Posted by cheoky > 2017-03-12 17:37 | Report Abuse

Wow. Quality work n selfless sharing....thank you very much.

Posted by LA777 > 2017-03-12 18:58 | Report Abuse

Thanks for sharing!

Posted by VenFx > 2017-03-12 19:59 | Report Abuse

PetronM $9.00 ? Interesting way of value calculating.
Thx..sumato88

Posted by ysh8793ysh > 2017-03-12 20:00 | Report Abuse

Thank you for your good work.

Posted by Jeffbkt > 2017-03-12 20:27 | Report Abuse

Thanks

Posted by probability > 2017-03-12 21:16 | Report Abuse

sumato88...actually i dont see any reason for you to discount due to economies of scale. I see that you can actually put a premium instead to Petron's refinery business due to Euro 5 technology and its flexibility on capitalizing from volatility of crude prices (2 weeks stock holding & smaller througput).

The same can be applied on its retail too...due to its aggressive marketing and expansions of its stations.

http://www.mthrfknwin.com/petrons-turbo-diesel-euro-5-now-34-stations-counting/

by end of last year they targeted 70 stations to incorporate euro 5 diesel.

Anyway..i have some powerful information to share later once i have compiled.

Posted by sumato88 > 2017-03-12 21:22 | Report Abuse

Thanks, guys. I just try to be very conservative. If you value Petronm's marketing biz on par with PetDag, you will be shock with the upside. I wouldn't rule that possibility out, Petronm's discount to PetDag and Shell shall narrow over time when more investors understand the biz model and Petronm continues to deliver profit.

Posted by probability > 2017-03-12 21:26 | Report Abuse

and why discount against Petdag...what is the core advantage of the economies of scale there? I see the Gas Stations looks old and probably started to have high maintenance cost for Petdag...

Tell me how they can have advantage by their size - u mean due to easy accessibility and loyalty? Hmm....i kinda get depressed when i go to their stations...

Anyway would love to know on your opinion why they have an advantage due to size?

Posted by myongcc5 > 2017-03-12 21:26 | Report Abuse

Thx, Smaller co., should hv bigger room to grow but Huge EV co., already saturated.
Example 1,Petronm can expand it's sales (petrol Kiosk) while Petronas almost hv all stations everywhere even near to small kpg.

Posted by myongcc5 > 2017-03-12 21:28 | Report Abuse

I foresee Petronm way of management and swift expansion with debt clearance will catch up with Petdag in yrs to come.

Posted by sumato88 > 2017-03-12 21:51 | Report Abuse

Economic of scales is a very powerful tool, that's the reason why every companies fight for market share at all cost when the demand is growing. every biz have fixed cost such as management, marketing & other back end support team. This cost will not grow linearly when the petrol station network grow. So when the volume is big, you will enjoy economic or scales, as simple as that. This is also the reason why I like DKSH while ppl think the margin is too thin.

Posted by myongcc5 > 2017-03-12 21:56 | Report Abuse

DKsH is a good co., Zuelliq also not bad. Any idea Zuelliq listed in M'sia?

Posted by sumato88 > 2017-03-12 22:10 | Report Abuse

Sorry, goodstock, I will just restrict my discussion at public forum for the time being. I have a full time job and wish not to spend too much time on private discussion. Hope u understand that.

Posted by 逍遥子 > 2017-03-12 22:28 | Report Abuse

@ sumato88 Good work ! Thanks for sharing

Posted by probability > 2017-03-12 23:26 | Report Abuse

Hi sumato88, i have a different way/concept for valuation by sum of parts. My valuation is as per below based on your same discount factor 50% due to economy of scale:

Basis 1) Petron is running at its rated capacity - its not 53% as you had mentioned. I can verify on this if required. The same applies to Shell for my valuation purpose ( i have not verified for Shell).

Basis 2) I value the Asset by the running Capacity of the Refinery (for Refinery) and the Number of Gas stations owned (for Retail). And thus i give a 50% discount on Petron's valuation relative to Shell and Petdag on its Refinery and Retail segments respectively. I ignore EBITDA as eventually they should be the same for per unit basis of running capacity or the number of stations in operation.


A) Petron's Refinery Value by same valuation of Shell's refinery:

= (EV of Shell / Capacity of Shell) x (Capacity of Petron)
= (2123 / 156 ) x (88)
= 1,193M


B) Petron's Retails Value by same valuation of Petdag's retails:

= (EV of Petdag / Number of Petdag Stations) x (No. Petron stations)
= (21828/1000 ) x (320)
= 6,984M


Apply an EV discounted by 50% on the above (A) & (B) , you get:

= 50% x 1,193 M + 50% x 6,984
= 4,091M

Thus, the current EV is 1,710M compared to its 50% discounted valuation of 4,091.

This approximately gives = 140% upside instead of what you had reported as 56%.

Posted by sumato88 > 2017-03-13 00:36 | Report Abuse

Hi, Probability

1) I got the refinery daily throughput from both of the annual report 2015, the throughput shall be higher in 2016 (haven't reveal yet) but I don't think the throughput will spike by 30% yoy.

2) the valuation for Shell's refinery should be higher due to its complexity. And that's also one of the reason why some refineries (including Petron) cannot run at maximum capacity as the low complexity will have high output of low margin products, so to avoid flooding the market with low margin products that will result in losses, some refineries just can't run at max. You can read more about refineries here http://www.galpenergia.com/EN/agalpenergia/Os-nossos-negocios/Refinacao-Distribuicao/ARL/Refinacao/Paginas/Didatico-

3) I beg to differ on same EBITDA profit per litre due to different volume/economic or scales, although I agree there is room for improvement for Petronm when it's volume catch up with the peers.

4) upside can be 140% or more if more investors understand the biz and Petronm deliver higher profit which I think it will although I do think the quarterly profit might be volatile due to the refinery margin. But if we look at the big picture, as long as it reports higher profit yoy and full year or cumulative profit is higher yoy, we shouldn't be too concern on lower profit qoq due to changes in refinery margin, refinery shut down for maintenance and others. The key jewel is its marketing biz which is very valuable in my view. This biz is growing in a saturated market, hence it is gaining market share and better economic of scales.

Hope that helps. Pls forgive me if I don't answer all the questions, will probably answer what I think is more important.

Cheers!

Posted by sumato88 > 2017-03-13 00:37 | Report Abuse

http://www.galpenergia.com/EN/agalpenergia/Os-nossos-negocios/Refinacao-Distribuicao/ARL/Refinacao/Paginas/Didatico-Refinacao.aspx

The complete link is here

Posted by ysh8793ysh > 2017-03-13 00:48 | Report Abuse

@sumato88 & probability, both of you had done a good job, thanks.

Posted by probability > 2017-03-13 01:25 | Report Abuse

sumato88..u can refer 2nd qtr ending June 2016, note 12:

The 6 months throughput is 16.1 million barrels.

Use an average of 30 days x 6 months = 180 days to figure out the daily throughput.

16.1million/180 days = ~ 88k bpd

Posted by sumato88 > 2017-03-13 05:02 | Report Abuse

The 16.1m is total sales volume, full year was 32m in 2016. Refinery throughput/volume only about 17-19m p.a. over the past 5 years (all disclosed in annual report). So basically, Petronm only produce about 55-65% of what it sell and distributes, the rest of the refined products are imported. That's the reason why I think Petronm is more a PetDag than Shell.

Posted by probability > 2017-03-13 11:18 | Report Abuse

thanks sumato88..

Posted by paperplane2016 > 2017-03-28 22:56 | Report Abuse

Even rm9 is low. Woow

Posted by tftey > 2017-06-08 15:48 | Report Abuse

Thumbs up to both Sumato88 and Probability. Good Job.

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