Hengyuan- investors overreacted


If you look at the price chart you will see that it was Rm 18 about 3 months ago. In fact, I was too greedy I did not sell at Rm 18. But the Authorities forced me to sell to reduce my wife and my margin facilities limit by 75% in our Maybank trading account because I am a strong supporter of the opposition political parties. In fact, 3 income tax officers from KL raided my house in Ipoh and immediately frozen my Maybank current account a few months ago. As a result, I was forced to sell all our Hengyuan shares.

Yesterday our stock market over-reacted to the trade war between US and China which you can see in the news.

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Out of the 1,100 listed companies, more than 900 counters dropped in price. Investors always over-react to good or bad news. I think investors over-reacted on Hengyaun. They have the herd instinct. They are like sheep, always follow the leader. .

Today I will bottom fish and hope for the down trend to reverse to make money. As I pointed out in my previous article “Why Hengyuan is falling so rapidly”, its EPS for last year was Rm 3.03 per share. Yesterday, the share price dropped to around Rm 6, selling at P/E 2.

In my previous article, I said the refinery has to stop 2 months for upgrading and also the company has to pay tax for the profit it made last year. Due to these 2 factors, its share price will remain depressed until it starts to make increasing profit.

However, if I consider the 2 months shut down which will reduce its profit by about 20% and paying income tax is normal for all businesses, I should not be afraid to buy it for a long-term investment. I am prepared to wait.

I cannot find another good respectable company share selling at such ridiculously low P/E. I strongly believe the company will start making increasing profit next year and 1 year is not too long to wait.

As I said, 3 months ago the price was Rm 18, if I buy it at around Rm 6.??, I can afford to wait 1,2 or even 3 years for it to recover back to Rm 18. Even if it takes 3 years, I will get about 300% in 3 years. What is wrong with about 100% return per year?       




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