Upcoming infrastructure projects to boost Ann Joo in FY17
KUCHING: Ann Joo Resources Bhd’s ( Ann Joo) prospects for the financial year 2017 ( FY17 ) has been viewed positively by analysts due to the expected rise in demand from upcoming infrastructure projects.
The research arm of Kenanga Investment Bank Bhd ( Kenanga Research), said for FY17, it expected the gradual pick up in infrastructure projects dished out in FY16 to drive demand for the second half of 2017 ( 2H17) and continue to buoy local pr ices of more than RM2,000 per tonne level.
“We believe we can rest our worries on cheap Chinese imports for the medium term considering that safeguard measures and import duties are in place coupled with the higher China prices due to the Chinese Government championing capacity cuts and increased infrastructure spending,” it added.
Aside from that, it also highlighted that Ann Joo is en route to be listed as a syariahcompliant security.
It opined that it could be inducted into the syariahcompliant list either by May 2017 or latest, by November 2017, given that the company met the criteria in which conventional debts over tota l as set s are less than 33 per cent as of FY16.
With that, Kenanga Research upgraded its FY17 to FY18 estimated earnings by 15 to 18 per cent to RM219 million and RM228 million respectively after upgrading its average rebar prices to RM2,225 per tonne, reducing its average scrap cost to US$ 270, and reducing its iron ore cost to US$ 73.
The research team also maintained its ‘ outperform’ call on the stock.
On the company’s f irst quarter of 2017 (1Q17) results, it noted that Ann Joo’s 1Q17 core net profit of RM74 million came in expectations, driven by positive variances such as higher than- expected steel average selling prices (ASPs) and lower- than- expected raw material costs.
It also pointed out that Ann Joo’s 1Q17 net gearing of 0.77- folds continue to show improvement quar ter- onquater ( q- o- q), which was previously at 0.85- folds.
“We note that current gearing levels is also within man a gement ’ s comfor t level of less than one- fold,” it added.