An arm’s length relationship
Ho Chung Teng | 06 Jul 2018 00:30
Hengyuan Refining Company Bhd, formerly known as Shell Refining Company (FOM) Bhd, had a new breath of life following a change in control from Royal Dutch Shell plc to China’s Shandong Hengyuan Petrochemical Company Ltd (SHPL) on Dec 22, 2016.

Hengyuan managed to increase its FY17 net profit by more than 2.7 times to RM929.75 mil from RM335.27 mil in 2016.

The Port Dickson-based Hengyuan also sparked investors’ interest when its share price rallied to a 52-week high of RM19.20 on Dec 29, 2017 from RM2 on Dec 22, 2016. The bullish sentiment was buoyed by strong refining margins and lower downtime.

However, the good times did not last. Its latest quarterly net profit fell sharply by 68.94% and its shares have since plunged to close at RM6.18 on July 3, 2018, its lowest in three months.

The fall in net profit was attributed to lower margins due to volatile world oil prices and higher finance costs. The company also began to recognise tax charges as tax credits from prior years were fully utilised in FY17.

With poor investor sentiment and weak earnings outlook, fund managers FocusM spoke to remain concerned on Hengyuan’s fundamentals. They also feel SHPL had not been seen to be doing much since taking over, besides providing financial assistance to Hengyuan’s capital commitment and borrowings.

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