We welcome Kinsteel (KSB)’s latest mining agreement with  the  Sultan of  Pahang  to  undertake  iron  ore  mining  in  Kuala  Lipis  in  Pahang. Although  we  would  need  more  details  to  evaluate  the  financial implications  of  this  new  venture,  we  believe  this  piece  of  news  may boost  sentiment  in  the  counter,  which  is  trading  near  its  six-year historical  low.  Thus,  we  upgrade  KSB  to  Trading  BUY,  with  an unchanged FV of MYR0.43.  
 
- Seals  mining  agreement.  KSB  has  entered  into  a  mining  agreement with  Kebawah  Duli  Yang  Maha  Mulia  Sultan  Haji  Ahmad  Shah  Al-Musta'in  Billah  Ibni  Al-Marhum  Sultan  Abu  Bakar  Ri'ayatuddin  Al-Mu'adzam Shah (KDYMM Sultan of Pahang / the Licence Holder) for the exclusive  rights  to  carry  out  mining  of  iron  ore  and  other  minerals  in Kuala Lipis, Pahang.  

- Details still sketchy. The announcement said the mining site measures about 500 acres. We understand a few small-scale miners are currently operating in Kuala Lipis on open pit mines. The type of ore found in the area  is  said  to  be  magnetite  ore,  which  is  suitable  feed  for  the  new concentration  plant  operated  by KSB’s 37%-owned Perwaja’s (PERH MK, Neutral, FV MYR0.44). That said, we would need proper geological reports  to  evaluate  this  project,  even  though  Management  is  already targeting  to  start  mining  in  three  to  six  months.  KSB’s  primary responsibilities will include mining, excavating and carrying away the iron ore  found  on  the  land  parcel.  The  company  is  now  working  towards getting all the necessary approvals from the relevant authorities.

- More transformation in the pipeline. Separately, the group’s persistent losses  have  prompted  the  group  to  undertake  several  restructuring exercise  to  put  KSB  and  PERH  back  on  steady  ground.  Recently,  the Islamic  debt papers of  KSB  and  PERH  were  downgraded  by  Malaysian Rating  Corp  (MARC)  to  non-investment  grade.  This  prompted Management  to  move  fast  to  appoint  Mr.  Ravi  Manchanda  as  the  new group  executive  chairman  of  both  KSB  and  PERH  two  days  ago, replacing Tan Sri Abu Sahid Mohamed, who has retired. We suspect the appointment of Mr. Ravi, 54, is to put in place professional managers in order to take the group forward in the current trying times.

Source: RHB