Ann Joo Resources Bhd BUY

Price target RM5.00

Share price at 7 May RM3.78

Investment summary


Q108 earnings again beat the Street by 50%, as the steel super-cycle continues to surprise on the upside. Record results re-affirm our BUY rating on AJR: (1) ASPs and margins will expand on global emerging market cyclical demand growth, plus possible domestic demand up-tick from the 9th Malaysia Plan; (2) 40% EPS CAGR driven by the new blast-furnace plant and privatization of AJS; (3) sub-market fully-diluted 6x FY08 PE.

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.



Watch the foreign s/holding

AJR is now on the screens of foreign brokers, and we think the share price should run given current low foreign shareholding (<5%) and broker upgrades from the Q108 results/ mini-BF plant.
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