We foresee a volatile business environment ahead for Lion Industries, as steel prices may remain under pressure and Parkson may continue to book poor sales. As losses may extend into FY16 (Jun), together with our internal resource reallocation, we are ceasing coverage on the company. Our last recommendation for the stock was NEUTRAL with a TP of MYR0.27.

Challenging outlook. We believe lower scrap prices may continue to dent the profitability of Lion Industries’ iron-making unit. In addition, intensifying competition from steel imports may adversely affect marginsof its steel bars and wire rods manufacturing business in the near term. Separately, we expect contribution from its 20%-owned Parkson Holdings (PKS MK, NR) to remain poor, with weak sales growth expected from most of its retail outlets.

Ceasing coverage. We project losses to potentially extend into FY16 onfast-declining steel prices, before the company breaks even in FY17.The poor equity market sentiment also suggests that steel counters may be out of investors’ radar for some time. Coupled with our internal resource reallocation, we are ceasing coverage on Lion Industries. Our last recommendation for the stock was NETRAL with a TP of MYR0.27.