Lion Industries (Initiating Coverage): Same lion with a different skin
Date:
2012-04-23
Firm:
ECMLIBRA
Stock:
Price Target:
2.16
Price Call:
BUY
Last Price:
0.23
Upside/Downside:
+1.93 (839.13%)
STRONG BUY, TP: RM2.16
Weinitiate coverage on Lion Industries with a Strong Buy call. The share pricehas fallen 37% from its previous peak of RM2.16, reflecting thebearish sentiment faced by the local steel industry, marked by deterioratingearnings reported by its peers like Masteel, Kinsteel and Perwaja over the pastfew quarters in CY11. The company has managed to revamp its balance sheet frombeing highly geared in FY06 (101%) to one with a net gearing of 3% atend-2QFY12, thus adding 58% to its NAV/share over the period. However, we thinkthis accretion to shareholders' funds has been overlooked as the stocktrades at only 0.3x P/B, which is a steep discount to its peer average P/B of0.6x. Therefore, we feel that the stock deserves to be re-rated to RM2.16,based on our sum-of-parts valuation, implying a forward FY13 P/B of 0.5x.
Source: ECM Newz Bits 23 April 2012, Full PDF Report
Weinitiate coverage on Lion Industries with a Strong Buy call. The share pricehas fallen 37% from its previous peak of RM2.16, reflecting thebearish sentiment faced by the local steel industry, marked by deterioratingearnings reported by its peers like Masteel, Kinsteel and Perwaja over the pastfew quarters in CY11. The company has managed to revamp its balance sheet frombeing highly geared in FY06 (101%) to one with a net gearing of 3% atend-2QFY12, thus adding 58% to its NAV/share over the period. However, we thinkthis accretion to shareholders' funds has been overlooked as the stocktrades at only 0.3x P/B, which is a steep discount to its peer average P/B of0.6x. Therefore, we feel that the stock deserves to be re-rated to RM2.16,based on our sum-of-parts valuation, implying a forward FY13 P/B of 0.5x.
Source: ECM Newz Bits 23 April 2012, Full PDF Report
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2012-04-26 10:33