Lion Industries on 'hold' with uncertainty in steel sector / other analyst calls

by **Cals** Wed 15 Jan 2014, 04:45

Published: Tuesday January 14, 2014 MYT 12:00:00 AM
Updated: Tuesday January 14, 2014 MYT 7:57:26 AM
Lion Industries on 'hold' with uncertainty in steel sector
BY ANALYST REPORTS
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For Esthetics International it is 'buy'.
LION INDUSTRIES CORP BHD
(LICB)
By AmResearch
Hold (re-initiation)
Fair value: 82 sen

WITH uncertainty now in the steel sector driven by higher operation costs due to the electricity tariff hike, overcapacity in China, which continued to suppress global steel prices and dumping of cheap wire rods and billets from China in the local market,AmResearch said it re-initiated coverage on Lion Industries Corp Bhd (LICB) with a “hold”’ recommendation.
While the acceleration of Mass Rail Transit (MRT) jobs was expected to benefit steel players, it said the steel products manufacturer and property developer conglomerate’s earnings would be negligible due to depressed margins given the rise in costs and weak selling prices.
Following a restructuring exercise that was completed early last year, Lion Corp Bhd had disposed of its 27% stake in LICB to Tan Sri William Cheng, who now holds a 30% direct stake in LICB.
The bank-backed research house said it was also positive over the recent termination of a proposed joint venture to develop a blast furnace.
Reflecting the tough operating environment, it has included a 75% discount to the sum-of-parts derived value of RM3.28 per share to arrive at a fair value of 82 sen per share.

WAH SEONG CORP BHD
By RHB Research Institute
Buy
Target price: RM2.25

WITH abundant pipe-coating work orders to rejuvenate margins, more overseas jobs to mitigate dependence on domestic works and higher associate income, RHB Research has rated Wah Seong Corp Bhd (WSC) a “buy”.
It said it expected these factors to diminish the negatives of the international oil and gas and industrial services group’s loss-making plantation venture and low margin jobs.
It added this was supported by a RM1.7bil oil & gas (O&G) orderbook backlog including Statoil and North Malay Basin jobs which will become full scale in financial year ending Dec 31, 2014 while it conservatively assumed Wah Seong’s exposure to the recently-terminated Kristin project as minimal at RM20mil to RM30mil.
The bank-backed research house noted that the company was securing more overseas jobs, which boded well against the dependency on domestic works.
WSC said that any jobs related to Petronas’ enhanced oil recovery projects, marginal oil fields and pipeline replacement works were expected to be small in value, but would provide some level of recurring orderbook replenishment.
With new bids for O&G jobs in Brazil and West Africa, and better prospects in the oleochemical market that directly supported the process equipment of its renewable energy division, RHB Research said the company was rated “buy” at a target price of RM2.25 at 16 times of its price-to-earnings ratio.

ESTHETICS INTERNATIONAL
GROUP BHD
By RHB Research Institute
Buy
Target price: RM1.78

HAVING an established partnership with the reputable Dermalogica skincare group, committed family-led management and decent earnings growth, RHB Research Institute has rated Esthetics International Group (EIG) with a “buy” call.
The bank-backed research house said it expected the group to register core earnings of RM15.8mil to RM21.7mil, implying a three-year compounded annual growth rate of 11.2% in the financial year ending March 31, 2014 (FY14) to FY16 forecast respectively.
As part of management’s plan to expand its regional presence by leveraging on Dermalogica’s maturing brand, the group also intends to expand its products offering and brands via potential partnerships with international brand owners.
The company, which focuses on the distribution of skincare, cosmetics and wellness products as well as services through its network of self-owned and third-party salons, also owns and operates the AsterSpring chain of beauty salons, which carry Dermalogica’s skincare products.
To strengthen its market presence, EIG is looking to increase the collective number of its own salons and retail kiosks to 100 outlets over the next three to five years from 70 currently.
It has forecast an annual dividend yield of 3.1% to 3.8% for FY15 to FY16 respectively, in view of EIG’s current net cash of RM59.4mil.

GREENTOWN CHINA HOLDING
LTD (HK)
By Hong Leong Investment
Bank Bhd

GREENTOWN China Holdings Ltd builds residential villas, low-rise and high-rise apartment for the middle and high-income people.
The developer’s stock is currently trading at 3.7 times financial year 2014 (FY14) forward of price-to-earnings as compared with the industry average of 10.5 times.
Hong Leong Investment Bank Bhd noted that there were 19 analysts rating the stock with “buy” calls against two “hold” and two “sell” ratings. Compared with the consensus target price of HK$16.77, this will translate to a further 39% upside potential. 
Chart-wise, the share price is gaining upside momentum due to the hourly downtrend channel breakout; daily downtrend channel breakout and hourly and daily indicators that showed that bulls were gaining strong momentum.
The investment bank also noted that the upside targets were at HK$12.93 with a 50-day simple moving average (SMA) and HK$14 (100-day SMA), with long-term target price of HK$16.76 which was the high on Aug 15, 2013. Immediate supports are at HK$11.70 (100-hour SMA) and HK$11.49 (downtrend line). It also recommended cut loss at HK$11.37 (50-hour SMA).