since Jan 2018, Crude oil had downtrended about -10% off its peak.In view of this, good chance HY will have inventory losses for upcoming Q1 2018 result due in May.

HY upcoming quarterly result due in may 2018 may not better its past two Quarterly Results.

HY current market price downturn is in the process of reflecting this as the market price discounts the future.

HY had already broke down its 200 SMA and HY is now bearish.
Immediate support is at 8.0. If support at 8.0 does not hold, the next supports are at 7.0 and 6.0.

Will break 8.0 support

Rebound was weak and its over.Renewed downtrend. High chance HY will break down RM 8.0

Crude oil price has regressed since Jan 2018 and high chance there will be inventory loss on Q1 2018. Most expect Q1 2018 to be better than Q4 2017 but there is a risk that it may not be better.

FED will most likely increase interest rate next week and there will be more rate increase in 2018. So higher interest rate payment will eat into the margins of any company including Heng Yuan

Rebound for HY is over. HY cannot break out of gap resistance. Renewed downtrend for HY has started and high chance HY will break support@RM 8.0

Momentum of HY is weakening again. The gap above is a strong resistance. If HY cannot break the gap resistance, it will reverse trend to break RM 8.0

I do not want to be anchored by any price projections which can be based on fundamental or technical factors as these can adversely bias decision making on buy/sell or hold

What I focus on is ONLY price action

OTB,
Daily chart showed a hammer- Bullish
2Hr chart showed Bullish piercing
15M, 1Hr chart are very bullish

Todays volume was 16.409 mil shares vs 17.516 mi shares on 19.01.2018(first steep correction for HY)

This is indication that shares had switched from weak hands to very strong hands

Today is an excellent opportunity to buy on retrace for a strong uptrending stock like HY
Despite the steep short term correction, HY is still an uptrending stock
The negative concerns on HY 2018 earnings is hugely overblown
Very few stocks in Bursa can match HY in earning power and generating strong cashflows

HY delivered RM 3.03 eps for 2017..very respectable performance for a BURSA stock

There is a planned shutdown in 2H 2018 but no certainty on timing to start as management had already stated that there might be a delay on starting date.

This has a dampener on HY 2018 earnings and the general perception seems to be that it will be a big minus on HY 2018 earnings...Will it be so?

The paltry first interim dividend of 2 cents/share had inflicted more damage to HY share price todate than its planned shutdown and it is in HY management interest to better take heed on this negative reaction towards the paltry 2 cents dividend when deciding on future dividend payouts.

A higher and consistent dividend payout will rerate HY PE upward

KYY sold 8 mil shares HY at higher price
Just ask..Who bought?
Retailers or fund managers? maybe mix of retailers + fund managers...likely fund managers bought more than retailers

Are fund managers so stupid to buy KYY shares at higher prices?
maybe its time to ponder more...what do the fund managers see that KYY do not see??

Consolidation for HY is over. HY will re-challenge its old high@19.20 and surpass it

The current price correction for HY is not short of emotional trauma for some who still hold on to HY or exciting opportunity for those who had sold off before HY price corrected or sold off on way up and sold off balance after price breaks critical support at higher price level.

A few FA investors had averaged down until they feel rather despondent, exasperated. Other TA traders did ask the important question " Has the bottom formed? "

Where will HY price go from now onward?

Well it all depends on sentiments..yes pure sentiments..it will not be FA driven nor TA driven but high chance it will be sentiment driven

Be that as it may, one may be perfectly rational now on what one plans to do but be rest assured that when "that day comes" there is high chance that most players will throw away rationality and succumb to the sentiments that unfolds right infront of their eyes...

HengYuan is now a component stock in MSCI Malaysia Small Cap Index. The market has been re-rating HengYuan price upward indicating than HRC deserves a higher PE multiple relative to its historical price.

HengYuan had languished in sideways mode for about 30 years since 1987. It's share price easily broke out of its old high of RM 12.30 ( registered OH since Sept 23, 2005) on Dec 13, 2017. After it broke out of it's old high effortlessly, HRC has continued on its strong uptrend in both big and short time frame. It closed at RM 16.30 last Friday , chalking a impressive gain of +32% since Dec 13, 2017. 

The chart shows HengYuan is a strong uptrending momentum stock.It took HengYuan slightly over 12 years to break out of its old high of RM 12.30. The driver for the strong share price performance is the stellar earnings chalked up during the 3 quarters of 2017. The strong momentum is indicating that upcoming Q4R 2017 due in Feb 2018 will be impressive too. 

Based on its closing price of 16.30 and a prospective EPS 2017 of RM3.6 per share, HRC is commanding a PE of only 4.528. Its regional peers are commanding a PE multiple higher than 10, much higher than HengYuan. An expectation of the market re-rating HRC towards PE8 to PE10 in line with its local n regional peers is reasonable n moreover HRC is now a MSCI Malaysia Small Cap index component. 

As we enter 2018, its risk on for equities meaning PE multiples for equities in general will move higher. Besides crack spread is expected to remain favourable in 2018 and with a slight upside bias of crude oil price in 2018, it will likely translate into higher absolute net profit value for HRC implying higher EPS. High chance we will likely be looking at potentially a future price range of RM 25 to RM 36 for HRC. The recent correction last Friday accords an excellent opportunity for a "risk on trade with HengYuan" due to its relative undemanding valuation vs its peers.

HengYuan is now a component stock in MSCI Malaysia Small Cap Index. The market has been re-rating the price of HengYuan upward indicating than HRC deserves a higher PE multiple relative to the past.

HengYuan had languished in sideways mode for many years since 1987 (about 30 years). It's share price easily broke out of its old high of RM 12.30 (old high since Sept 23, 2005) on Dec 13, 2017. Since it broke out of old high effortlessly, it became a strong uptrending stock both in big and short time frame. It closed at RM 16.30 last Friday ..chalking a respectable gain of +32% since Dec 13, 2017.

The chart shows HengYuan is a strong uptrending momentum stock.It took HengYuan slightly over 12 years to break out of its old high of RM 12.30. The driver for the strong momentum is the stellar earnings chalked up during the 3 quarters of 2017. The strong momentum is indicating that upcoming Q4R 2017 due in Feb 2018 will be impressive.

Based on its closing price of 16.30 and with a prospective EPS 2017 of RM3.6 per share, HRC is commanding a PE of only 4.528. Its regional peers r commanding a PE higher than 10, much higher than HengYuan. A market re-rating towards PE8 to PE10 in line with its local n regional peers is reasonable. Moreover HRC in now a MSCI Malaysia Small Cap index component.

As we enter 2018, its risk on for equities meaning PE multiples for equities in general will move higher. Besides crack spread is expected to remains favourable in 2018 and with a gradual upside bias to crude oil prices in 2018, it will likely translate into higher absolute net profit value for HRC implying higher EPS.

We r looking at potentially a future price range of RM 25 to RM 36 for HRC. The recent correction last Friday accords an excellent opportunity for a "risk on trade with HengYuan" due to its relative undemanding valuation.

HengYuan had been in sideways mode for many years since 1987 (about 30 years).

However on Dec 13, 2017, HengYuan broke out of its old high of RM 12.30 (old high since Sept 23, 2005) without much effort. It closed at RM 16.30 last Friday ..chalking a respectable gain of +32% since Dec 13, 2017.

Since it broke out of RM 12.30 effortlessly, it became a strong uptrending stock both in big and short time frame.

The recent healthy correction is but a brief pause before HRC resumes its trend up again as the market will likely further re-rate it upward towards fair valuation of an index component stock in line with its local and regional peers

HengYuan is now a component stock in MSCI Malaysia Small Cap Index. In view of this, the market has been re-rating the price of HengYuan upward. Since it is a component of MSCI Malaysia Small Cap, market is indicating HRC deserves a higher PE multiple.

The recent correction is very healthy.

Based on its closing price of 16.30 and with a prospective EPS 2017 of RM3.6 per share, HRC is commanding a PE of only 4.528. Its regional peers r commanding a PE higher than 10. In view of this n HRC being included in MSCI Malaysia Small Cap index there is a high chance that market will continue to re-rate HRC upward to be in line with its local n regional peers.


A decent rating of PE8 to PE10 is reasonable for HRC in view of it being an index component. We r looking at potential future price range of RM 25 to RM 36 for HRC.

As we enter 2018, its risk on for equities meaning PE multiples for equities in general will move higher

IF PRICE HITS RM 12.30 AND CREATES A NEW HIGH, HY WILL CHANGE TREND FROM SIDEWAYS TO UPTREND IN BIG TIME FRAME SPANNING YEARS

IT IS UPTRENDING IN SHORT TIME FRAME

NEAR TERM TP@ RM 12.30

Extremely high chance Upcoming QR due soon will SURPRISE ON THE UPSIDE
A Trend player will gain much more with a strong uptrending stock like Heng Yuan

THE ERA OF QUANTITATIVE (2009 TO 2016) EASING WHICH LASTED 7 YEARS IS OVER

THE NEXT LEG OF THE BULL MARKET FOR GLOBAL EQUITIES HAS ALREADY STARTED IN 2017

THIS NEW BULL MARKET IS AND WILL BE DRIVEN BY FURTHER FISCAL MEASURES

INTEREST RATE WILL GO UP GRADUALLY BUT THE TREND OF THE GLOBAL EQUITIES MARKET WILL BE UP

BASED ON STOCK MARKET CYCLE , THE NEXT BULL RUN IS EXPECTED TO RUN FOR 7 YEARS TIME PERIOD(2017-2023) ALBEIT WITH INTERMITTENT CORRECTIONS.

INTEREST RATE WILL RISE IN THE FUTURE AND IT WILL ONLY POSE A MAJOR CONCERN WHEN THE FED FUNDS RATE APPROACHES 3.0%.

WE ARE FAR AWAY FROM IT NOW.

In the event that HRC delivers Q3 EPS between RM 1.0 to RM 1.4, how will the financial analysts react n respond? 

Will there be a mad rush by financial analysts to do writeups on HRC? 
  
How will the market respond?

Prospective EPS for 4Qtrs is RM 3.35. With a conservative discount of 15%, the discounted EPS=RM 2.85
PE6 gives a Market price of RM 17.0 n this assumes Q3 EPS of RM 1.3 n Q4 EPS of 0.34

There is a market price for gasoline n diesel at any given period

There is also a variance in purchase price of crude oil at any time period

Market price of crude oil do fluctuate sideways, trend up or trend down

This pose challenges to purchasers of crude oil for refineries

Different purchasers have varying skills in buying crude oil at lows n the not so skillful buy at the highs

MNCs actively practise transfer pricing to optimize profits n also to minimize tax payments

So is there a significant differentiating factor in the performance between HRC n Shell Msia??

If you think there is high chance that upcoming QR will be above RM 1.0 per share..you should be buying even at this price

If you r business savvy..would you produce higher profits in location which has higher tax rate n not 100% owned?

A Business savvy person will produce super profits where tax rate is the lowest.

Take a look into Shell Msia n Shell Spore
Which is 100% owned n which has lower corporate tax rate?

Just ask yourself what has changed in HRC? The plant is still in PD n the former shell employees r still working. So what has changed?

Why HRC can produce such good profits whereas Shell Msia could not??

HENGYUAN is a strong uptrending stock. Recent price consolidation is just about over. It is resuming its strong uptrend. Immediate medium term TP@11.13.

Is it's price steadily factoring in a stellar Q3 result due in November???

Strong uptrending stock. Immediate TP@ 4.64. If hit TP, it will go higher

Remember..a rising tide will lift all boats..and rest assured the tide will rise in due course.

Even if u equip yourself with top skills in Intrinsic valuation..your calculated result is not a 100% guarantee that price action will follow your calculated value.

No need to crack your head over this. The stock chart price action will guide you.

Due to the small paid up capital n coupled to the future expectation of much better Q3 results, high chance demand will exceed supply.