KUALA LUMPUR: Hwang DBS Vickers Research said the recent increase in average selling price for bars and rods (+20% to RM2,400/ton from RM2,000 in Dec-10) should widen spreads between bars/rods and iron ore.
'We expect Kinsteel to turn profitable in 1QFY11 and report decent profit for the year, supported by improving steel prices. 2011 will be the year to build up Perwaja's pelletising capability to counter rising iron ore costs and relocate Gurun's bars and wire rods production to Kemaman.
'By 2H 2012, we expect Kinsteel to deliver meaningful cost reduction from using own pelletised iron ore and better operating efficiency after the relocation. Key catalyst is a pickup in CONSTRUCTION [] activities, which will propel steel consumption and lift Kinsteel's valuation,' said HDBSVR.
'We expect Kinsteel to turn profitable in 1QFY11 and report decent profit for the year, supported by improving steel prices. 2011 will be the year to build up Perwaja's pelletising capability to counter rising iron ore costs and relocate Gurun's bars and wire rods production to Kemaman.
'By 2H 2012, we expect Kinsteel to deliver meaningful cost reduction from using own pelletised iron ore and better operating efficiency after the relocation. Key catalyst is a pickup in CONSTRUCTION [] activities, which will propel steel consumption and lift Kinsteel's valuation,' said HDBSVR.
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