ann joo resources berhad · 2,050 2,250 2,450 2,650 2,850 rm/mt 9 may 2018 general election –14...
TRANSCRIPT
ANN JOO RESOURCES BERHAD
23RD ANNUAL GENERAL MEETING
DATO’ LIM HONG THYE, GROUP MANAGING DIRECTOR
31 MAY 2019
INDUSTRY OVERVIEW
3
STEEL MARKET PERFORMANCE
2008 – 2010 Subprime Crisis 2016-2017
China Steel Industry Reform & Induction Furnaces Elimination
2013 – 2015China Steel Industry Overcapacity > 400 mil mt, leading to :
a) Overproduction b) Rapid growth in Chinese
exportsc) Prices slumped to huge loss-
making levels in 2H15
2018▪ China prices declined sharply since 4Q18 amidst global trade frictions:
a) US Section 232b) EU Safeguard – 25% import tariff (w.e.f. 19 Jul 18)
▪ Steel prices recovered on rising iron ore & coke prices
(source : Mysteel ) China Rebar HRB400 (RMB/mt Ex-work)
2,050
2,250
2,450
2,650
2,850RM/MT
9 MAY 2018GENERAL ELECTION – 14
(source : Mysteel, MITI Weekly Bulletin)
Malaysia Rebar Price (RM/mt delivered)
DEPRESSED LOCAL STEEL PRICE (↓ 20% Y-O-Y)(FROM RM2,700 TO RM2,150)
2018 STEEL MARKET REVIEW
MALAYSIA vs. CHINA STEEL BAR PRICE (RM/MT)SUPPLY-DEMAND IMBALANCE
4
❑ Domestic demand weakened followingreview of mega infra projects
❑ Intensified competition with emergenceof foreign-owned steel mills in Malaysia
❑ Increased import from non-Chinasources such as Russia, Turkey, UAE,Vietnam amidst trade fictions acrossUS, China & EU
❑ Oil & Gas and Palm Oil Mill Fabricationsectors remained subdued
❑ ASEAN-6 2018 steel demand started torecover in 2018, with an estimatedincrease of around 2-3 mil MT over2017 to as much as 77 mil MT
OCT 2018PRODUCTION OF A 100% FOREIGN-OWNED STEEL MILL
China Rebar HRB400 (USD/mt Ex-work)
VOLATILE RAW MATERIAL & HIKING FUEL COST
5
2018 STEEL MARKET REVIEW
50
60
70
80
90
100
USD/MTIron Ore Price (Jan’17-Dec’18)
(2017 @ USD 71/mt)
(2018 @ USD 69/mt)250
280
310
340
370
400
USD/MTScrap Price (Jan’17-Dec’18)
(2018 @ USD 351/mt)
(2017 @ USD 305/mt)
Iron Ore ↓ 3% y-o-y
Scrap ↑ 15% y-o-y
120
160
200
240
280
320
USD/MT Premium Coking Coal (Jan’17-Dec’19)
(2018 @ USD 207/mt)(2017 @ USD 188/mt)
Coking Coal ↑ 10% y-o-y
240
290
340
390
440
USD/MTCoke (Jan’17-Dec’19)
(2017 @ USD 295/mt)
(2018 @ USD 350/mt)
Coke ↑ 19% y-o-y
(source : Steel Business Briefing)
FINANCIAL HIGHLIGHTS
Profit & Loss (RM mil)
2018 2017
Revenue 2,322.1 2,195.2
EBITDA 229.6 329.7
Pretax Profit 149.9 252.9
Net Profit 149.5 205.4
Basic EPS (sen) 28.13 40.52
DPS (sen) 12.0 19.0
FINANCIAL HIGHLIGHTS
Borrowings
Operating Cash Flow - RM 58.6mil
Notes:1. Free Cash Flow defined as Operating Cash Flow less Investing Cash Flow
Free Cash Flow 1 - RM 99.7mil
+ RM 176.6mil (+ 20.9%)
2018Financial Position
Net Gearing 0.73xBalance Sheet (RM mil)
2018 2017
Shareholders’ Funds 1,325.2 1,227.3
Net Borrowings 966.6 788.9
Inventory 1,085.4 846.7
Trade Receivables 465.7 391.1
RM 193.2mil
RM 171.9mil
- RM 113.0mil (- 11.8%)
2017
0.64x
7
589,064
509,625
547,694
675,725
538,124
1Q18 2Q18 3Q18 4Q18 1Q19
QUARTERLY REVENUE (RM’000)
GROUP REVENUE
8
2,291,974
1,760,928 1,870,050
2,195,212 2,322,108
2014 2015 2016 2017 2018
YEARLY REVENUE (RM’000)
82,721
29,312 37,234
680
(10,922)1Q18 2Q18 3Q18 4Q18 1Q19
QUARTERLY PROFIT/(LOSS) BEFORE TAX (RM’000)
GROUP PROFITABILITY
9
24,970
(140,544)
202,128 252,861
149,947
2014 2015 2016 2017 2018
YEARLY PROFIT/(LOSS) BEFORE TAX (RM’000)
61,445
20,700
34,384 33,015
(6,598)1Q18 2Q18 3Q18 4Q18 1Q19
QUARTERLY PROFIT/(LOSS) AFTER TAX (RM’000)
23,388
(135,475)
166,775 205,384
149,544
2014 2015 2016 2017 2018
YEARLY PROFIT/(LOSS) AFTER TAX (RM’000)
*2015 Adj. EBITDA of RM37 mil
*Adj. EBITDA before NRV adj. / impairment & unrealized FX gain/(loss)
10
FINANCIAL HIGHLIGHTS – BALANCE SHEET MANAGEMENT
STRONG FINANCIAL POSITION TO RESTRAIN OVERSUPPLY SITUATION
1,063 927
1,068 1,227 1,325 1,320
2.12 1.85
2.13 2.38 2.46 2.45
0
500
1,000
1,500
2014 2015 2016 2017 2018 1Q19
0.00
1.00
2.00
3.00
Net Assets & Net Assets Per Share
Net Assets Net Assets Per Share
(RM’mil) (RM/share)1,404
1,300
958 845
1,022 1,075 1.26 1.34
0.85 0.64 0.73 0.77
0
500
1,000
1,500
2014 2015 2016 2017 2018 1Q19
0.00
0.50
1.00
1.50Borrowings & Net Gearing Ratio
Borowings Net Gearing Ratio
(RM’mil) (X)
2014 2015 2016 2017 2018 1Q19
275,647
233,928
300,210
391,085
465,666 434,394
Trade Receivables (RM’000)
2014 2015 2016 2017 2018 1Q19
1,165,046
951,990 830,764 846,718
1,085,366 1,090,040
Inventory (RM’000)
11
LONG-TERM FINANCIAL PERFORMANCE
17 16 24 37
69
20
127
198
149
31
121
62
(19)
12 23
(135)
167
205
150
(7)
ANN JOO GROUP PAT (2000-2018 & 1Q19)
2000 Took over Malayawata’smanagement
2007Privatization of AJSB2006
AJSB (Malayawata) became subsidiary of AJR
Oct 2011 BF Commissioning
2016 Total Steel Solution Provider(RM’mil)
FINANCIAL RESULTS : LONG-PRODUCT PRODUCERS
Notes:1) Lion Ind quarterly results refer to the steel segment only (before Interest & Exceptional Items)
680
(24,147)
(60,318)
(5,390)(10,922) (11,444)
(55,950)
(63,929)
Ann Joo Masteel Southern Lion Ind
Profit /(Loss) Before Tax (4Q18 & 1Q19)
4Q18 1Q19
(RM’000)
12
33,015
(24,868)
(44,386)
(5,390)(6,598) (8,678)
(41,550)
(63,929)
Ann Joo Masteel Southern Lion Ind
Profit /(Loss) After Tax (4Q18 & 1Q19)
4Q18 1Q19
(RM’000)
1
1
PROSPECTS
STEEL INDUSTRY DYNAMICS & CHALLENGES
14
SOFTNESS IN DOMESTIC DEMAND1
ADDITIONAL SUPPLY FROM FOREIGN-OWNED STEEL MILLS2
IMPACTS OF US-CHINA TRADE WAR ON WORLD ECONOMY
3 SURGE IN IRON ORE PRICE
4
REVIVAL OF SELECTIVE MEGA PROJECTS
15
LRT 3 MRT 2
ECRL
KVDT2Phase 2
PR
OJE
CTS
RES
UM
PTI
ON
KL-SG HSR MRT3
Bandar Malaysia
SG - JBRTS
PG LRT
REVIVAL OF MEGAPROJECTS AS KEY GROWTH DRIVER FOR
CONSTRUCTION STEEL CONSUMPTION
❑ Revival of ECRL at a lower cost of RM44 bil compared withits original cost of RM65.5 bil, with a cost saving of RM21.5bil
❑ Development of Bandar Malaysia with GDV of RM33.8 bilwithin China’s Global “Belt & Road” Initiative will beresumed
PR
OJE
CTS
UN
DER
REV
IEW
1,950
2,150
2,350
2,550
2,750
2,950
RM/MT
9 May 2018GE-14
7 Apr 2018Dissolution of Parliament
Oct 2018A wholly foreign-owned steel mill commenced bar production
End-Jan 2019Iron ore price surged on supply tightness
(source : Mysteel, MITI Weekly Bulletin)
Malaysia Rebar Price (RM/mt delivered) * MS 146 standard ≈ HRB 500 @ RMB100-150/mt > HRB400
As of 28 May 2019
MYS Bar PriceRM 2,120/MT
STEEL PRICE REBOUNDED POST-CNY ON COST PUSH FACTOR
MALAYSIA vs CHINA STEEL BAR PRICE (RM/MT)
China Bar Price RM 2,467 /MT
China Rebar HRB400 (USD/mt Ex-work)
16
❑ Scrap price dropped to USD306/mt from USD343/mt sincemid March due to weak market sentiment
❑ Current spot price @ USD306/mt vs 4Q18 avg. @USD341/mt, ↓ 10.3%
KEY RAW MATERIAL PRICES – IRON ORE & SCRAP
IRON ORE
❑ Iron Ore surpassed USD100/mt on increased demand &concerns on supply tightness from Brazil & Australia
60
70
80
90
100
110
IODEX 62% Fe / North China import CFR Average Quarterly Price
USD/MT Iron Ore Price (Jan’18-May’19)(source: SBB)
(source: Platts, Steel Business Briefing)
SCRAP
290
310
330
350
370
390
410
Scrap HMS CFR East Asia Import CFR $/t Average Quarterly Price
USD/MT Scrap Price (Jan’18-May’19)(source: SBB)
17
ANN JOO STRATEGIC DIRECTION - KEY FOCUS AREAS
18
Continuous productivity improvement programme
Flexible sales mix amongst Pig Iron, Billet, Bar & Wire Rod for both local & export markets
Actively pursue export opportunities, leveraging on operational flexibility
Continue engagement with Government to curb oversupply situation domestically
Proactive balance sheet management – inventory, receivables & gearing 1
2
3
4
5
Active hedging of iron ore & coking coal in SGX market to mitigate price volatility 6
19
MARKET CAP OF STEEL PLAYERS
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
Ann Joo Southern Lion Ind Masteel
2013-2015China Factor
STEEL PLAYERS’ MARKET CAPITALIZATION (1996 – YTD2019)
2008Subprime Crisis
2016-2017AJ expanded market leadership due to cost advantage
Oct 2011AJ’s BF Commissioned
Oct 2007 Merger of AJR & Malayawata
1996AJ listed on main market
1998Asian FinancialCrisis
2001911 Terrorist Attack
RM’mil
2018AJ remained the largest steel counter by market cap despite slump in domestic market
INVESTMENT RESEARCH ON ANN JOO
RESEARCH REPORTS BASED ON 1Q19 RESULTSRESEARCH HOUSE DATE OF
REPORTRECOMMENDATION TARGET
PRICE (RM)
PE (X)
NET PROFIT (RM MIL)
EPS (SEN)
FY19 FY20 FY19 FY20 FY19 FY20
KAF-Seagroatt & Campbell
29/05/2019 Hold 1.38 55.0 11.0 11.1 77.9 2.7 13.3
Maybank Investment Bank
29/05/2019 Hold 1.34 9.6 8.3 82 96 15.3 17.7
UOB KayHian 29/05/2019 Hold 1.30 21.7 10.7 42.5 86.0 6.8 13.7
KenangaInvestment Bank
29/05/2019 Underperform 1.15 69.1 54.4 11 14 2.1 2.7
Hong Leong Investment Bank
29/05/2019 Sell 1.12 10.6 9.6 90.5 99.3 14.0 15.3
TA Securities 29/05/2019 Sell 1.00 (72.5) 15.9 (11.1) 51.7 (2.0) 9.2
AmInvestmentBank
29/05/2019 Underweight 0.97 16.6 12.1 53.0 74.2 8.9 12.1
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THANK YOU