KUALA LUMPUR (April 23): ECM Libra Investment Research has initiated coverage on Lion Industries Holdings Bhd at RM1.37 with a strong Buy recommendation and target price of RM2.16.
In a note Monday, the research house said the share price had fallen 37% from its previous peak of RM2.16, reflecting the bearish sentiment faced by the local steel industry, marked by deteriorating earnings reported by its peers like Masteel, Kinsteel and Perwaja over the past few quarters in CY11.
ECM Libra said the company has managed to revamp its balance sheet from being highly geared in FY06 (101%) to one with a net gearing of 3% at end-2QFY12, thus adding 58% to its NAV/share over the period.
“However, we think this accretion to shareholders’ funds has been overlooked as the stock trades at only 0.3x P/B, which is a steep discount to its peer average P/B of 0.6 times.
“Therefore, we feel that the stock deserves to be re-rated to RM2.16, based on sur sum-of-parts valuation, implying a forward FY13 P/B of 0.5 times,’” it said.
In a note Monday, the research house said the share price had fallen 37% from its previous peak of RM2.16, reflecting the bearish sentiment faced by the local steel industry, marked by deteriorating earnings reported by its peers like Masteel, Kinsteel and Perwaja over the past few quarters in CY11.
ECM Libra said the company has managed to revamp its balance sheet from being highly geared in FY06 (101%) to one with a net gearing of 3% at end-2QFY12, thus adding 58% to its NAV/share over the period.
“However, we think this accretion to shareholders’ funds has been overlooked as the stock trades at only 0.3x P/B, which is a steep discount to its peer average P/B of 0.6 times.
“Therefore, we feel that the stock deserves to be re-rated to RM2.16, based on sur sum-of-parts valuation, implying a forward FY13 P/B of 0.5 times,’” it said.
