KUALA LUMPUR: Shares of Lion Industries Corp Bhd (LICB) slipped on Friday, March 4 as analysts were concerned about its joint venture plan to set up a blast furnace.
At 4.28pm, it is down four sen to RM1.64, off the early high of RM1.73. There were 3.04 million shares done.
OSK Research's target price for LICB was reduced to RM1.57 from the previous RM2.07.
LCIB had on Thursday entered into a joint venture agreement with Lion Diversified (LDHB, the holding company), Lion Forest (a 73% subsidiary) and Lion Blast Furnace (LBF) to jointly undertake the CONSTRUCTION [] of a blast furnace project, which has a rated capacity of 2.1 million tonnes/annum. Under the agreement, LICB, LDHB and LFIB will invest 29%, 51% and 20% respectively in LBF.
LICB, LFIB, and LDHB would invest RM281.3 million, RM194 million and RM494.7 million respectively into the blast furnace project. LICB will also provide corporate guarantee to the project's loan facility.
OSK Research said while it was upbeat that the blast furnace project would add value to the group's flat steel segment, 'we think the direct 29% and 20% JV stakes of Lion Industries (LICB) and its subsidiary, Lion Forest (LFIB), plus the large scale investment pose a high investment risk to the JV partners and Lion Group as a whole'.
However, the research house said the share price, which had plunged since its downgrade on March 1, might have priced in this negative news.
'The stock's undemanding valuation at this price level prompts us to maintain our NEUTRAL call but with lower TP of RM1.57, derived from 5x PER and 0.43x P/NTA on CY11 figures,' it said.
At 4.28pm, it is down four sen to RM1.64, off the early high of RM1.73. There were 3.04 million shares done.
OSK Research's target price for LICB was reduced to RM1.57 from the previous RM2.07.
LCIB had on Thursday entered into a joint venture agreement with Lion Diversified (LDHB, the holding company), Lion Forest (a 73% subsidiary) and Lion Blast Furnace (LBF) to jointly undertake the CONSTRUCTION [] of a blast furnace project, which has a rated capacity of 2.1 million tonnes/annum. Under the agreement, LICB, LDHB and LFIB will invest 29%, 51% and 20% respectively in LBF.
LICB, LFIB, and LDHB would invest RM281.3 million, RM194 million and RM494.7 million respectively into the blast furnace project. LICB will also provide corporate guarantee to the project's loan facility.
OSK Research said while it was upbeat that the blast furnace project would add value to the group's flat steel segment, 'we think the direct 29% and 20% JV stakes of Lion Industries (LICB) and its subsidiary, Lion Forest (LFIB), plus the large scale investment pose a high investment risk to the JV partners and Lion Group as a whole'.
However, the research house said the share price, which had plunged since its downgrade on March 1, might have priced in this negative news.
'The stock's undemanding valuation at this price level prompts us to maintain our NEUTRAL call but with lower TP of RM1.57, derived from 5x PER and 0.43x P/NTA on CY11 figures,' it said.
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