STOCKWATCH: Angang New Steel higher on results/high dividend yield
HONG KONG (AFX-ASIA) - Angang New Steel Co Ltd shares were higher, outperforming a broader weak market following the company's better-than-expected results and its defensive nature, with a high dividend yield, dealers said. At 11:15 am, Angang New Steel was up 0.03 hkd or 3.65 pct at 0.85 on volume of 13.42 mln units. The Hang Seng Index was down 273.56 points at 12,950.30. "The net profit in 2000 turned out to be 66.3 pct higher than that of 1999, better than the market generally expected and better than our original forecast of about 49 pct growth," Patrick Pong, analyst of South China Research, said. The company posted 491.395 mln yuan in net profit for 2000 against 295.421 mln a year earlier. Pong said earnings growth was primarily attributed to improved gross margin and sales growth from both stronger domestic demand and exports. "The average profit margin amounted to about 10.4 pct in 2000, which is a very encouraging result since it's very difficult to achieve such a profit in the steel sector," he added. In addition, he said investors will be attracted by the defensive nature of the company with a high dividend yield amid a volatile stockmarket and uncertainties over the global economy. "In fact the company proposes to declare 0.09 yuan in final dividend for 2000, representing about 10 pct dividend yield," Pong said, adding that the company currently holds about 2 bln yuan cash on hand and no debt. Despite the fact that steel prices are expected to maintain flat growth in 2001 and thus the company's net profit is unlikely to be as high as that in 2000, Pong said the company's sales will be boosted when its new production plants commence operation in 2003. Also, domestic demand for steel will remain strong given many infrastructure projects planned under the fifth Ten-Year Plan in China, he added. Pong said his house recommends a "buy" rating on the company with a target price of 1.1 hkd.
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