Kinsteel; Hold
Price Target: RM0.30; KSB MK

Kinsteel’s 37%-owned subsidiary Perwaja Steel has been ordered by the court to settle RM146m in debt to Petronas for payment over the supply of dry gas. Petronas claimed that Perwaja failed to make payment for the supply of dry gas for seven months, while Perwaja disputed that Petronas had already suspended the gas supply during that period. In its Bursa quarterly announcement, Perwaja disclosed that it has made sufficient provision in the balance sheet to meet this claim.

We have yet to see signs of earnings recovery for Kinsteel in 1H2013 given the still volatile iron ore prices, weak steel prices and sales volume. Although local steel demand will be supported by government infrastructure projects, the positive effects will take a longer time to filter though. We have a HOLD rating on Kinsteel with a TP of RM0.30 (based on FY13 P/BV of 0.6x).

Source: HwangDBS Research - 14 Jun 2013