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 was higher-than-expected production cost.
- Recommended a final NDPS of 3.5 sen, bringing total NDPS for FY11 to 7.5 sen.
- Management maintains its cautious view on steel price outlook in 2012, given the global economic uncertainties and the expected slowdown in the Chinese economy. Given its cautious view on steel prices, management indicated that it would pare down its inventory level for raw materials.
- Hopeful to achieve cost savings at its blast furnace in 3 months’ time, pending installation of several auxiliary facilities, the utilization of pulverized coal injection and the utilization of cheaper raw materials.
- Expects sales tonnage of this division will grow by at least 10% in 2012.
- Maintain 2012-13 net profit forecasts and TP of RM1.34 (based on unchanged 9x 2012 FD EPS of 14.9 sen).
Source: HLIB Research 29 Feb 2012
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