To commemorate the commencement of construction on the concentration and pelletizing plant of its 37%-owned subsidiary Perwaja Holdings (Perwaja), the group held a ground breaking ceremony last Saturday, which was graced by the Menteri Besar of Terengganu, Dato’ Seri Haji Ahmad bin Said (MB). The MB told Bernama after the event that the state government is ready to consent to Perwaja’s application to mine iron ore in Bukit Besi, Terengganu.
Upgrade to Trading BUY. Apart from these positive developments, we remain watchful of Kinsteel’s gearing in FY11, which may balloon to 2.6x in the event none of the recently proposed renounceable restricted offer for sale (ROS) is taken up by Perwaja shareholders. However, we see the MB’s announcement in relation to Perwaja at the ground breaking, which was attended by about 3,000 people, as a show of support for the company’s endeavor to start mining iron ore in Terengganu. Therefore, we are including 10% of the iron ore mining DCF to our original fair value, from which we derive a new value of RM0.82, and upgrade our rating on Kinsteel to Trading BUY from NEUTRAL.
Upgrade to Trading BUY. Apart from these positive developments, we remain watchful of Kinsteel’s gearing in FY11, which may balloon to 2.6x in the event none of the recently proposed renounceable restricted offer for sale (ROS) is taken up by Perwaja shareholders. However, we see the MB’s announcement in relation to Perwaja at the ground breaking, which was attended by about 3,000 people, as a show of support for the company’s endeavor to start mining iron ore in Terengganu. Therefore, we are including 10% of the iron ore mining DCF to our original fair value, from which we derive a new value of RM0.82, and upgrade our rating on Kinsteel to Trading BUY from NEUTRAL.
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