Monday, November 8, 2021

CAN HENGYUAN REPEAT ITS GLORY FORM IN 2017 2018 ?

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As you know that I had mentioned about Hengyuan earlier, hence today I would want to tell you why I am optimistic on Hengyuan performance in the mere future for at least the next 6 months to come.

Here  I would want to show you the past trading chart of Hengyuan against the oil refinery crack spread. I will use the nearest regional global spot price, which is the Singapore Morgas 92 unleaded as a benchmark on Hengyuan pricing

If you want to refer to this oil crack spread in the future, here is the link

So what is packing in for Hengyuan in the coming short term future?



As you can see, Hengyuan had an exceptional run up in share price when it start to deliver stellar result from the quarterly earning. The share price had started to run in November 2017, and shot up to above RM 17 at the end of December 2017 heading into Jan 2018.

If you compare the chart on Singapore Morgas 92, there is a period of peak oil demand where refinery capacity is very fully loaded, where the oil crack spread shot above USD 14 per barrel.

This is usually an indication of a bottleneck whereby supply is limited and demand is furiously high, which is back in 2017.


Now coming to the end of 2021, where are we looking at?

Demand pull factor
1. Economy reopening from the coronavirus pandemic. Heavy industry restart operation, logistic and machinery are starting their engine and running again.

2. Higher pricing in Natural Gas and Coal had pushed power plant to take up crude oil as substitute feed stock for power producing in China. Coal price higher due to flooding in China.

3. Winter season which is coming to the northern hemisphere will pent up demand for power due to switching on of house heating equipment


Supply drag factor
1. Hurricane Ida disrupted 2 month of oil refinery operation in the US, which account for more than 30% of the US output

2. Oil cartel OPEC+ decision to follow the gradual increase of oil production will scramble buyer to buy more oil now in fear of price getting higher and higher which will spike high feed in cost due to demand more than supply.

Conclusion
With the above factor combining together, we might be able to see Hengyuan going back into 2017 2018 where result will be greatly improved.

At the current price of below RM 4.30, Hengyuan is definitely a attractive option for any investor looking for medium term oil sector exposure.

I had to informed that I had invested into Hengyuan based on my own research on the information I had researched on. However, this should not be construe as an investment decision for you as a reader. Please do your own concluding research and make your own investment decision to buy sell or trade in Hengyuan.

IMPORTANT NOTICE

Projection is based on estimation, and I am not responsible for the accuracy of the data provided. Please be informed, I am not a professional or certified analyst. I am not a licensed consultant, just a normal retail investor. I am just sharing my ideas and opinion on the market outlook. Any company mentioned should not be interpreted as a buy/sell/trade call. Please do your own research and buy/sell/trade at your own risk.



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