AmResearch keeps overweight call on steel sector

AmResearch maintained its overweight stance on the steel sector, saying the industry is at the early stages of a steel price upcycle.

Steel consumption is expected to pick up significantly from the first quarter onwards, it noted, as governments within Asia intensify pump-priming initiatives to boost their respective economies.

A weak US dollar is another structural driver for steel demand, while the renewed merger and acquisitions newsflow is another booster.

Ann Joo is AmResearch's top pick to ride on the rising steel prices. It has a buy call on Ann Joo (6556) with a RM4.50 target price.
Ann Joo's structural repositioning as an integrated steelmaker puts it in a sweet spot as an early beneficiary of accelerated infrastructure spending, it noted.

AmResearch is also starting to cover Lion Industries Bhd with a buy call. The stock's fair value is pegged at RM2.50.

"Despite a strong run-up in its share prices of late, Lion Industries is the cheapest stock within our steel sector universe at three to four times price earnings of financial year 2010 and 2011," according to a January 26 AmResearch note.