HENGYUAN (4324) - (richDad): HENGYUAN - 3 reasons there is still deep value in this stock


 1. Strong earnings in the first quarter. As an investor, I believe that earnings matters the most. Heng Yuan 1QFY17 Net Profit surged 175% to RM279m. Its EPS also jump 175% to 93.16sen. Reason for the earnings surge is mainly due to improved gross profit margin in line with higher product cracks. From Wikipedia, "Crack spread is a term used on the oil industry and futures trading for the differential between the price of crude oil and petroleum products extracted from it." In short, the earnings is REAL based on strong fundamentals. PETRONM earnings also improve and so it is an industry trend of better cracks.

2. Undervalued. Its first quarter EPS is 93 sen. So how much do you think Heng Yuan can achieve for full year? For simple calculation (if you take a neutral stance), the full year earnings potential is RM3.60 of EPS. At RM8.00, you divide RM8.00 by RM3.60 you get 2.2x PE. I REPEAT 2.2x PE. Having said that, I always like to be conservative so I ignore one quarter and so only times 3... 93 times 3 gives you RM2.79... Still at this rate, we are talking about 2.9x PE stock... Do your own checking you will know that Oil & Gas Company should trade at least 7x PE...

3. Under researched. As of the time of writing, there is no single research by any investment banks in the world on this stock. What does that mean? It means that the big money (funds or foreigners) have not discovered this stock. If you do your own diligence and learned about the fundamentals of HENGYUAN, there is bigger chance to discover something that most people still does not fully understand.






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