14 November 2010

Would Steel sector ‘Stealing’ the show next?

Pre and Post-Budget 2011, you like it or not, construction sector was the main beneficiary. Judging from the share price, construction stocks are almost fully valued now, with less upside space. Gamuda, IJM, MRCB, HSL, with the latest gainers of AZRB and Muhibbah, opportunities seems disappearing in construction counters.

Next wave is STEEL?

If you missed the construction boat, another boat is coming your way. Do not worry.
What people forget was the chain effect of mega construction projects.
What would construction sector needs? Can you construct without cement? Can you construct without steel?

Investors have two choices now – cement and steel. Since there are only 3 cement stocks, namely LMCement, YTL Cement and Tasek, which was not so attractive right now, we better focus on steel related stocks.

So, forget about the already construction rally and focus on steel counters instead, on the following reasons:-

  • Spur by local mega construction projects, such as LRT extensions and Warisan Merdeka Tower.
  • New Vale distribution hub in Lumut, which could lower the cost of local steel millers.
  • The maiden SCORE project at Sarawak to boost capacity substantially.
  • Potential duty hike for export of scrap metals, which is the raw materials needed locally.

* Hint: LionCorp was looking attractive now

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