PetronM's net profit rose 29% q-o-q to RM73 million on the back of a 23%-increase in revenue to RM2.265 billion. Revenue increased q-o-q due to higher selling prices of finished products & increased output of 7.9 million barrels (compared to 7.2 million barrels in QE31/3/2015). The company attributed the improved bottom-line to operational efficiency and improved margins (flowing from continued cracking margin recovery).
Cracking margins or crack spreads represent the price difference between refiners’ revenues—achieved through the sale of finished refined products—and refiner costs—that is, the price of crude oil. Crack spreads increase when product prices increase more than the price of crude oil, or when the price of crude oil falls more than product prices.
Table: PetronM's last 11 quarterly results
Chart 1: PetronM's last 11 quarterly results
Valuation
PetronM (closed at RM2.86 yesterday) is now trading at a PER of 3 times (based on annualized EPS of 96 sen). The exceptionally high earning is likely to reverse once the crude oil prices recover and the crack spreads narrow.
Technical Outlook
PetronM tested its uptrend line support at RM2.50 last few months. It has now broken above its intermediate downtrend line, RR at RM2.80. This means that the stock could rise further.
Chart 2: PetronM's monthly chart as at Aug 25, 2015 (Source: ShareInvestor,com)
Conclusion
Based on turnaround in financial performance, attractive valuation & mildly positive technical outlook. PetronM could be a good stock for a medium-term investment.
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.
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