KUALA LUMPUR (Feb 20): AmResearch is maintaining its Buy on Ann Joo Resources with a slightly lower fair value of RM2.73 a share (previously: RM2.79) to factor in a more muted 4QFY11 and initial start-up cost for its new blast furnace project.
It said on Monday that notwithstanding, it projects FY12F to be a turnaround year for Ann Joo on account of:
(i) Stronger domestic demand with the imminent roll-out of domestic projects, particularly the Sg.Buloh-Kajang (SBK) MRT;
(ii) Earnings are at an inflection point (4.7 times jump in FY12F net profit to RM139 million);
(iii) Normalisation of key input costs (e.g. iron ore, scrap, coking coal); and
(iv) Full-year impact from its blast furnace operations.
“After a recent re-rating of CONSTRUCTION [] stocks, we recommend investors to catch the next MRT ‘wave’ through domestic steel plays,” it said.
AmResearch said with capex front-loaded, Ann Joo is one of only five integrated local suppliers of construction steel that can ride on the imminent roll-out of MRT works, irrespective of the contractors involved – maiden orders may kick in from June onwards.
"Ann Joo’s earnings are at its inflection point, rising from RM30 million in FY11F to RM139 million and RM179 million in FY12F-13F amid attractive forward PEs of 7.0 times and 9.0 times, below its six-year average historical price-to-earnings of 11 times," said the research house.
It said on Monday that notwithstanding, it projects FY12F to be a turnaround year for Ann Joo on account of:
(i) Stronger domestic demand with the imminent roll-out of domestic projects, particularly the Sg.Buloh-Kajang (SBK) MRT;
(ii) Earnings are at an inflection point (4.7 times jump in FY12F net profit to RM139 million);
(iii) Normalisation of key input costs (e.g. iron ore, scrap, coking coal); and
(iv) Full-year impact from its blast furnace operations.
“After a recent re-rating of CONSTRUCTION [] stocks, we recommend investors to catch the next MRT ‘wave’ through domestic steel plays,” it said.
AmResearch said with capex front-loaded, Ann Joo is one of only five integrated local suppliers of construction steel that can ride on the imminent roll-out of MRT works, irrespective of the contractors involved – maiden orders may kick in from June onwards.
"Ann Joo’s earnings are at its inflection point, rising from RM30 million in FY11F to RM139 million and RM179 million in FY12F-13F amid attractive forward PEs of 7.0 times and 9.0 times, below its six-year average historical price-to-earnings of 11 times," said the research house.
