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Thursday, December 22, 2011

Lion Industries Corporation Berhad buy or sell

Lion Industries share price RM1.36.Two different stories by two brokers, EcmLibra said STRONG BUY (2Dec) and RHB said Underperform (5dec).

Lionind stock PE Ratio: for financial year ended June 2011, PE ratio is about 8x.

Growth: RHB forecast negative 14.3% (2012), positive 18.9% (2013) and positive 9.2% (2014).

The EcmLibra report does not provide any forecast figures, but saying the share price of Lion Industries have dropped 38% due to fear of a slowdown in Malaysia’s economic and other steel companies have already reported losses. But their view is that Malaysia will continue to register positive economic growth in 2012 and Lion Industries will benefit when many infrastructure projects kick off in 2012.

Lion Industries is having net cash. Dividend yield is quite low.

Comment by RHB:
LionCorp proposed capital reconstruction and settlement. Lion Industries will end up with a smaller stake in LionCorp, to 14.3%. During the process, Lion Industries may need to write-off 80% of the trade receivables and could be ended up with a net loss of RM45.6m.

Steel producers will continue to be under pressure, due to weak steel prices, high material cost, and hike in electricity and natural gas tariff. The financial uncertainties of LionCorp may spill over o Lion Industries by virtue of LionCorp’s 25% stake in Lion Industries. Lionind fair value is RM1.19.

Comment by EmcLibra:
Lion Industries has undergone a transformation for the past five years, from highly geared company to a clean balance sheet. Although cyclical nature of the steel industry, they still added value from Net Asset Value per share of RM2.88 to RM4.54. If value Lion Industries at 50% of RNAV per share of RM4.31, Lion Industries fair value will be RM2.16, that is 61% upside potential. If the Lionind share price can trade close to the RNAV per share, then the potential upside will be 217%. Overall comment is Strong Buy. For info, one of the item that EcmLibra used to derive the RNAV is 50% receivables write-off.

I’m not sure why there are two different views from analysts. Maybe something happened or got major news between 2Dec to 5Dec. More info, please refer to RHB and EcmLibra.

Uo to individuals.

Other articles:

How your wife can help you in stock market

Technical Analysis Practical

Point of Sale in Bursa Malaysia Stock Market


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1 comments:

  1. Why crack your brain on this share, whereas you can easily buy shares such as GAB & Carlsberg that would generally go up during coming festive seasons, Xmas, NY& CNY. Cheers, happy trading.

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