OSK trims MSC fair value, maintains 'buy' call (5916)

Declining tin prices have raised concerns over Malaysia Smelting
Corporation Bhd's (MSC) earnings. This said OSK Research, might force
it to slash about 55.1 per cent of the company's financial year 2012
earnings.

The research house has also cut its financial year 2012 tin price
estimate to US$20,000 per tonne (US$1 = RM3.18).

"We
had earlier warned investors of a potential earnings downgrade as tin
prices fell on renewed concerns over Europe's growing sovereign debt
crisis.

"On top of the tin price revision, we also incorporated
higher mining costs at PT Koba Tin, as the sharp plunge in prices may
have caught the company's management off-guard.

"As the shift
from a higher cost mining pit to one of lower cost spurred by falling
tin prices may take time and affect the company more severely, we are
prompted to slash our 2012 earnings forecast for MSC drastically by
55.1 per cent to RM39.5 million," the firm said in a research note
today.

OSK Research said however, despite the negative macro
impact, MSC made efforts to expand its tin business in first half of
the current financial year, including an extension on Rahman Hydraulic
Tin's (RHT) mining concession, striking a strategic agreement with an
influential Indon partner to extend PT Koba's Contract of Works (CoW),
and establishing a presence in Africa.

For the financial year
ended Dec 31, 2011, MSC, an integrated producer of tin metal and
tin-based products, registered a core net profit of RM85.6 million on
the back of RM3.098 billion, in revenue.

The research house
is also trimming MSC's fair value to RM5.50 following the earnings
revision, but yet maintained its "buy" call. -- Bernama