LIONFIB (8486) - LionFib - The Better Lion
Lion Forest Industries Berhad (LionFib - 8486) is the trading and distribution arm for the Lion Group, especially in the building and construction material and steel bars. It also involves in tradings of auto lubricants and oils under brand name of Hi-Rev.
The Lion Group made a good fortune from steel industry during the better days back at 2010. However, things started to fall apart when competition got intense with steel import from neighboring countries such as China, putting a dent in the profit margin. The last couple of years saw steel products imported from China are even cheaper than the production cost of some steel manufacturer. The Lion Group took a tougher beating when Megasteel which manufacture hot rolled steel ceased operation due to financial issue.
Among the packs of Lion, the better ones are Lion Industries Corporation Berhad (Lionind - 4235) and Lion Forest Industries Berhad. While Lionind produces long steel bars and wire rods that are used in construction, it is LionFib that is in charge of the distribution of the long steel bars, wire rods and other building construction material.
MITI to impose anti dumping steel tax on long steel bar
According
to the latest official notice into the investigation with regard to
steel concrete reinforcing bar products imported into Malaysia, the
investigation authority had found out that there was an increase in
imports during the period 1 October 2012 to 30 September 2015 which had
caused serious injury to the domestic industry, and result in decline of
market share, domestic sales, profitability, negative cash flow and
reduction in employment and wages.As of such, the provision to safe guard the domestic industry will be in the form of a safeguard duty of 13.42% imposed on imports of long steel bar, with the final outcome to be made within 26 to 28 September 2016.
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| Annjoo |
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| LionInd |
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| Masteel |
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| Ssteel |
Amidst the challenging economy, government had played their part in ensuring the survival of domestic steel player with the imposition of safe guard tax on all imports of long steel bar. This new development had been celebrated by steel manufacturer that are involves in production of long steel bar.
Link to official notice :
Fundamental Outlook
During the Q4 of FYE 2016, Lionfib continue to show great losses, which
is contributed from impairment of long term receivables from associate
company.
Despite the company having a profitable operation, the impairment of
more than RM 300 million of receivables from associate company had
hammered a huge blow into financial result of Lionfib. The impairment
exercise had saw the share price taking a severe beating as well.
However, on the bright part, now the company is looking to start afresh
again, where investor do no need to worry on any future impairment on
receivables at least for the next 3 years.
At the current cash level of RM 104 million with a borrowing of RM
22.3 million, that still leave LionFib with a net cash of RM 81.7
million, or approximately 35 cents of cash per share. At the current market price of RM 0.53, that would be buying into a share with 66% of the value in the form of cash.
The current NTA of the company is RM 2.26 per share.
With the imposition of the safeguard tax towards long steel bar that is
used in reinforce concrete in building and construction, it will be
believe that LionFib will be able to perform better at least for the
next 200 days. A net cash position and no foreseeable large impairment
would definitely put LionFib in an interesting position for any investor
that are willing to take position of the current situation for a
turnaround.
Technical Outlook
The technical price chart also outline on the positive changes in the
company by rebounding above the technical support line of RM 0.50, and
broken above the downtrend line. If compared to company such as Masteel,
Annjoo, Ssteel and Lionind, it is notable that LionFib does have a
larger space of capital appreciation.
Conclusion
LionFib's share price had reflected on the damage from the impairment
exercise. However, the current price could resemble a good opportunity
for investor to pitch in the potential turnaround at an attractive
pricing, considering a net cash level of RM 0.35, NTA of RM 2.26 per
share and government effort in stepping up to protect the local steel
industry. With technical chart pointing a potential rebound, it will
anyhow be a worthwhile risk to be taken.
Bone's TP : RM 0.70
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LIONFIB (8486) - LionFib - The Better Lion
