KUALA LUMPUR: OSK Research is maintaining its Neutral call on Southern Steel due to the gloomy industry outlook for the industry in the second half.

Last Friday, July 16, Signaland Sdn Bhd, a SPV linked to Tan Sri Quek Leng Chan, announced a mandatory general offer (MGO) to acquire all the remaining ordinary RM1 shares in Southern Steel that it and related parties does not already own for RM2.05 apiece.

Signaland acquired 113.4 million Southern Steel shares, or 27% of the voting shares of the company, at RM2.05 each, or approximately RM232.4m, from NatSteel Holdings Pte Ltd, a unit of Tata Steel. This brings Singaland?s together with its related parties? stake in Southern Steel to approximately 70% and it is subsequently making this MGO.

OSK Research said on Monday, July 19 that with the share price having surged close to the offer price in trading last Friday, the offeror is also unlikely to revise upwards its offer price.

'This, including the gloomy industry outlook for 2H, prompts us to keep our NEUTRAL recommendation on Southern Steel. However, we are revising upwards our target price to RM2.05 to match the MGO offer price, which implies 6.1x FY10 EPS,? it said.