วันพุธที่ 27 พฤษภาคม พ.ศ. 2552

Kim Eng Stock Market Results Recommends Sell GSTEEL

G Steel (GSTEEL) - SELL

Price (Bt) 0.37
Target (Bt) 0.35
Set Index 540.22

1Q09 heavy loss, loans due, poor Audit report

1Q09 huge loss of Bt4,755mn
G Steel (GSTEEL) announced very poor 1Q09 earnings with a huge loss

today's stock market results
of Bt4,755mn compared with the previous quarterly loss of Bt5,883mn and the previous year net profit of Bt4,878mn. This net loss is composed of 1) a normalised loss of Bt1,292mn, 2) bad and doubtful debt expense of Bt1,406mn, 3) a loss on confirmed purchase orders of undelivered raw material of Bt2,341mn, 4) net foreign exchange losses of Bt273mn and 5) a slightly positive on a reversal of devaluation on inventory of Bt557mn. This huge 1Q09 loss came from the high cost inventory and the very low current demand. GSTEEL has cut production to only nights and weekends to save on electricity expenses. Sales were down to just Bt5,541mn (-22% qoq, -26% yoy). The gross margin was still hugely negative at –50% compared with –64% in the previous quarter and +10% last year. S.G& A. was up strongly to Bt717mn (+452% qoq, +320% yoy) and interest expenses were Bt279mn (-58% qoq, +59% yoy).

Auditors issue disclaimer of opinion on financial statements
The auditors have issued a disclaimer of opinion on the GSTEEL financial statement. This issue
concerns the shortage of liquidity for debt payment for a subsidiary this year of $30mn and others that
come due in 2010 amounting to $34mn. The Company also has obligations amounting to Bt6,005mn for the
redemption of bonds that mature in 2010.

Moody's and S&P ratings - risk of default
On May 13, S&P lowered the long-term corporate credit rating on GSTEEL to 'SD' from 'CC' after
GSTEEL missed a loan installment payment on April 30, 2009. Previously, Moody's had downgraded the GSteel
rating to Ca with outlook negative on May 07, 2009. These credit ratings place GSTEEL as a high risk of
default or a company in actual default.

High risk from loans due and auditor disclaimer
The major risk for GSTEEL is the shortage of liquidity and the 1H09 losses from steel industry
weakness. In addition, the auditor has not expressed an opinion on the GSTEEL financial statement. We are
maintaining our recommendation to SELL.

Earnings summary
Year End Dec 31 2006 2007 2008 2009F 2010F
Sales (Btmn) 18,003 22,042 36,487 23,355 29,106
EBITDA (Btmn) 2,233 2,460 15 3,191 3,818
Normalised earnings (Btmn) 894 793 518 -101 746
Earnings (Btmn) 1,678 1,732 -1,234 -101 746
Normalised EPS (Bt) 0.089 0.071 0.04 -0.007 0.05
EPS (Bt) 0.167 0.156 -0.094 -0.007 0.05
Normalised PER (x) 4.2 5.2 9.4 -50.5 6.8
PER (x) 2.2 2.4 N.A. N.A. 6.8
EV/EBITDA (x) 6 5.7 1,100.50 4.5 3.3
CF/share (Bt) -0.1 0.2 0.6 0.3 0.3
BVPS (Bt) 2.6 2.5 2.3 2.2 2.3
P/BV (x) 0.1 0.1 0.2 0.2 0.2
Net debt/equity (x) 0.1 0.1 0.2 0.1 0.1
ROA (%) 4.80% 4.10% -2.30% -0.20% 1.30%
ROE (%) 7.00% 6.40% -4.20% -0.30% 2.40%
Source : Company reports and KELIVE Research estimates.

By Kim Eng Securities (Thailand) Company Limited on May 19, 2009

today's stock market results
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