Fundamentally . . .
Sino Hua-An International (SHA), a producer of metallurgical coke, has seen its share price rising >100% YTD as outlook for China’s steel sector improves. China’s pump priming and loose credit policies boosted demand for steel products while re-stocking activities also helped support steel prices. All these bode well for SHA as it also means greater demand for metallurgical coke. As the gap between coke and coal prices (main input) have started to widen again, after a steep drop in 4Q08, we expect SHA to hand in better results going forward. Also, we gather that the value of its by-products have also risen, thanks to a rise in crude oil prices. While the upcoming 2Q results could still be in the red, we believe things should turn better in 3Q, as stronger demand for metallurgical coke, arising from higher steel demand, as well as higher prices of coke and by-products would help it turnaround in coming quarters.
Technically . . .
FY09P/E: 16.3x, P/BV: 0.8x
• The stock broke out of its Triangle resistance yesterday. We expect it to test the June’s high of RM0.59 very soon. Further upswing should carry it towards the next upside target at RM0.62 and RM0.665.
• MACD has just confirmed its golden cross while RSI is moving towards the upper band of the neutral zone. The current upswing could last for a while longer due to the improving technical landscape.
• Traders may start to accumulate on pullbacks, preferably near the RM0.54 and RM0.52 support zone. Cut loss however if it breaks below RM0.50 as it may signal the end of its uptrend.
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