Posted by probability > 2017-07-27 18:23 | Report Abuse

http://in.reuters.com/article/asia-refinery-idINL4N1JY2A3

Posted by probability > 2017-07-27 18:31 | Report Abuse

David..i admire you for the amount of hardwork you had placed for compiling all these hard to obtain information and present it in a relatively easy format for people to go through and understand.

Nice to see the information in all your posting has the 'required flow' / continuity to it. My sincere appreciation.

Posted by Alex Foo > 2017-07-27 18:32 | Report Abuse

probability....can summarise what david wrote? hehe....I must be hardowking d

Posted by soojinhou > 2017-07-27 18:34 | Report Abuse

Thank you for the extensive research. Just a minor error, rapid is scheduled to commence operation in q1 2019, not 2020

Posted by probability > 2017-07-27 18:36 | Report Abuse

Alex..with you i have to start with Q&A...as usual..
so u must shoot your question first! he he

Posted by davidtslim > 2017-07-27 18:49 | Report Abuse

Thanks probability and soojinhou for your comments. I corrected Rapid to 2019 but normally with some technical challenge and big investment required, it has the possibility to delay.

Posted by paperplane2016 > 2017-07-27 18:51 | Report Abuse

good!

Posted by paperplane2016 > 2017-07-27 18:52 | Report Abuse

I have one question, not sure if it is a stupid one.

How come the crack spread recover? What has lead to it? Is it sustainable?

Posted by paperplane2016 > 2017-07-27 19:34 | Report Abuse

Anyone? Probability. You are expert. I forgot what is the reason spread improve

Posted by Equityengineer > 2017-07-27 19:39 | Report Abuse

Thanks for the wonderful article

Posted by probability > 2017-07-27 19:41 | Report Abuse

paper , so many articles posted on these to explain it..but the core factor is the 'constraint for refining within the region'....

for HRC, one needs not worry if the current good crack spread is sustainable..but only just value it with a reasonable long term high complexity refinery margins.

as can be shown, even 6 USD/brl should easily value it at RM 16 with a PE less than 10.

the current good refinery margin exceeding 9 USD/brl should be taken as a blessing to par down their Debts in the short term and even sustain a better net profit in the future with the finance costs completely eliminated.

The already low crude price had also eliminated risks of significant stock loss in the future ensures that HRC is rightly placed to kill the Debts.

Posted by paperplane2016 > 2017-07-27 19:41 | Report Abuse

Thanks probability. I hope they do slowly parred down debts. As interest seems going to be higher and higher for future

Posted by davidtslim > 2017-07-27 20:22 | Report Abuse

I increased the size of the cash flow chart for a more comfortable view. Previous chart font size is too small.
U can check again the article as I hv done some corrections

Posted by paperplane2016 > 2017-07-27 21:57 | Report Abuse

Thanks David for the hard works and efforts. Also many thanks on your selfishnless sharing here. I learnt a lot from reading all hardwoods here. Yours surely a must read!

Posted by pputeh > 2017-07-27 21:59 | Report Abuse

David, sure appreciate yr hard work to enlighten us on the prospects of HY. Thanks

Posted by paperplane2016 > 2017-07-27 22:03 | Report Abuse

A few things come to my mind as well.
1. Auto sales! If more cars on the road, it will lead to more demand, so more volume of business. So it might help to have some studies or forecast on future of autocar business in Malaysia? Will hybrid car be a threat , electronic car etc?
2.ROE is used here. It has also substantial debts. Is ROA more relevant? Assets is equity plus liability.
3. ROE my view could be misleading. Equity is not the price we paid now. We paid now market price RM6.36xoutstanding shares 300mil. If I were to takeover this Hengyuan now, I am buying it at open market this prices of RM1.91bil. isn't this more relevant, compared to equity of RM1.27bil above.

Posted by paperplane2016 > 2017-07-27 22:03 | Report Abuse

Using same logic, I guess. PetronM shall at the same time do well! So buy petronm and hengyuan as both still so undervalued!

Posted by musangfoxking > 2017-07-27 22:06 | Report Abuse

remember, by 2040, no gas or diesel vehicles in UK!! any impact on oil price?

Posted by probability > 2017-07-27 22:22 | Report Abuse

3. ROE my view could be misleading. Equity is not the price we paid now. We paid now market price RM6.36xoutstanding shares 300mil. If I were to takeover this Hengyuan now, I am buying it at open market this prices of RM1.91bil. isn't this more relevant, compared to equity of RM1.27bil above.

aiya paper..thats why P/E is invented!

Posted by paperplane2016 > 2017-07-27 22:48 | Report Abuse

Ya. PE. Price by EPS

Posted by paperplane2016 > 2017-07-27 22:51 | Report Abuse

Yes. Debts might not be a major concern now unless interest keep rising too fast. But still it is manageable after considering inventory, which can easily convert into cash.
But in term of return should we use ROA?ROE?

Posted by probability > 2017-07-27 22:55 | Report Abuse

(P/B) / (ROE) = P/E

whenever your ROE the Denominator goes high...
your Numerator (P/B) i.e Mcap over Equity has to go proportional higher..

to maintain the same P/E.

P/E is the King.

Of course ...the above is only true provided you use the right normalize representative Earnings - E in the above equation.

Posted by probability > 2017-07-27 23:03 | Report Abuse

I always use ROA to ensure its definitely way way above Cost of Debt (COD, the interest rate). Their difference is basically 'the sea depth' for the Ship to stay afloat.

This way we know we dont get cheated by high ROE due to high Debt while the ROA is just barely above the COD.

If the ROA too near to COD and sinks just a little lower the ship may just hit the seabed..and stall.

Posted by paperplane2016 > 2017-07-27 23:09 | Report Abuse

Good point probability