BOTH HENGYUAN AND PETRONM ARE OVERVALUED


 BOTH OF THEM ARE OVERVALUED BY PER VALUATION

    At current PER of annualised FY17 EPS, PETRONM and HENGYUAN are trading above regional PER valuation.

    I believe most of people here are mistranslated PER valuation.

    It does not mean PER of 2x, 3x, 4x, 5x are cheap. You have to compare with both local and REGIONAL MARKET AS WELL.

    Why compare regional? Because this refinery business is globally. Not only in Malaysia!

    Unless the company is making nasi lemak, which is only in Malaysia!

    Some articles that promoting these stocks have misled investors.

    Based on both companies current market caps between RM2.0-RM3.0 billion only, trading at current PER are seen OVERVALUED against regional refinery companies, who are far far bigger market cap.

    For example, let’s look at (1) Mangalore refinery in India, the lowest market cap in India, of RM15.0 billion, its PER only at 6.5x with ROE of 46%.

    Another example, (2) Hindustan Petroleum with RM40.7 billion market cap, its PER only at 7.4x and ROE of 43%.

    Last example in Japan, (3) JXTG holdings Inc with market cap of RM65.8 b billion, its PER only 7.7x,

    while (4) Idemitsu Kossan Co LT with market cap of RM21.0 billion, its PER only 4.7x.

    So, in terms of PER valuation, PETRONM and HENGYUAN have NO MORE UPSIDE TO OFFER TO INVESTORS.

    I just share my view. I dont recommend anything here. It is up to you to decide it.


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