Unhappiness at Hengyuan

IT was just five months ago when shareholders of Hengyuan Refining Company Bhd were riding high.

The company’s shares were one of the best performing on Bursa Malaysia for 2017. The company reported spectacular profits for that year, and investors were looking forward to its share price surpassing RM20 apiece. Fast forward to today and Hengyuan is trading at a mere RM7 a share, and for its first quarter ended March 31, earnings plunged by a massive 69% to RM86.8mil from RM279.5 mil a year earlier. The company has declared a mere two-sen dividend.

To be fair, Hengyuan’s earnings are co-related to the price of oil. It is an oil refiner and earns its money from the spread between the price of oil and petroleum products. The margins are fixed. Refiners make more money when oil prices move faster than the petroleum products. This is why the company made a lot of profits last year, as the price of oil was on an uptrend. However, after prices stabilised at a high price, Hengyuan’s profits have been negatively impacted, as would all refiners in Malaysia. Still, shareholders of the company are not impressed.

At its AGM this week, disgruntled shareholders were queuing up to express their dissatisfaction with the company or share their views on how to improve its performance. Questions focused on the company’s decision recently to secure financing facilities worth US$430mil (RM1.7bil) to fund the planned upgrade and maintenance of its refinery. It has allocated RM700mil in capital expenditure over the next one to two years to finance two cornerstone projects. Shareholders, on the other hand, are wondering what’s being done for them, with some suggesting bonus shares or free warrants, or at least a share split considering the high price of the stock.

All eyes are now on Hengyuan and what it will do to regain investor interest.