Ann Joo Resources (Sell; TP: RM1.34) - Below our expectation

Stock Name: ANNJOO
Company Name: ANN JOO RESOURCES BHD

Research House: HLG

Price Call: SELL

Target Price: 1.34

Ann Joo Resources (Sell; TP: RM1.34)

Below our expectation

• FY11 core net profit of RM103.4m (-13.8%) came in below our expectation,at only 84.6% of our forecast. Variance against our forecast washigher-than-expected production cost.
• Recommended a final NDPS of 3.5 sen, bringing totalNDPS for FY11 to 7.5 sen.
• Management maintains its cautious view onsteel price outlook in 2012, given the global economic uncertainties and theexpected slowdown in the Chinese economy. Given its cautious view on steelprices, management indicated that it would pare down its inventory level forraw materials.
• Hopeful to achieve cost savings at itsblast furnace in 3 months' time, pending installation of several auxiliaryfacilities, the utilization of pulverized coal injection and the utilization ofcheaper raw materials.
• Expects sales tonnage of this division will grow by atleast 10% in 2012.
• Maintain 2012-13 net profit forecasts and TP of RM1.34 (based onunchanged 9x 2012 FD EPS of 14.9 sen).  

Source: HLIB Research 29 Feb 2012