Posted by BornToSpeculate > 2017-08-12 11:30 | Report Abuse

Inventory loss is common and should be the same for all oil refining operations. The question we should be asking the past 2 quarters how much was the 'extra-ordinary gain on inventory'.

Obviously we cant just take crack spread and use this as the only input for profitability.

Super investor if you ask me, would have bought in cheap when HengYuan first reporting their Q4 turnaround profit of 200m+. Knowingly that there are not much shares in circulation, this is the best down to pare down some holdings when there is volume.

Posted by InsiderR > 2017-08-12 11:42 | Report Abuse

Q2 inventory loss can be recovered in q3? Nobody can guarantee. How well the crude oil will perform in Aug & Sept still unknown. And nobody knows which day exactly HRC place order for crude. Buy high sell low is very likely, everythg depends on how good are HRC crude experts. Also, pls take note HRC has no hedging as of today. For inventory loss, u may go through Shell previous reports, it is possible inventory loss can wipe out all your margin when crude up/down tremendously. It is not as simple as just minus crude price at end of the mth/qtr with early of the mth/qtr. Anyway, counting down remaining +/-10 trading days for Q2. Good lucks!

Posted by ckcc > 2017-08-12 11:45 | Report Abuse

If HRC crude is expert why last year Hengyuan can drop below RM 2? There are also some loss qtrs.

Posted by RedGreen > 2017-08-12 12:02 | Report Abuse

Why hold 40 day stock ? Are they preparing for refinery maintenance or inspection ? Petron corp philipines shutdown 45 days for the maintenance ?
Just suggesting.

Posted by vinc3362 > 2017-08-12 12:22 | Report Abuse

Anyway, please apply above article calculations to HRC 1st QR report.........
For your info....Brent crude prices (from Bloomberg) as at
30/12/2016 USD 56.82
31/3/2017 USD 52.83
30/6/2017 USD 47.92

1st QR Brent crude price decreased USD 3.99 bpd
2nd QR Brent crude price decreased USD 4.91 bpd

HRC 1st QR EPS 93 sen.
HRC 2nd QR EPS ????? ( Only HRC finance guys will know the important key price
datas to input for profit estimation)

To predict HRC EPS at 19 sen is way off the mark. And from FutureEyes analysis, he is a smart guy. Why throw so much red herring to unsuspecting amateur investors like us.........

I will quote following forummer's comment .......


Jupiterang> If i'm a shark with insider news, here's how I will run the monkey show... 

Before a Good News out, I create a panic sell to collect. When Good News out, Market will panic buy at high. I sell sell sell... 

Before a Bad News out, I create a panic buy to sell. When Bad News out..kaboom! It's none of my business as I have already sold all my holdings... 

All still remember how atta, lbalum, comcorp, Prelexus rose up by panic buying and crashed after Bad News out.. 

Do not chase high..
10/08/2017 14:30


Good luck for all those onboard HRC ship........remember Sifu Raider's advice dumb dumb hold........

Posted by FutureEyes > 2017-08-12 12:36 | Report Abuse

Note, my article is not misleading.

It was a very practical, realistic estimations. Q1 results could be due to stock gain resulting from improved products margins.

I agree with InsiderR points below (no hedging by HRC), and thus made a conservative estimation.

Note, as I had mentioned earlier you will obtain exactly the same inventory loss by accounting any fraction you wish on the inventory as refined products provided the refining margins remained the same between reporting period.

If you can see through my article content, you will realize it was meant to remove the misleading bias (too much weightage given) by market on quarterly earnings.


Posted by InsiderR > Aug 12, 2017 11:42 AM | Report Abuse

Q2 inventory loss can be recovered in q3? Nobody can guarantee. How well the crude oil will perform in Aug & Sept still unknown. And nobody knows which day exactly HRC place order for crude. Buy high sell low is very likely, everythg depends on how good are HRC crude experts. Also, pls take note HRC has no hedging as of today. For inventory loss, u may go through Shell previous reports, it is possible inventory loss can wipe out all your margin when crude up/down tremendously. It is not as simple as just minus crude price at end of the mth/qtr with early of the mth/qtr. Anyway, counting down remaining +/-10 trading days for Q2. Good lucks!

Posted by JayC > 2017-08-12 13:15 | Report Abuse

Very very good analysis. Keep it up.... I believe price is high atm

Posted by Bettyem > 2017-08-12 14:45 | Report Abuse

良好的分析。保持 but price high

Posted by Flintstones > 2017-08-12 14:54 | Report Abuse

Cyclical earnings are to be expected from hengyuan. Inventory gain or loss is a zero sum game. Wat comes down will go up again.

Posted by InsiderR > 2017-08-12 14:58 | Report Abuse

-Davidslim-
Yes. Inventories include crude oil and refined products. When current crude price i.e. Brent drops, both the 'value' of crude and refined product held by refinery will drop parallelly in response to crude price (provided margin remained the same). U only need to know the 'delta' of purchased crude and inventories to figure out the inventory loss. So estimating inventory loss by assuming all stockholdings as crude in FutureEyes' research should be valid.

Posted by LA777 > 2017-08-12 14:58 | Report Abuse

Flintstones, absolutely agree with you.

Posted by InsiderR > 2017-08-12 15:05 | Report Abuse

Inventory gain and loss is not neccessary a zero sum. It should be based on which day and what price refinery buy crude and what price they lock their products. When crude fluactuates up and down, inventory gain= buy low sell high, inventory loss= buy high sell low. Both scenarios are possible for refinery without hedging.

Posted by Flintstones > 2017-08-12 15:25 | Report Abuse

Anyway should investors focus on quarterly earnings of a refiner? A correction in this stock is an opportunity to accumulate in my opinion. If you ask any CFA on how to value a refiner, all of them will use reproduction cost instead of earnings. At this moment, hengyuan is indeed severely undervalued

Posted by cstanmyinvest > 2017-08-12 16:02 | Report Abuse

These are the Real Facts for Hengyuan EPS, Brent crack spread and Brent crude prices for the last 3 quarters :

4Q/2016 - EPS 69.27, average crack spread $6.80, Brent crude $46-$57 (+$11)
1Q/2017 - EPS 92.16, average crack spread $7.80. Brent crude $57-$52 (-$5)
2Q/2017 - ??? average crack spread $7.80, Brent crude $52-$48 (-$4)

Davidtslim has called 2Q EPS at 66.9 sen. We need more than Hard Facts to believe FutureEye's call at 19sen.

Posted by Jeffbkt > 2017-08-12 16:54 | Report Abuse

FutureEye, you need to back test your calculation on the past Q result to confirm the accuracy.

Posted by 360Capitalist > 2017-08-12 18:31 | Report Abuse

The actual EPS will not less than RM1.00 for Q2'17

Posted by beware1 > 2017-08-12 18:35 | Report Abuse

Bought abv RM 8? Wish you lose kaw kaw.

Posted by 360Capitalist > Aug 12, 2017 06:31 PM | Report Abuse
The actual EPS will not less than RM1.00 for Q2'17

Posted by vinc3362 > 2017-08-12 18:51 | Report Abuse

360 Capitalist.......you have my vote.......

Posted by 360Capitalist > 2017-08-13 04:22 | Report Abuse

Heng Yuan Earning Report Guidelines :-
http://stillwaterassociates.com/crack-spread-a-quick-and-dirty-indicator-of-refining-profitability/

As apended link, HengYuan is producing LPG, Propylene, Light Naphtha, Gasoline, Aviation Fuel (Jet Fuel), Diesel and Fuel Oil. (http://hrc.com.my/index.php/operations-products/ )

Earnings
1) To reflect the real scenario we should use 3-2-1 Crack Spread to gauge the profit of HengYuan ( https://www.energystockchannel.com/3-2-1-crack-spread/ )
Q2 ( April- June : USD16.00-20.00 per barrel ) / Avg : USD18
Gross Profit @ 10 million barrels Capacity Per Quarter : USD180mil
Processing Cost per Barrel Per Quarter: USD 6.50 = USD65Mil
Profit Before Overhead Cost : ( USD180mil-USD65mil ) X 4.3 = RM 495mil
Overhead Per Qtr : RM125mil
Net Profit : RM495mil - 125mil = RM370mil

Note :-
Q1'17 Avg Selling Price Per Barrel :USD65
(Crude Cost USD50, Crack Spread USD 15 per barrel)
Q2'18 Avg Selling Price Per Barrel : USD65
( Crude Cost USD47, Crack Spread USD 18 per barrel)

Inventory Loss
1) As inventory count is using First In First Out (FiFo) method, we should use the last crude oil price (May 1- June 30) to examine inventory holding status. Average loss per barrel USD4 X 4 - USD16mil or RM68.8mil

Earning Per Share (EPS)
RM370mil - RM68.8 =RM301.2 mil or EPS RM1.00

Industry Quarterly Profit >>>
Reference for Refinery PROFIT :-
http://zeenews.india.com/companies/ril-q1-results-net-profit-up-28-to-rs-9108-crore-2025393.html

Reference for Peer Share Price Benchmarking (All Time High) :-
https://www.investing.com/equities/reliance-industries

Posted by LA777 > 2017-08-13 08:23 | Report Abuse

360Capitalist, you have my vote too!

Posted by John Lu > 2017-08-13 08:23 | Report Abuse

360capitalist...yes!! Agree with your calculation.

Posted by ken > 2017-08-13 09:23 | Report Abuse

1. The Brent oil (Crude oil) pricing is misleading..

Around 1 April Brent oil price is around USD51 and End of June Brent oil price is around USD46.5.

As for Crude oil price, Beginning April is around USD48.5 and End of June is around USD44.

The price differ between 1 April to 30 June 2017 is around USD4.5 ... Not as stated USD8.

2. Base on last Q result, profit margin for each barrel is higher than USD8.. more than USD9.

As such Net profit estimate of 19 Cents is way too low. After all this Q stock loss will be next Q stock gain.... Comparing 1 Jan 2017 and 31 Dec 2017 stock gain/loss will be more meaningful..

Posted by ken > 2017-08-13 09:35 | Report Abuse

Your estimate gross profit RM346 mil compare with actual 1stQ2017 gross profit RM395.6 million... Your estimate of gross profit is out by about 50 million with assumption margin remain unchanged.

Posted by ken > 2017-08-13 09:40 | Report Abuse

Conclusion, David Lim's net profit estimate will be much more accurate than yours.

Posted by suregain > 2017-08-13 10:24 | Report Abuse

I think yoy up but qoq drop.. it all depends on market wether like it or not

Posted by FutureEyes > 2017-08-13 20:47 | Report Abuse

To PETRONM shareholders, especially call warrants holders, suggest to exit by tomorrow as I will be publishing an article probably Monday evening on its possible unsatisfactory earnings based on Petron Corp earnings reported on 8th August 2017.

Posted by 360Capitalist > 2017-08-13 21:52 | Report Abuse

Future Eyes, dont show your stupidity to mislead others

Posted by grateful_ > 2017-08-13 22:36 | Report Abuse

FutureEyes I forecast Hengyuan loss QR why your profit so high?

Posted by paperplane > 2017-08-13 23:14 | Report Abuse

This guy wanna show he is smart....but end up showing his own stupidity

Posted by 360Capitalist > 2017-08-14 08:52 | Report Abuse

Future Eyes, your write-up is not making any business sense.

1) How can a company register lower profit while crack spread (profit margin) is going higher and higher ?
Q4'16, Crack Spread USD14/barrel, Actual : RM207mil / EPS : 69 cts (Production :10.4 mil barrels)
Q1'17, Crack Spread USD16/barrel, Actual : RM279mil / EPS : 93 cts (Production :10.1 mil barrels)
Q2'17, Crack Spread USD18/barrel, **Est : minimum PAT RM300mil / EPS : RM1.00 (100 cents)
Allowance : Profit can touch RM365 mil if without inventory loss.

Note :-
1) Crack Spread = Selling Price - Cost of Crude Oil per Barrel
2) Every USD2 increase in Crack Spread will boost HengYuan's profit by USD20mil or RM86mil or EPS 28 cts idf production volume is at 10 mil barrels per quarter.

2) Most of the refinery companies achieve better or increase profit in Q2'17, Shell, Reliance, Philip66 and many imdustry peers. This is something being announced by refinery companies and not based on own assumptions.

Reference for Refinery PROFIT :-
http://zeenews.india.com/companies/ril-q1-results-net-profit-up-28-to-rs-9108-crore-2025393.html

Reference for Peer Share Price Benchmarking (All Time High) :-
https://www.investing.com/equities/reliance-industries

(Future Eyes, please provide real case example instead of your own unproven assumptions to sustain your claims )

3) Lower crude oil will boost Super Profit for refinery companies.
If you based on crude oil price at USD50 per barrel and crack spread (profit margin) at USD20 per barrel, the GROSS PROFIT MARGIN is 40%, which is very lucrative for any manufacturing business. As compares to the time when crude oil is at USD100 perbarrel, the gross profit margin is only 20%.

4) Refinery is the Future ( Game Changer for Oil & Gas Industry)
Due to excess supply of crude oil, the crude price will remain low for next few years which is very good for refinery companies to sustain its profitability in medium term. The exploration & production will experience profit trade off with lower profit in long run while refinery will continue to enjoy sustainable and high profit in longer run.

Future Eyes,
I repeat Heng Yuan will report minimum EPS RM1.00 in Q2'17

Posted by 5858 > 2017-08-14 08:56 | Report Abuse

360capitalist...very good analysis and powerful sharing...

Posted by Alex Foo > 2017-08-14 08:59 | Report Abuse

360 should copy paste this at blog section, titled 'eps at least 91 sen and above' =)

Posted by 360Capitalist > 2017-08-14 09:01 | Report Abuse

Bro Alex.. i dont know, please do for me,, Thank you

Posted by grateful_ > 2017-08-14 09:06 | Report Abuse

Your eyesight got problem? Why 19 sen reversed?

Posted by Alex Foo > Aug 14, 2017 08:59 AM | Report Abuse
360 should copy paste this at blog section, titled 'eps at least 91 sen and above' =)

Posted by Icon8888 > 2017-08-14 09:13 | Report Abuse

Future eyes you better be right. Many people reacted to your article by selling today. If later results comes out to be good, they might blame you

Posted by Icon8888 > 2017-08-14 09:14 | Report Abuse

Bloggers carry heavy responsibility

: )

Posted by paperplane > 2017-08-14 13:20 | Report Abuse

Or ask him give his contact , address, working address. If result is not true. Go bombard him. Ask for refund. Hehehe

Posted by tftey > 2017-08-14 15:35 | Report Abuse

Q2's profit should be rather close to Q1. Any dip is good opportunity to top up.

Posted by hissyu2 > 2017-08-14 20:42 | Report Abuse

hi pro, mind if you can use your method to calculate Q1 result? let us know if your estimation/calculation make sense?

Posted by hissyu2 > 2017-08-14 20:55 | Report Abuse

Ending Value of Inventory (Jun17) = Inventory (barrels) x Ending Price of Brent (USD/barrel)

= 4700k barrels x USD 45/brl

= 211M


brent crude oil price at 6/30 was 47 o... why 45$???

Posted by hissyu2 > 2017-08-14 20:59 | Report Abuse

please rework your calculation with brent crude oil price at 6/30 = 47$. then you got 100m profit wor... 35c, still not good?? share price only 7.5rm... annualize it you still get pe of 5x... where to find a? and please dont ignore the refinery margin rally after 6/30... LOL...

Posted by FutureEyes > 2017-08-14 21:00 | Report Abuse

hissyu2, please read again my article with the assumptions i had used to derive the brent price.

note also, the refining margin i had used as 8USD/brl for Q2 versus Q1 of 9USD/brl is very high considering the drop in jet fuel crack spread and gasoline relative to Q1.

Posted by hissyu2 > 2017-08-14 21:30 | Report Abuse

I Dont understand. since the brent oil price u used for 3/31 was 52$ .... hehe... but okay la~~ wait result lo~

given 20c Q2, 93c Q1, considering 60c for Q3+Q4... it is about 180c... then, forward PE also 4x nia~ cannot find any cheaper stock in bursa liao~ hoho

Posted by Icon8888 > 2017-08-17 12:16 | Report Abuse

Whoever that panic sold few days ago regret

Posted by stockraider > 2017-08-17 12:16 | Report Abuse

Calvin Tan,

Raider's friend who fought together with many successful battle, pls stay clear of HRC bcos the tsunami profit is coming loh....!!

Please don pick a fight with HRC anymore loh....!!

HRC result is superb & coming loh....!!

Posted by 3iii > 2017-08-26 10:32 |

Post removed.Why?

Posted by musangfoxking > 2017-08-26 10:38 | Report Abuse

yes, Q2 data not impressive; but u just watch a company by just 1 QR? the journi to its destinations has many many quarters!!!! the sum total is more important!!!!

Posted by KLCI King > 2017-08-26 10:53 | Report Abuse

Fantastic analysis, the result is not far from the prediction.

Winner of the debates!

Posted by eyewitness > 2017-09-03 15:02 | Report Abuse

Btw what is CCS profit?

Posted by brightsmart > 2017-09-03 16:45 | Report Abuse

How much this guy lost?

Posted by 360Capitalist > Aug 14, 2017 08:52 AM | Report Abuse



Future Eyes,
I repeat Heng Yuan will report minimum EPS RM1.00 in Q2'17