OSK research: Overweight steel counters

With steel counters back on the spotlight, we made a fundamental review and found
ourselves looking at a much improved environment of:
(i) Rising steel prices and expectation of expanding margins, particularly for
iron making,
(ii) Demand set to surge after the Chinese New Year celebration, driven by real
demand and improved buying sentiment on positive price trends,
(iii) New yearly benchmark prices for iron ore and coking coal likely to increase
by 20% to 30%, which will support ASP,
(iv) Implementation of stimulus packages worldwide have just begun to spur
long steel requirements,
(v) Huge untapped semi finished steel market in SEA region, and
(vi) Generally still undemanding valuations,
These factors prompt us to maintain our OVERWEIGHT stance on the steel sector
with fair values raised across the board. We have BUY calls on Lion Industries,
Southern Steel and Masteel, a Trading BUY on Perwaja, but a NEUTRAL call for
Kinsteel and a SELL on Ann Joo.