In July 2015, I projected that the stake may be sold for as little as RM1.19 per share based on the same formula that arrived at the selling price of Exxon group's 65%-stake in Esso Malaysia Bhd. Thus the selling of RM1.80 was a 50% higher than my computation.
The reasons for the sale by Royal Dutch Shell group are
1) the need to invest in upgrading the refinery plant to (meet) Euro 4M & Euro 5 requirementShellM did not mention the amount of capex to upgrade the refinery plant but we know that the company achieved the following results over
2) the consistent level of losses recorded
1) Revenue: RM108 billionThis is clearly shown by the chart below:
2) Pre-tax loss: RM667 million
3) Net loss: RM688 million
Chart 1: Shell's last 36 quarterly result
I have appended below the charts of ShellM and PetronM. Due to the sharp rally in PetronM in response to its outstanding profit in the past 3 quarters, Shell also rallied 3 weeks ago to a high of RM6.30. Today, the sweet memory of that rally would probably still linger in the mind of its shareholders. The quicker you shake of that memory, the sooner you would be able to take the decisive action to sell off your Shell shares. Shell
Chart 2: ShellM's weekly chart as at Jan 29, 2016 (Source: ShareInvestor.com)
Those investors who are fortunate enough to have bought into PetronM is reminded again that you should continue to take profit on that stock. Its last 3 quarters of sterling financial results is due to favorable crack spread- something which may not hold for long. See my earlier report on PetronM.
Chart 3: PetronM's weekly chart as at Jan 29, 2016 (Source: ShareInvestor.com)
Based on the above, it is recommended a SELL rating for both ShellM and PetronM.
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, ShellM & PetronM.