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Is Petron Malaysia a value trap? (Part 2 of 2)

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Value Investing Case Study 05-2:  Investment thesis of Petron Malaysia. This post focuses on top management performance, risks, and valuation.    Petroleum products are commodities. To win in this environment, Petron Malaysia has spent considerable efforts to  Improve its refining operations,  Expand its distribution and logistics infrastructure,  Expand its service station network, Establish its Petron brand. With its current price of RM 3.26 (1 Oct 2020) compared to its NTA of RM 5.93 (as of 30 June 2020), you may wonder why the market is not recognizing these efforts. Has the market overswung on its way down or are there management issues and other risks that the market has inferred into the price?  In Part 1 , I have shown that despite the Malaysian economic environment and the excess capacity in the global oil market, Petron Malaysia has managed to grow its physical sales volume.  In Part 2, I will argue that Petron Malaysia has the financial resources and track record for lo

Is Petron Malaysia a value trap? (Part 1 of 2)

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Value Investing Case Study 05-1:  Fundamental analysis and valuation of Petron Malaysia. This post focuses on its current situation, how it got to where it is today, and its future prospects Petron Malaysia Refining and Marketing Berhad (Petron Malaysia) is a downstream oil and gas company. With its current price of RM 3.26 (1 Oct 2020) compared to its NTA of RM 5.93 (as of 30 June 2020), you may wonder why is the market giving you such a bargain. No doubt the oil and gas industry is going through a challenging period due to the Covid-19 pandemic as well as the global excess supply.  Is the share price at such a level because the company has poor prospects?  Are its assets going to be impaired? If these answers are yes, then it is a value trap.  But if it is not, then it is a bargain Join me in a 2-parts series as I present my rationale why Petron Malaysia is not a value trap. I will show that it still has a good future and that its assets are not going to be impaired.  Its intrin

Baby steps in assessing Permanent Loss of Capital

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Case Notes 04: This is a post about how I compared the risk of investing in two companies from a permanent loss of capital perspective using a risk management framework. In investing, there are 2 schools of thoughts about risk The volatility school that view risk as variance The permanent loss of capital school that view risk as a permanent reduction of the amount invested The volatility school has strong academic credentials.  This branch of finance theory has developed to a stage where you can numerically bring risk into the valuation process.   But all the discussions on risk as permanent loss of capital are qualitative. If you are a beginner in investing following the permanent loss of capital school, how can you manage risk? Specifically How to compare risks between two companies? How to methodically bring the permanent loss of capital into the investment process? This can be achieved through a risk management approach comprising: Identifying the possible causes that can lead