The murky outlook in the next two quarters also suggests that investors should avoid cyclical steel stocks. However, as the recent selldown may have fully priced in the negative developments, we are mostly NEUTRAL on the sector and companies under our universe except Lion Industries, on which we have a Trading BUY.
If you are going to invest in Stell Stocks now, remember the following
- Average selling prices (ASP) of steel products are diving after peaking in April 2010.
- Energy subsidy cut just around the corner.
Taking the above factor into consideration, below are the target price for steel sector.
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For financial end 2010, ASM pays 6.3 sen dividend to the unitholders. In the same period, a total of more than 551,918 peoples subscribe in ASM with total fund size of more than RM11 billion. It means that only left less than 3 billion unit to be subscribed.
In summary, ASM invest 68.92% of the total funds size in Malaysia Stock Market. The remaining is in cash or other income instrument.
The following table show which company that ASM invest into & also unitholder distribution for financial end of 31st March 2010.
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Amanah Saham Nasional Bhd (ASNB), a wholly-owned unit of Permodalan Nasional Bhd (PNB), announced an income distribution of 6.35 sen per unit for Amanah Saham Didik (ASD) for the financial year ending June 30 2010.
The income distribution would involve a total payment of RM207.75 million, an increase of 33.50 per cent compared with RM155.59 million paid last year. As of June 2010,there are 293,504 unit holders who collectively owned 3.59 billion units.
Until June 11, 2010, ASD recorded a gross income of RM258.33 million with dividend income from investee companies contributing RM89.09 million or 34.49 per cent to the total income.
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2H10 would be an exciting period for the O&G industry, especially in 4QCY10, during which we expect most of the contract to be awarded, alongside the listing of MMHE, which may lead to a re-rating of the share prices of most O&G companies, which are currently trading at single digit PER valuations.
However, we do not expect to see strong quarterly performance by most O&G companies in 2H10 and would not be surprised if they reported results that are below our and the industry expectations as there was a stark shortage of new contracts late last year and in 1H10. This led to poor utilization rates and margin compression as a result of strong market competition.
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Construction, Property and Utilities most affected. As can be expected from a development plan, the Construction and Property sectors were the most impacted. While we were pleased to note that there was no cut to the development budget, we also noted the shift to PPP-type projects and remain skeptical that funding can be sourced simultaneously for the LRT extension, Double Track extension and KL MRT projects. We prefer Sarawakian companies for construction play given the continued emphasis in the 10MP.
As for property, while noting that land value could be unlocked with the development of Sungai Buloh, Sungai Besi airport and Kampung Baru, we are concerned that existing commercial property values could be capped if the launch of these new developments is not properly planned.
Finally, on Utilities, the LNG plant and new coal power plants coupled with planned subsidy reductions should help assuage concerns of a looming power crunch although political will is needed in cutting the subsidies.
A selection of beneficiaries. In distilling down the sectoral impact, we believe that among the notable beneficiaries of the 10MP will be:
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