KUALA LUMPUR: CIMB Research sees iron-clad prospects for Malaysia Steel Works (KL) Bhd which is on an expansion programme that is set to double its earnings to RM80m-RM90m by FY12, lowering its FD P/E to below 5 times or 60% below the KLCI P/E.

CIMB Research said on Monday, April 11 the target is achievable as it is expanding capacity to meet rising demand from property launches and ETP infrastructure project starts.

'On P/NTA basis, the stock is cheap at 0.6x CY10, 40% below the sector. We value Masteel at 10.2x forward P/E, 30% below our 14.5x target market P/E. This works out to RM2.95, more than double its current price,' it said.

The research house said Masteel's valuation discount is wider than Ann Joo's 10%. Should it succeed in its bid for the Iskandar rail project, FY12 FD core EPS would rise by 29% to 37.4 sen, implying a value of RM3.80 or hefty upside of 170%.