• Business profile. Leon Fuat Berhad (listed in June 2013) is involved in the business of trading (contributed 39% to FY15 revenue) and processing (accounted for 61% to FY15 sales) of steel products, specialising in rolled long and flat products. Over the last four decades, the group has carved a niche as steel products trading house that offers value-added processing services cus tomized according to clients ’ requirements.
• The trading activity involves buying and selling flat and long steel products (i.e. carbon steel, stainless steel and alloy steel products). On the other hand, its processing division complements the trading business by providing valueadded s ervices to LFB’s cus tomers such as cutting, levelling, shearing, profiling, bending and finishing, as well as producing customized expanded steel upon customer request.
• Likely to retest RM0.535-0.575 after a bullish downtrend line breakout. LEONFB staged a bullish long term downtrend line breakout as share prices rallied 5.4% to RM0.49 yesterday, supported by upticks in technical oscillators and huge volume of 2.09m shares (16% and 197% higher against 1-month & 3- month average). Lately, sentiment on steel stocks improved amid (1) positive newsflow of government intervention in imposing anti- dumping duties towards several steel import products; (2) higher demand due to more public infrastructure project being dished out in 2016 and (3) recovering Ringgit will translate to better margins and operation profits.
• A decisive breach above RM0.50 psychological barrier will spur prices higher towards the RM0.535 (61.8% FR) and RM0.56 (76.4%FR) targets before reaching our long term objective of RM0.575. Key supports are RM0.48 (200-d SMA) and RM0.47 (50-d SMA). Cut loss at RM0.46.
• Attractive risk to reward ratio with 17.3% upside against 6.1% downside. All in, we see a good risk to reward ratio for investor with a theoretical entry price of RM0.49 given that the downside to the cut loss zone of RM0.46 is 3 sen (-6.1%) while the upside to the LT target of RM0.575 is 8.5 sen (+17.3%).

Source: Hong Leong Investment Bank Research - 8 Apr 2016