AP Oil

(08-12-2014, 09:54 PM)chew Wrote: this may be relevant to AP oil's case

http://www.livemint.com/Money/FZ2lv9m7Iw...um=twitter

Thanks Chew for the article. I shall quote and organize the important parts here for easy reading -

Falling crude prices, though, may not immediately reflect in the company’s margins. The company usually carries 45-60 days of raw material inventory. So, for the falling base oil prices to reflect in the company’s raw material costs, it can take about two months, likely from January next year (if we take November as the base).

Even then, one cannot for sure say the entire drop in the crude or the base oil prices will be captured in the company’s margins. If the competition decides to pass on the benefits of low raw material prices, Gulf Oil will have no option but to follow them.

The translation, however, happens with a lag. Also, in a falling base oil price scenario, the industry tends to retain some of the benefits from falling raw material prices.

Does overall market demand volume of lube increase because of lower crude and natural gas prices? Maybe just moderately if and when global economic activities expand because of lower oil and gas prices. Meanwhile, those in the value chain which have a long raw materials inventory position of a few months may have to suffer lower profit margins in the short term because of market competition and customers' expectation of lower market prices.

Seems like AP Oil is trying to further expand its network into the Asia Pacific and Middle East region with the acquisition of 60% interest in Heptalink Chemicals. Based on its business model (see 'Our Business Model': http://www.heptalink.com/about-heptalink.asp ), I believe its a huge value-add to its existing core operations. The acquisition seems like a good deal and AP Oil should be well positioned to fund this purchase with its $20M+ of cash.

http://infopub.sgx.com/FileOpen/APOIL_AN...eID=327628

Heptalink is merely a trader in oil and petrochemicals, and there are many middleman traders in the oil and gas value chain. The value of a trader would usually include product knowledge and trading experience (especially prudence and risk management), plus good contacts with customer/supplier counter-parties and logistics providers in the physical trades domain. If AP Oil is buying 60% with the understanding to bank-roll Heptalink's growing and naturally high-risk oil trading activities, they better have a close handle on what the new company would trade in and the related finances.

(12-12-2014, 08:55 AM)dydx Wrote: Heptalink is merely a trader in oil and petrochemicals, and there are many middleman traders in the oil and gas value chain. The value of a trader would usually include product knowledge and trading experience (especially prudence and risk management), plus good contacts with customer/supplier counter-parties and logistics providers in the physical trades domain. If AP Oil is buying 60% with the understanding to bank-roll Heptalink's growing and naturally high-risk oil trading activities, they better have a close handle on what the new company would trade in and the related finances.

I would also add that other than the product knowledge and trading experience, the value may also include the customer network that Heptalink might have built up over the years since it started operations in 2011 and whether AP Oil's products can tap into this existing network. There ain't much information on all these so I guess the proof still lies in the results.

Interestingly, AP Oil also disposed all of its 38.2% interest in one of its associates at a premium to book:
http://infopub.sgx.com/FileOpen/AP%20Oil...eID=327836

A quick calculation should show that there will be more cash idling in the the balance sheet despite the acquisition of Heptalink. Personally, I feel that the management may be good business operators, but probably not as good capital allocators. Hopefully these cash will put into better use and reward shareholders in the long run.

AP Oil has released its financial report for FY2014:
http://infopub.sgx.com/FileOpen/APOIL_FU...eID=335898

Given the latest market price of $0.205, I find AP Oil to be a value buy for the following reasons:

1) AP Oil has grown its equity from $10.5 mio in 2001 when it IPOed, to $46.3 mio in 2014.

2) It has a low P/E of 6.6.

3) It has been generating free cash flow for the past five years.

3) It zero debt.

4) Its cash balance of $31.3 mio is only slightly less than its latest market cap of $33.7 mio (at $0.205 per share).

(24-02-2015, 08:34 PM)karlmarx Wrote: AP Oil has released its financial report for FY2014:
http://infopub.sgx.com/FileOpen/APOIL_FU...eID=335898

Given the latest market price of $0.205, I find AP Oil to be a value buy for the following reasons:

1) AP Oil has grown its equity from $10.5 mio in 2001 when it IPOed, to $46.3 mio in 2014.

2) It has a low P/E of 6.6.

3) It has been generating free cash flow for the past five years.

3) It zero debt.

4) Its cash balance of $31.3 mio is only slightly less than its latest market cap of $33.7 mio (at $0.205 per share).

don't forget, read the earlier posts on this thread.

1) History of poor dividend payout, past few years despite good cash flow and not much capex, $0.005 div = yield of 2.44% (EPS is $0.228 leh, cannot even payout half meh?)

2) Fat Paycheck for directors / management.

Waste of time to park your money here.

However now that Net cash is so high level, can keep on radar and wait for signal from directors to G.O. (share buy-backs and director open market purchase) as they will want to privatise on the cheap. This is the next logical step given that they have been marginalising OPMI for so long and the same people are still running this ship.

(24-02-2015, 09:16 PM)BlueKelah Wrote:

(24-02-2015, 08:34 PM)karlmarx Wrote: AP Oil has released its financial report for FY2014:
http://infopub.sgx.com/FileOpen/APOIL_FU...eID=335898

Given the latest market price of $0.205, I find AP Oil to be a value buy for the following reasons:

1) AP Oil has grown its equity from $10.5 mio in 2001 when it IPOed, to $46.3 mio in 2014.

2) It has a low P/E of 6.6.

3) It has been generating free cash flow for the past five years.

3) It zero debt.

4) Its cash balance of $31.3 mio is only slightly less than its latest market cap of $33.7 mio (at $0.205 per share).

don't forget, read the earlier posts on this thread.

1) History of poor dividend payout, past few years despite good cash flow and not much capex, $0.005 div = yield of 2.44% (EPS is $0.228 leh, cannot even payout half meh?)

2) Fat Paycheck for directors / management.

Waste of time to park your money here.

However now that Net cash is so high level, can keep on radar and wait for signal from directors to G.O. (share buy-backs and director open market purchase) as they will want to privatise on the cheap. This is the next logical step given that they have been marginalising OPMI for so long and the same people are still running this ship.

i use the latest annual report
http://www.apoil.com.sg/UploadedImg/file...AR2012.pdf

it shows renumeration to director and management is 4.2million,

comprehensive income is 4.7 million

dividend is 0.83 million

so if we take 4.2/(4.2+4.7)=47% of income is going to management

about 0.83/(4.2+4.7)=9% of income is going to shareholder

i dont see how this ratio is going to change, after so many years,

there is nothing you can do about it, as the management controls almost 50% of it, they figure out it is more profitable to pay the profit to themselves then to pay out as dividend

yesterday FS, shows it makes 2.88 cents, at 9% ( profit +salary), return to shareholder, is about 0.5 cents, assume the growth of income 4%, let say require return is 10%

using discounted dividend valuation the worth of the share is 0.5/(0.1-0.04)=8.33 cents

I dont see how there is any change to this company structure in the future, the son is groom to takeover the company, the milking can continue for a long time , given these dividend and structure, it is cheaper just to let the minority shareholder keep the share then to takeover

Good set of results announced but unfortunately the improvement in earnings is not commensurate with the dividends declared. Although I wouldn't use dividends to value a company like AP Oil, the sustained low dividend payout is a poor reflection of the management's intention to reward shareholders. Nevertheless, the company did pay some dividends every year in the past few years and price now is still reasonable. Might be a long wait but rewards may be attractive too.

(25-02-2015, 12:50 PM)secretinvestors Wrote: Good set of results announced but unfortunately the improvement in earnings is not commensurate with the dividends declared. Although I wouldn't use dividends to value a company like AP Oil, the sustained low dividend payout is a poor reflection of the management's intention to reward shareholders. Nevertheless, the company did pay some dividends every year in the past few years and price now is still reasonable. Might be a long wait but rewards may be attractive too.

I did attend an AGM of apoil a few years ago and the reason given for the low payout was that it is such a small cap co, the company needs to a set a sort of 'minimum sum' aside before it can payout dividend. The smaller the co, the higher the percentage it has to set aside. SGX rule or so. Never verified this statement tho. I am OK with current management and company direction.