OSK Research keeps Sino Hua-An (2739.KU) at Buy

OSK Research keeps Sino Hua-An (2739.KU) at Buy with unchanged 87 sen target on optimism over prospects. Analyst Ng Sem Guan says although company's 4Q09 numbers may fall short of house expectations on temporary pullback in coke prices at end of last year, expects a good start to 2010, bolstered by aggressive steel demand from China's stimulus package, particularly after Chinese New Year and recent escalation in raw materials prices, including iron ore and coke. "These have in turn boosted sentiment in the sector," says Ng; adds strong correlation of 0.67X between its share price and coke price offers some form of comfort on quantitative front. Stock last +4.8% at 54.5 sen.
Although we suspect the company’s 4QFY09 numbers may fall short of our expectations on a temporary pullback in coke prices at the end of last year, we expect a good start to 2010, bolstered by aggressive steel demand from China’s stimulus package, particularly after Chinese New Year and the recent escalation in
raw materials prices, including iron ore and coke. These have in turn boosted sentiment in the sector. Our optimism on Sino Hua-An’s prospects prompts us to maintain our Buy call at RM0.87. In addition, the strong correlation of 0.67x between its share price and coke price offers some form of comfort on the quantitative front.