Lion Industries Corp Bhd BUY
Price target RM3.30
Share price at 27 Feb RM2.00
Investment summary
H108 earnings doubled yoy, and is 20-30% ahead of HLG/market estimates. Earnings continue to be driven by margin expansion on higher steel ASPs, and re-affirm our BUY rating on the stock. We like Lion Ind because of: (1) cyclical regional demand growth and ASP inflation; (2) a sharp 40% discount to its SOTP, based on market prices of its LionDiv, Parkson and LionForest stakes; (3) sub-market FY08 PE of 5x. We are positive on Malaysia’s steel sector due to: (1) a rebound in domestic demand from the construction sector; (2) Chinese steel export curbs, which create a benign pricing environment for Malaysian producers; (3) the introduction of the APM in H108, which could reduce margin volatility.
Cheap RNAV to Parkson
H108 earnings (+170% yoy) beat the street on Q208 ASP hikes. Iron ore price hikes could bite in FY09, but the huge RNAV discount more than prices this in. Current mkt value of Parkson/LionDiv/LionForest stakes is RM2.50/share, and investors effectively get LionInd’s steel business for free.
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Tuesday 4 March 2008
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