Sunday, July 28, 2013
A Way Out through Kinsteel's Quagmire
Ng Sem Guan, RHB Research analyst talks about Kinsteel. The stock has seen a lot of interest because of Kinsteel’s latest mining agreement with the Sultan of Pahang to undertake iron ore mining in Kuala Lipis in Pahang.
He recently upgraded the stock from Neutral to Trading buy at 43 sen. He discussed:
- any guesstimates at this point?
- it's been making losses since 2010. So, on the strength of mining agreement sans details, still warrants a trading buy? Poor execution track record in the past.
- still trying times, with its islamic debt papers downgraded to non-investment grade. Will new group exec chairman, Ravi Manchanda be Kinsteel’s man of steel?
- demand for steel, especially with talk about China slowing down and restructuring its economy.
- outlook for steel prices?
- likelihood of a potential equity raising exercise (via placement of new shares or a rights issuance) since capex required for mining activity and need ot refinance its current borrowings
- industry outlook and top pick