MIDF upgrades Kinsteel to 'buy'

Source From (Business Times): http://www.btimes.com.my/Current_News/BTIMES/articles/20120516173005/Article/index_html

Published: 16 May 2012

OSK Research is maintaining a "neutral" call on steel manufacturer, Kinsteel Bhd, saying that it was not pinning too much hope on its business since the implementation of mega projects under the Economic Transformation Programme may encounter delay.

"However, we expect the better iron-making margin from cheaper iron ore pellets to more than compensate for the negative impact arising from the potential delay in the commissioning of the concentration and pelletization plant at Perwaya, Kinsteel's subsidiary," OSK Research said in its research notes.

OSK is maintaining its "neutral" call on Kinsteel with unchanged fair value of 49 sen.

MIDF Research, however, has upgraded its call to "buy" from a "neutral" recommendation on Kinsteel with a target price of 51 sen.

"Domestically, we expect orders for steel bars to be sustained at least in the next five to 10 years as there are plenty of sizeable construction projects currently ongoing, with more to be awarded," MIDF Research said.

MIDF Research said Kinsteel's stock price has declined by 15.7 per cent year to date.

"We believe that investors may have over-imputed the external risks for this stock. Hence, given the ample upside of 20 per cent, we are upgrading Kinsteel to 'buy'," MIDF Research said.

Kinsteel swung to profit after six quarters of net losses. It delivered a net profit of RM10.3 million for first quarter financial year 2012.

As at 4.34 pm, Kinsteel rose one sen to 43.5 sen. -- BERNAMA