Thursday, September 8, 2011

AnnJoo ... Sep11

The Lim family, the major stakeholder of Ann Joo Resources Bhd, is expected to pare down its stake in the company although they are not ready to give up the controlling stake currently.

Taking the cue from moves by some overseas steel mills to snap up small stakes in their respective customers to ensure long-term customer relationship, Ann Joo may see its supplier acquire up to 15 per cent stake in the company.

Ann Joo is a key trader of steel plates mainly imported from Japan.

Potential re-rating catalysts for Ann Joo include stronger domestic demand in the second half as construction starts to gain momentum.

While steel prices may have moved at a slower pace, the cost of raw material namely scrap metal rose sharply early 2011, indicating that the profit margins for Ann Joo would remain bleak.Ann Joo posted a net profit of RM75mil for the first half of FY11 ended June 30, which was a 33% drop year-on-year from RM112.4mil.

Its performance was mainly affected by weaker international steel prices, rising costs and a 10% increase in the effective tax rate to 18.5% due to lower export incentives.

Ann Joo's 2Q net profit slid 54% to RM32.7mil from RM70.9mil a year ago. The drop in profits was attributed to the social unrest in the Middle East disrupting demand and the March 11 earthquake disaster in Japan which had disrupted the supply chain.

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