Stock Name: LIONIND
Company Name: LION INDUSTRIES CORPORATION
Research House: AMMB

KUALA LUMPUR: AmResearch is maintaining a Buy call on Lion Industries Corp Bhd (Lion Ind) - with fair value lowered from RM2.35 a share to RM2.30 a share based on an unchanged 10% discount to its revised sum-of-parts value of RM2.6 a share.



It said on Thursday, Sept 9 that near-term, sequential earnings are likely to weaken as steel demand contracted during the June-July period.



"We expect margins for its Hot Briquetted Iron (HBI) division to be compressed in 1QFY11," it said.



AmResearch said Lion Industries believes its earnings outlook should improve moving into 2HFY11.



On demand side, there have been tentative signs of a rebound in regional steel orders - especially from Vietnam. It also said Lion Industries' HBI operations should get a kick from rising scrap prices by 1H 2011.



"We project Lion Industries' FY12F earnings to turnaround (+33% YoY) at RM388 million against an estimated 3% contraction in FY11F. Valuations remain attractive at FY11F-12F PEs of only 3x-4x against a net gearing position of 17%. There is also potential room for capital management initiatives once the balance RM60 million in LICB bonds are fully paid by year-end," it said.