Bigger Pie For Flat Steel Players
The Ministry of International Trade and Industry (MITI) has announced several measures effective Aug 1, ‘09 to enhance the competitiveness of the steel industry. Among others, the Government will continue to issue import licences for flat products for monitoring and data collection purposes but will abolish the fixed ratio for locally sourced and imported products. Also, the current import duty of 50%
on flat products including Hot-Rolled Coils (HRC), Cold-Rolled Coils (CRC) and Electro-Galvanised Iron
(EGI), will be reduced to 25% and further reduced to between 0% and 10% from Jan 1, 2018. Import duty will be exempted on flat products used as (i) raw materials in the production of finished goods for the export market, irrespective of local availability, (ii) products for which grades and specifications are not produced locally for the local market, and (iii) products used as raw material to produce finished goods without any duty. The Government has also decided that the determination of the HRC base price by MITI be abolished, allowing HRC price to be determined by domestic and international market forces. For long products which are subject to import duties, the reduction in import duties will be implemented gradually. Import duties will be reduced to 10% from Aug 1, ‘09 and 5% from Jan 1, ‘10 and for the subsequent years. The current import and export duty exemption on 57 tariff lines of long products will be maintained. Also, to prevent the influx of sub-standard products into the country, the Government will implement mandatory standards for imported and locally produced long and flat products. The imposition of mandatory standards will be implemented in stages effective from Aug 1, ‘09 for iron and steel products which bear the Malaysian Standard (MS).
Trading opportunity on Lion Group. As our evaluation on the latest policy introduced by MITI is very much skewed towards Megasteel, which is a private entity, we take a re-look at its holding listed entities which may offer immediate trading opportunities for investors. Apart from being owned by Lion Corporation (Not Rated), Lion Diversified Holdings (Not Rated) also owns a substantial stake in Megasteel via direct and indirect holdings (refer Figure 3). As both are not under our coverage, investors may opt for indirect exposure to Megasteel via Lion Industries (BUY – TP: RM2.05), which is also our TOP PICK for the steel sector which also offers solid fundamentals.
WILL YOU BUY LION CORP OR LION IND OR LIONDIV ????????