HENGYUAN REFINING COMPANY BERHAD (HENGYUAN)

Hengyuan Refining Company Berhad (4324)

Hengyuan Refining Company Berhad (HENGYUAN) is one of only two petroleum refineries operating in Malaysia — the other being Petronas' RAPID refinery in Pengerang. Their refinery is located in Port Dickson, Negeri Sembilan, with a refining capacity of 156,000 barrels per day (bpd).

The company is involved in refining and manufacturing petroleum products, including:

• 🛢️ LPG (cooking gas)
• ⛽ Gasoline (RON 95/97 petrol)
• 🚛 Diesel
• ✈️ Aviation fuel (jet fuel)
• 🏭 Chemical feedstocks — light naphtha and propylene
• 🔥 Fuel oil components

The refinery was formerly known as Shell Refining Company. In 2016, Shell sold its 51% stake to Shandong Hengyuan Petrochemical, a Chinese oil refinery company. HENGYUAN is now controlled by Malaysia Hengyuan International Limited (MHIL) holding 51.02% of shares.

As one of only two refineries in Malaysia, HENGYUAN plays a strategic role in the national energy supply chain. However, profitability depends entirely on crack spreads — the price difference between crude oil and refined products.

HENGYUAN has posted a dramatic turnaround over its two most recent quarters. After years of losses and marginal profits, Q1 FY2026 (ended 31 March 2026) recorded net profit of RM525.55 million (EPS 83.39 sen) versus a loss of RM170.44 million in Q1 FY2025 — a swing of nearly RM700 million in a single quarter. This was followed by Q2 FY2026 (ended 30 June 2026), which posted net profit of RM600.54 million — the 4th consecutive profitable quarter and the highest in 4 years.

*Q2 FY2026 EPS is estimated based on ~600 million shares outstanding (official figure not yet reflected in our internal database). **The reported Q1 FY2025 EPS appears inconsistent with the loss magnitude — likely a share-count adjustment (rights issue) during that period; use the ringgit profit/loss figure as the primary reference.

For the first half of FY2026 (H1 FY2026), HENGYUAN posted revenue of RM10.06 billion (up 71% YoY) and net profit of RM1.13 billion — the highest first-half result in 10 years. The main driver: much higher average selling prices for refined products amid Middle East geopolitical tensions, supported by stable plant operations and disciplined financial risk management.

Major development: HENGYUAN declared a 10 sen per share dividend for Q2 FY2026 — the company's FIRST dividend since Q2 2022. This ends a long dividend drought and directly corrects the long-standing perception of HENGYUAN as a 'zero dividend' stock. At the current price of RM3.18, this single dividend gives an indicative yield of about 3.14% — but this is NOT an annualized yield, since only one payment has been declared so far.

The payout ratio against Q2 FY2026 EPS (~100 sen) is only around 10% — very conservative. This suggests cautious management, possibly prioritising balance sheet and working capital strength after years of financial pressure, rather than aggressively distributing profits immediately.