Posted by arv18 > 2018-03-17 12:33 | Report Abuse

David, thanks for taking the time out to do this.

Posted by CharlesT > 2018-03-17 12:34 | Report Abuse

I better trust my crystal ball or Paul on my TP instead of this DFC Model

Posted by CharlesT > 2018-03-17 12:35 | Report Abuse

The key assumptions are koyak in the first place

Posted by CharlesT > 2018-03-17 12:36 | Report Abuse

And funny that most sifu are busy here arguing on the 1% to 2% discount rate difference applied

Posted by probability > 2018-03-17 12:37 | Report Abuse

important thing is not to ass-u-me lor...

finding a logical basis...intelligent basis for the variables used lor...kiki

Posted by CharlesT > 2018-03-17 12:38 | Report Abuse

Good for academical discussion lah

Posted by CharlesT > 2018-03-17 12:44 | Report Abuse

Posted by probability > Mar 17, 2018 12:32 PM | Report Abuse

like i said the greatest fortune teller wins....as he can predict future correctly.

its all about the future.

So what do u think will affect the profit of Heng Yuan in 2018 (dont want to talk too far like beyond 2020 or 2050)?

Crack spread? Plant shutdown? Forex?Others?

Posted by rchi > 2018-03-17 12:50 | Report Abuse

most of the time,ppl are killed not on the way up,but on the way down...the reason...the ppl feel the stk is getting cheaper n cheaper when compared to rm19.2 n still with eps of rm3.0....think lar...if next qr is so very good the top boss already has an idea but you all hv to wait till next qr is out...so why did the boss let the price down?
follow the big money ,man....remember ifca the darling of cimb some yrs ago?what happened then?

Posted by probability > 2018-03-17 12:52 | Report Abuse

aiyo charles many times i had already presented lor...i can only make forecast based on available data...and data seems to be available as per the below timing only.

if you ask what is crack spread even for tomorrow i cannot tell liao..




..........................................................

There are (three) explosive factors one needs to consider when valuing HY.....


(1) The throughput will rise by 20% after the upgrade due to the technology and effects of displacing catalyst used after 18 years at the hydrocrackers.

...this results with pure surplus cash to the bottom line. No additional administrative costs...no extra finance costs.... this is pure BONUS cash flow.

(2) Hengyuan management had mentioned they are planning to venture into trading of Petrochemical products...just another 10k bpd equivalent with a thin margin will have mind boggling effects on its bottom line...

(3) The IMO 2020 effects will start to become more and more apparent beginning of 2019....and brew into a 'perfect storm'..it will show its full force as it hits 2020. It will be pure blessing to Hengyuan which mainly produces Diesel.... This effects will at least last a few years... Its like a hundred Hurricane Harvey coming one after another continuously...

Item no.3 should never be underestimated..especially when data shows that net regional refining capacity additions is lower than the demand rise...

IMO 2020 itself would have killed a major chunk of the available refineries in the world..those Simple refineries that produces mainly Fuel Oil...

This will result with exponential rise in refining margins of Hengyuan in the near future...

Posted by CharlesT > 2018-03-17 12:56 | Report Abuse

Posted by rchi > Mar 17, 2018 12:50 PM | Report Abuse

most of the time,ppl are killed not on the way up,but on the way down...the reason...the ppl feel the stk is getting cheaper n cheaper when compared to rm19.2 n still with eps of rm3.0....think lar...if next qr is so very good the top boss already has an idea but you all hv to wait till next qr is out...so why did the boss let the price down?
follow the big money ,man....remember ifca the darling of cimb some yrs ago?what happened then?

This is a seasoned trader's experience...

Most of the time stock prices will be pushed up few hundred percents (HYC from RM2 to Rm19+) and many made easy money (assuming they took profit)

However when prices started to come down most likely they will buy in again at difference price level( even OTB claimed he bought back at Rm16+, Rm12+ etc)..If price drops further to RM8 or even Rm6 or even lower n consolidate for a long time some will kena margin call or cut loss n eventually lost their initial profit n incurr losses at the end

China people may make more killings later after Q1 n Q2 results....let's c

Posted by CharlesT > 2018-03-17 12:59 | Report Abuse

There are (three) explosive factors one needs to consider when valuing HY.....


(1) The throughput will rise by 20% after the upgrade due to the technology and effects of displacing catalyst used after 18 years at the hydrocrackers.

...this results with pure surplus cash to the bottom line. No additional administrative costs...no extra finance costs.... this is pure BONUS cash flow.

(2) Hengyuan management had mentioned they are planning to venture into trading of Petrochemical products...just another 10k bpd equivalent with a thin margin will have mind boggling effects on its bottom line...

(3) The IMO 2020 effects will start to become more and more apparent beginning of 2019....and brew into a 'perfect storm'..it will show its full force as it hits 2020. It will be pure blessing to Hengyuan which mainly produces Diesel.... This effects will at least last a few years... Its like a hundred Hurricane Harvey coming one after another continuously...

Item no.3 should never be underestimated..especially when data shows that net regional refining capacity additions is lower than the demand rise...

Bro Probability, I do agree that after the upgrade thene the whole scenario will be very different...Only after then loh (2019? 2020?)

But in 2018 lots of negative development in short term...(lower crack spread/ plant shutdown etc)...Dont fight against the tide...

Posted by CharlesT > 2018-03-17 13:00 | Report Abuse

2020 maybe good provided u can survive thru 2018 first loh

Posted by rchi > 2018-03-17 13:00 | Report Abuse

from what i observe from hrc-ch which i traded numerous times,cimb has no longer any desire to push it n the highs n lows are getting lower....dun you all think cimb being the biggest IB has the most up to date info on hrc...then why izzit ch is going lower n lower?
think lar.

Posted by CharlesT > 2018-03-17 13:03 | Report Abuse

I solely comment from investment psychology...I presumed China man etc happily sold a lot of their shares at high prices and they may use Q1 n Q2 to press down the prices further to kill off someone..

I learnt this from Johotin's Boss few years ago

Posted by CharlesT > 2018-03-17 13:04 | Report Abuse

If dumb dumb buy dumb dumb hold using margin may dumb dumb die loh

Posted by CharlesT > 2018-03-17 13:07 | Report Abuse

Fm Johotin's case...2 lousy Q results to hentam the prices really low...then followed by few good Q results plus bonus/shares split n goreng to record high

Posted by CharlesT > 2018-03-17 13:38 | Report Abuse

Ask yrself a simple question...if q1 is lower n q2 or q3 see red colour (possible or not when plant shutdown for 2 months?) n prices drop below rm6 would u dare to buy more and do u still hv money to down average?

Posted by CharlesT > 2018-03-17 13:47 | Report Abuse

I dont know whether crack spread will go up or come down tmr (mayb my friend Paul knows)...but i think q1 will likely b lower than q4 due to lower crack spread n they will report one loss making Q when their plant shut down for 2 months+..aint no rocket science...i read book not much dont know how to do dfc model also dare to forecast so...

Posted by probability > 2018-03-17 14:16 | Report Abuse

Charles look at price movement after Q3 2015 results of -50 cents (after MTA)

The stock barely changed after results. It was trading close to RM 6 then.

For the whole year 2015 EPS of 117 cents...it was trading close to RM 6.

note that during 2015 refining margins were at 6 USD/brl (as reported in annual report and gross profit margin), and now 2018 at 9 USD/brl (based on recent Q4 2017 gross profit) at about the same exchange rate during 2015 Q3.


9 USD/brl minus 6 USD/brl = 3 USD/brl.

......................................


3 USD/brl difference means additional 40 cents EPS (after 25% tax) per qtr now in 2018 compared to 2015.

Meaning 2018 has 40 cents/qtr x 4 = RM 1.60 EPS per annum higher than 2015.

PE 5 for the difference in EPS itself deserves RM 8.

you add RM 6 of 2015 with the difference of RM 8 (a PE 5), HY should be minimum valued at RM 14 with the same market perception of 2015.

........................................

THIS SHOULD BE A SCREAMING OBVIOUS FIGURE (RM 14) IF ONE HAS A RATIONAL MIND.


Note: The above is not considering the brighter ( 3 explosive factors) i had presented above...

Posted by CharlesT > 2018-03-17 14:19 | Report Abuse

Tq. Will wait to see what will happen after q1 in may.

With china people in board now this co becomes much more interesting...or else we wouldnt see prices up rm2+ to rm19+ within one year...

Posted by probability > 2018-03-17 14:19 | Report Abuse

there are some surplus maintenance cost and higher admin cost which popped up in Q4 2017...they should disappear in future...and the q4 results did not report any inventory gains...

this means management is being smart to avoid volatility in earnings by under declaring their inventory value at the end of 2017.

this ensures a much better Q1 2018 results.

Posted by CharlesT > 2018-03-17 14:21 | Report Abuse

Q4 reported good result eps rm0.60+ but price plunged fm rm16 to the current rm9+....

Posted by CharlesT > 2018-03-17 14:22 | Report Abuse

Mayb q1 reported lower eps price moves up to rm16 leh

Posted by CharlesT > 2018-03-17 14:23 | Report Abuse

So crack spread has no or little effect on q1?

Posted by CharlesT > 2018-03-17 14:25 | Report Abuse

Again shall we hv a friend bet on q1 result on bakuteh...i bet it will b lower than q4 loh...just for fun lah

Posted by feet > 2018-03-17 14:25 | Report Abuse

as expected, different story is needed to revive the hope and momentum.

Posted by probability > 2018-03-17 14:26 | Report Abuse

just like market overreacted with an EPS 120 cents to shoot to RM 19 within weeks...

market had overreacted knowing the shutdown and upgrade work is around the corner...

We need over-reaction only then we can see mismatch of value and price to capitalize.


Posted by CharlesT > Mar 17, 2018 02:21 PM | Report Abuse

Q4 reported good result eps rm0.60+ but price plunged fm rm16 to the current rm9+....

Posted by CharlesT > 2018-03-17 14:28 | Report Abuse

This stock has become casino stock

Posted by probability > 2018-03-17 14:31 | Report Abuse

aiyo charles...no need all this info lor....if i said heavy and it dropped a lot 3iii will come and pour salt on my wound liao...

i manage investment with calculated risks- so no worries

dont worry about what i do..or have...concern only on the facts i present...if i find the argument rational i will respond...

Posted by CharlesT > 2018-03-17 14:32 | Report Abuse

Dont get addicted into any stocks...its just a tool for us to make money

Posted by probability > 2018-03-17 14:32 | Report Abuse

no i am not addicted...just capitalizing my knowledge...

Posted by CharlesT > 2018-03-17 14:33 | Report Abuse

Me too...

Posted by probability > 2018-03-17 14:34 | Report Abuse

i have no subscribers to push ma...i have to rely on my own competence...i invest where i have an edge...(at least where i think i have)..he he

Posted by hstha > 2018-03-17 16:10 | Report Abuse

Why economists can’t predict the future
http://www.macleans.ca/economy/economicanalysis/why-economists-cant-predict-the-future/

Posted by Ricky Yeo > 2018-03-17 18:25 | Report Abuse

"those fortune teller that rely on past earth quakes and made extra supports on to make earth quake prove buildings....and bridges...have less return lor... "

Please what are you talking about? No one has ever consistently predicted an earthquake. So there's no 'less return' to begin with because high return (correctly predicting earthquake) never exist.

Predicting future correctly wins, yes. But don't confuse winning with making money. A person that gets the future correct still can lose money. It all comes down to expected value.

Posted by John_Lee > 2018-03-19 14:33 | Report Abuse

CharlesT But the use of DCF is not without merit. Personally, I find that DCF is useful when valuing a stable company where the operations are mature, the industry it operates within is stable, and its historical accounting numbers do not fluctuate significantly. Under these conditions, the analyst is allowed to work within a more predictable environment leading to more reliable numbers being used in the forecast and projections. Unfortunately, I do not see HRC falling within these criteria as the refinery business is highly volatile. Nevertheless, I am also intrigue by what sort of numbers may possibly come up for HRC via applying the DCF method.

Yr paragraph 3....

So do u think Heng Yuan fits into the above conditions?

---------- ---------- ----------

CharlesT, he already say that "I do not see HRC falling within these criteria as the refinery business is highly volatile". He ask you to read again and you can re-post what he said with the answer to your question. You got read what pple write or not? Or you just want to cari pasal with pple?

Posted by John_Lee > 2018-03-19 14:37 | Report Abuse

I read the comments here also i vomit blood. You all tembak David_Tan for what? At the start he already said he dont believe in this DCF method mah. But you pple ask him to do his valuation based on DCF. So he dont believe also do to show you all. Apa lagi lu orang mau?

Posted by CharlesT > 2018-03-19 14:43 | Report Abuse

IF he didnt believe so then what is his purpose here using a DCF model to come out his fair value price of RM19+?

Who asked him to do a DCF model to value Heng Yuan?

Just for fun??

Posted by CharlesT > 2018-03-19 14:44 | Report Abuse

He also too shy to answer why he used the best last 2 years result as a base in his assumption....

Posted by CharlesT > 2018-03-19 14:46 | Report Abuse

Why conveniently disregard other loss making years?

Posted by John_Lee > 2018-03-19 14:52 | Report Abuse

CharlesT IF he didnt believe so then what is his purpose here using a DCF model to come out his fair value price of RM19+?

Who asked him to do a DCF model to value Heng Yuan?

Just for fun??

---------- ---------- ----------

See, see, see. I already say you dont read wht pple write. 1st paragraph already he explained lor. Read properly lah pls. You are embarassing yourself.

Posted by CharlesT > 2018-03-19 14:56 | Report Abuse

Subsequent to my analysis titled ‘Hengyuan – No Doom For 2018’, there have been strong discussions on the need to use the Discounted Cash Flow (“DCF”) method to value HRC.

But he himself admitted DCF is only suitable for the followings under Paragraph 3

Personally, I find that DCF is useful when valuing a stable company where the operations are mature, the industry it operates within is stable, and its historical accounting numbers do not fluctuate significantly.

And i presented Heng Yuan's last 10 years records clearly shows Heng Yuan doesnt fit into these...

Posted by CharlesT > 2018-03-19 14:58 | Report Abuse

Anyway in short can we agree that DCF may not be suitable to evaluate Heng Yuan who is cyclical in their biz nature.....unlike Nestle n DLady etc?

Posted by stockraider > 2018-03-19 15:01 | Report Abuse

Rubbish loh....!!

If u r last in ur kindegarden, now u r in university 4th yr...u r 1st do i assess u based on ur historical last position in kindergarden leh ??

USE BRAIN TO THINK LOH....!!

Posted by CharlesT > 2018-03-19 15:04 | Report Abuse

RM22 to RM42?

lol

Posted by John_Lee > 2018-03-19 15:05 | Report Abuse

CharlesT, OMG! You have serious reading comprehension problem. I deal with many pple like you. I already learn if a person got problem understanding, no matter how much I explain, such pple cannot understand.

It's ok. You are correct. You have always been correct. You win. Everyone is wrong. You win ok.

Posted by CharlesT > 2018-03-19 15:06 | Report Abuse

lol. If u cant present yr case u may stop here.

Drink more Barley water ya

Posted by feet > 2018-03-19 15:48 | Report Abuse

DCF is meant for long term track record with earning stability. without that, DCF is useless..the worst is that someone want to easily ignore the bad number and only want to count in the good number in calculation to justify high TP.

stockraider Rubbish loh....!!

If u r last in ur kindegarden, now u r in university 4th yr...u r 1st do i assess u based on ur historical last position in kindergarden leh ??

USE BRAIN TO THINK LOH....!!
19/03/2018 15:01

Posted by 3iii > 2018-03-20 07:16 |

Post removed.Why?

Posted by John_Lee > 2018-03-20 11:41 | Report Abuse

3iii, pls read up and understand why WACC is the most popular method in calculating discount rate by the professionals. It is very technical and it takes many factors into account. And not simply any single 1 rate to justify certain situation like you described