Tong Herr Resources (THR) has been a manufacturer of stainless steel nuts, bolts and screws for over 20 years, with its Malaysian base in Prai, Penang. Its recent acquisition of Metech Aluminium Industries will add aluminium extrusion products to its offering and make a full-year contribution in FY11, while the manufacture of steel billets is also on the cards. We value THR at RM3.10 based on a 10x FY11 PER, on the back of its new and future income streams, recovering ASPs and strengthening external demand. Initiate coverage with a Buy recommendation.
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