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Dutton Associates Announces Investment Opinion: General Steel Holdings Strong Speculative Buy In Update Coverage By Dutton Associates

Posted on: Monday, 7 July 2008, 12:00 CDT

Dutton Associates updates its coverage of General Steel Holdings (NYSE: GSI) with a Strong Speculative Buy rating and a price target of $14.60. The 13-page report by Dutton senior analyst Stanley Ng is available at www.jmdutton.com as well as from First Call, Bloomberg, Zacks, Reuters, Knobias, and other leading financial portals.

We believe investors should consider the disappointing financial results for 1Q08 for General Steel as an atypical non-recurring event because the higher-than-expected revenue and sustained increase in product prices suggest General Steel's products are in strong demand. The positive demand drivers, such as massive infrastructure and construction projects in the Shaanxi Province, growth in the energy sector along with the need to transport oil and natural gas through steel pipes, and higher demand for hot rolled carbon and silicon steel sheets for producing agricultural vehicles, discussed in our previous update report, will remain intact. Meanwhile, the sourcing of cheaper iron ore from its joint venture partner and the shift in product mix to higher margin silicon sheet at Daqiuzhuang Metal should contribute to visible improvement in gross margin ahead. Based on our revised revenue and net income forecast, the stock is trading at estimated 2008 PE of 12.5 times, which is at a substantial premium over its Chinese peers. Given its much higher ROE, more prestigious NYSE Arca listing status, inclusion in the Russell 3000 Index and forecast impressive 84.3% net income growth in 2009 driven by its latest acquisition of Hengda Steel, we believe General Steel will continue to trade at a significant premium to the average PE valuation of its Chinese peers. At our new target price of $14.60 per share, the stock is trading at prospective fully diluted 2008 PE of 17.8 times and 10.0 times for 2009.

About Dutton Associates

Dutton Associates is one of the largest independent investment research firms in the U.S. Its 30 senior analysts are primarily CFAs, and have expertise in many industries. Dutton Associates provides continuing analyst coverage of over 140 enrolled companies, and its research, estimates, and ratings are carried in all the major databases serving institutions and online investors.

The cost of enrollment in our one-year continuing research program is US $35,000 prepaid for 4 Research Reports, typically published quarterly, and requisite Research Notes. The Firm does not accept any equity compensation. We received $35,000 from the Company for 4 quarterly Research Reports with coverage commencing on 11/05/2007. Our principals and analysts are prohibited from owning or trading in securities of covered companies. The views expressed in this research report accurately reflect the analyst's personal views about the subject securities or issuer. Neither the analyst's compensation nor the compensation received by us is in any way related to the specific ratings or views contained in this research report or note. Please read full disclosures and analyst background at www.jmdutton.com before investing.

Source: Business Wire

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