Posted on 26 Oct 2012
Lion Industries Corp Bhd, one of the largest wire rod players in Malaysia is expected to benefit from the temporary anti-dumping duty on wire rods implemented by the Government from Oct 23 to February next year, said MIDF Research.
The research firm said nonetheless, the overall industry prospect still remained cloudy.
This id due to the slowdown in China’s economy and slower demand in European countries which have affected global steel and raw material prices.
MIDF Research maintained a “neutral” call on Lion Industries’s stock with a target price of RM1.18 based on a sum-of-parts method. Lion Industries’s stock closed unchanged at RM1.11 yesterday.
On Lion Industries’ proposed acquisition of Lion Metal Industries Sdn Bhd (LMI) for RM24.1mil, MIDF Research said funding was not an issue.
“Lion Industries has a strong balance sheet with RM569.1mil net cash balance as at end-June 2012,” it said.
It said as at June 2011, the net book value of the Wisma Amsteel was RM10.4mil.
LMI owns Wisma Amsteel, which is situated within Kawasan Industri Bukit Raja, Klang, Selangor.
Amsteel Mills Sdn Bhd is a 99%-owned subsidiary of Lion Industries, and it is the main tenant of the building, occupying 80.5% of the total tenanted area.
Amsteel is manufacturer of steel bars, wire rods, flat bars, and angle bars and contributes significantly to Lion Industries’ topline.
MIDF Research said the proposed acquisition would not have a material impact on Lion Industries’ earnings as it only saves about RM1.1mil per year in rental, against its total operating expenses of RM5.5bil in the last financial year.
The rental savings is only expected to contribute to earnings from financial year 2014 onwards, said the research firm.
