Investing

Hengyuan: are you in a dilemma?

 

The price chart of Hengyuan shows its price has gone up from below Rm 3.00 in January to close at Rm 14.42 on 22 Dec 2017, an increase of 480% within 12 months.

From the i3investor, I see many people with so many different views. Some are in a dilemma.

Let me illustrate the scenario with pictures.

Case 1

One who did not buy Hengyuan is like the bird hiding its face. He did not buy Hengyuan because it has gone up so rapidly and he was waiting for its correction to buy. But the corrections are usually so small and short. Before long, it continues to climb again.

Case 2

The one who has bought earlier and sold. He is laughing to the bank as you can see from the picture below. He is in a dilemma when he sees the price continue to climb. To buy back or not?

Case 3: The above average investors who have bought Hengyuan earlier and are selling slowly. They intend to sell all their holdings when its 4th quarter is announced.

Case 4

The super investors continue to buy using margin finance. As the price goes higher, they can borrow more to buy. They are so bullish because they can see that its 1st half year EPS was Rm 1.20. Its 3rd quarter EPS was Rm 1.21 and they expect its 4th quarter EPS to be more than its 3rd quarter because its crack spread or profit margin has been better during the 4th quarter.

Among all the super investors, there is one out standing who would not sell because he believes the company will continue to produce increasing profit. He will only sell when he sees a reduced profit in one quarter. He expects Hengyuan to show increasing profit for a long time.

Based on the huge volume traded daily, he also believes that institutional investors from China are buying aggressively because Hengyuan is controlled by a famous Chinese company from China. They cannot find another counter with similar quality as Hengyuan, selling at such low P/E ratio in China.

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