Although Sino Hua Ann reported a net profit of RM18.5m during the quarter under reveiw, it was insufficient to cover its previous losses, as the company still incurred a cumulative net loss of RM18.4m. These numbers are still way below our and street estimates for FY09. However, we maintain our Buy recommendation as we are looking at a potential recovery in FY10, primarily driven by the implementation of China’s RMB4trn stimulus package. Hence, we are maintaining our FY09 and FY10 numbers and our TP at RM0.87.
At the crack of dawn. We believe the company’s 4Q performance will hinge on China’s steel prices, which have rebounded in the past three weeks. Better coke prices are also seen as steel prices rebound. Hence, we reiterate our Buy recommendation. Given that the market is forward looking, we advise investors to ride on a potential recovery in FY10, mainly driven by implementation of China’s RMB4trn stimulus package. As China’s crude steel production has surpassed its historical peak of >95% of the country’s installed capacity since June 2009, this supports our view that any downside for Huaan will be limited. With that, we are keeping our FY09 and FY10 earnings assumption and fair value of RM0.87.
