Stock Name: SSTEEL
Company Name: SOUTHERN STEEL BHD
Research House: INTER PACIFIC
KUALA LUMPUR: Inter-Pacific Research Sdn Bhd has recommended SOUTHERN STEEL BHD [] (SSB) an outperform at RM2.35 with target price RM2.80 on the back of a more optimistic outlook which translates into firmer demand and steel price.
The target price of RM2.80 was derived based on a PER of 8.15 times on FY10 EPS of 34.4sen and P/BV of 1.35 times, it said.
The research house said that underpinned by better economy and firmer steel prices, SSB's top and bottom line which turned to black in 4QFY09 continued to remain in black in 1QFY10.
Topline in 1QFY10 surged by 59.7% year-on-year and 6.8% quarter-on-quarter to RM628.7 million, translating into earnings of RM34.5 million which accounts for 23.9% of FY10's forecast, it said.
"Although SSB's earnings improved, margins for both pre-tax and net profit eroded in 1QFY10 to 5.9% and 34.5% respectively from 10.8% and 59.7% in 4QFY09 respectively.
"Erosion was due to higher raw material cost which has been on the rise since early 2010. Pressure on margins could remain as the economic recovery at this stage remains nascent, thus affecting demand," it said.
Inter-Pacific Research said steel prices are expected to stay firm going forward primarily supported by both private and public CONSTRUCTION [] activities which are expected to roll out more significantly after the 10MP is unveiled in June 2010, plus possible stocking up by traders in anticipation of further price increases.
Company Name: SOUTHERN STEEL BHD
Research House: INTER PACIFIC
KUALA LUMPUR: Inter-Pacific Research Sdn Bhd has recommended SOUTHERN STEEL BHD [] (SSB) an outperform at RM2.35 with target price RM2.80 on the back of a more optimistic outlook which translates into firmer demand and steel price.
The target price of RM2.80 was derived based on a PER of 8.15 times on FY10 EPS of 34.4sen and P/BV of 1.35 times, it said.
The research house said that underpinned by better economy and firmer steel prices, SSB's top and bottom line which turned to black in 4QFY09 continued to remain in black in 1QFY10.
Topline in 1QFY10 surged by 59.7% year-on-year and 6.8% quarter-on-quarter to RM628.7 million, translating into earnings of RM34.5 million which accounts for 23.9% of FY10's forecast, it said.
"Although SSB's earnings improved, margins for both pre-tax and net profit eroded in 1QFY10 to 5.9% and 34.5% respectively from 10.8% and 59.7% in 4QFY09 respectively.
"Erosion was due to higher raw material cost which has been on the rise since early 2010. Pressure on margins could remain as the economic recovery at this stage remains nascent, thus affecting demand," it said.
Inter-Pacific Research said steel prices are expected to stay firm going forward primarily supported by both private and public CONSTRUCTION [] activities which are expected to roll out more significantly after the 10MP is unveiled in June 2010, plus possible stocking up by traders in anticipation of further price increases.
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