ANNJOO (6556) - Ann Joo Resources - Profit grew faster than revenue
Target RM1.12 (Stock Rating: HOLD)
Ann Joo's FY14 core net profit made up 100% of our full-year forecast but was 20% above consensus. The results were in line with our expectation. 4Q14's reported net loss was mainly due to inventory write-down and kitchen sinking but the group remained profitable for the year, thanks to operating efficiencies and declining iron ore and BFC input costs. We cut FY15-16 EPS forecasts as signs point to a re-acceleration of dumping activities from China. Chances of a trade action look slim, but this is partially mitigated by rising domestic demand. Our target price is reduced slightly, but remains pegged to 10.6x CY16 P/E (a 30% discount to the market P/E). Maintain Hold. Switch to contractors.
FY14 results in line
FY14 core net profit made up 100% of our full-year numbers but was 20% above consensus. The reported net loss in 4Q14 was a slight surprise but the sustained operating efficiencies throughout 9M14 with declining iron ore and blast furnace coke (BFC) input costs helped to cushion the kitchen sinking in 4Q - leading to FY14 EBITDA growing much faster than revenue. The full-year 3 sen DPS (at the higher end of the group's 60% payout policy) was above our forecast of 2 sen.
Brace for a re-acceleration of dumping from China
The flood of cheap imported steel products from China into the domestic market still accounted for more than 50% of the monthly steel consumption of 200k MT as at end-2014. The termination of the government's investigation into the anti-dumping duty (29 Jan 15), which could have led to a trade action, was a disappointment to local steel players. A trade action could have allowed for a recovery in domestic selling prices. Prices of local steel wire rods, for example, have stayed lower (less than RM1,900/tonne) than steel bars. Also, the 5% import duty exemption for steel products which was implemented in 2008 was not reinstated. Post Chinese New Year, there are signs pointing to a re-acceleration of dumping from China from Mar onwards.
Still a tough player to crack
Stay on the sidelines as the overall sentiment on the steel sector remains cautious. However, we continue to foresee Ann Joo's superior manufacturing efficiencies, supported by falling material prices, as key strengths in the quarters ahead.
Source: CIMB Daybreak - 27 February 2015
Target RM1.12 (Stock Rating: HOLD)
Ann Joo's FY14 core net profit made up 100% of our full-year forecast but was 20% above consensus. The results were in line with our expectation. 4Q14's reported net loss was mainly due to inventory write-down and kitchen sinking but the group remained profitable for the year, thanks to operating efficiencies and declining iron ore and BFC input costs. We cut FY15-16 EPS forecasts as signs point to a re-acceleration of dumping activities from China. Chances of a trade action look slim, but this is partially mitigated by rising domestic demand. Our target price is reduced slightly, but remains pegged to 10.6x CY16 P/E (a 30% discount to the market P/E). Maintain Hold. Switch to contractors.
FY14 results in line
FY14 core net profit made up 100% of our full-year numbers but was 20% above consensus. The reported net loss in 4Q14 was a slight surprise but the sustained operating efficiencies throughout 9M14 with declining iron ore and blast furnace coke (BFC) input costs helped to cushion the kitchen sinking in 4Q - leading to FY14 EBITDA growing much faster than revenue. The full-year 3 sen DPS (at the higher end of the group's 60% payout policy) was above our forecast of 2 sen.
Brace for a re-acceleration of dumping from China
The flood of cheap imported steel products from China into the domestic market still accounted for more than 50% of the monthly steel consumption of 200k MT as at end-2014. The termination of the government's investigation into the anti-dumping duty (29 Jan 15), which could have led to a trade action, was a disappointment to local steel players. A trade action could have allowed for a recovery in domestic selling prices. Prices of local steel wire rods, for example, have stayed lower (less than RM1,900/tonne) than steel bars. Also, the 5% import duty exemption for steel products which was implemented in 2008 was not reinstated. Post Chinese New Year, there are signs pointing to a re-acceleration of dumping from China from Mar onwards.
Still a tough player to crack
Stay on the sidelines as the overall sentiment on the steel sector remains cautious. However, we continue to foresee Ann Joo's superior manufacturing efficiencies, supported by falling material prices, as key strengths in the quarters ahead.
Source: CIMB Daybreak - 27 February 2015
