PetronM: Bottoming soon?

Background

Petron Malaysia Refining & Marketing Bhd ("PetronM") is involved in the manufacture and marketing of petroleum products in Malaysia. Its products include gasoline, diesel, liquefied petroleum gas, industrial and commercial fuels, and aviation fuel.

PetronM, formerly Esso Malaysia Bhd, is a subsidiary of San Miguel Corp ("SMC") of the Philippines. SMC bought over the company from Exxon Mobil Corp in 2011 for USD600 million.

Latest Quarterly Results

After six consecutive quarters of losses, PetronM returned to the black in QE31/3/2015. It reported a net profit of RM47 million on lower revenue of RM1.84 billion.

Revenue dropped 38% due to the lower selling prices as a result of lower oil prices. Sales volume remained flat at 7.2 million barrels. Product mix changed with higher sales of gasoline, LPG & aviation fuel & lower sales of retail diesel & exports.

Due to lower input costs (processed crudes) and its output (finished products), its gross profit & operating income improved significantly. This led to a net profit of RM57 million ( as compared to a net loss of RM48 million in QE31/12/2014 or RM7 million in QE31/3/2014).


Table: PetronM's last 11 quarterly results


Chart 1: PetronM's last 11 quarterly results

Financial Position

As at 31/3/2015, PetronM's financial position is deemed adequate, with current ratio at 1.2 times & gearing ratio at 1.6 times.  

Valuation

PetronM (closed at RM2.80 on May 22, 2015) is now trading at a PB of 0.93 times (based on NTA of RM3.02 p.s.). With a positive bottom-line and dividend, we can't compute PetronM's PER and DY. Unless PetronM's earning continues to recover, PetronM's valuation is deemed unattractive.

Technical Outlook

PetronM is resting at the lower line of its irregular upward channel at RM2.50. Unless the tentative earnings recovery frizzles out, this could be a good entry level for the stock.


Chart 2: PetronM's monthly chart as at May 22, 2015 (Source: ShareInvestor,com)

Conclusion

Based on tentative turnaround  & technical support sighted at present price, PetronM could be a good stock for a recovery play.

Note: 

In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, PetronM.