PETALING JAYA: Ann Joo Resources Bhd, which is involved in the manufacturing and trading of steel and steel-related products, will be focusing more on its export market due to subdued domestic prospects.

       Citing the company’s management, TA Securities in a report yesterday said domestic demand for long steel products remained soft, partly due to public spending constraints.

       “As such, the group will continue focusing on the export market in order to ride on the global recovery.

       “Management also guided that according to Fitch, the prices of key raw materials such as iron ore, coking coal and scrap are expected to be lower in 2022.”

       Additionally, TA Securities said the Cukai Makmur (or prosperity tax) will have a minimal impact on Ann Joo, due to tax allowances that the group is eligible for.

       In Budget 2022 unveiled in October, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said a one-off special prosperity tax would be imposed on companies that had a chargeable income of above RM100mil.

       Profit above this threshold would incur a tax rate of 33% for the 2022 assessment year, instead of the initial corporate rate of 24%.

       This is expected to largely affect companies in the banking, brewery, tobacco, utility, glove, telecommunication, automotive, palm oil and technology sectors.

       Separately, TA Securities said Ann Joo’s core net profit of RM267.9mil for the nine-month period ended Sept 30, 2021 had come in above expectations.

       The research house emphasised, however, that this was after stripping out a net exceptional loss amounting to RM41.5mil.

       “Year-on-year, the group recorded a higher core profit of RM267.9mil in the nine-month period ended September 2021, versus a core loss of RM86.1mil a year ago, as revenue increased by 22.5% to RM1.66bil.

       “The superb earnings performance was mainly attributed to significantly higher average selling prices of steel products and higher export tonnage.”

       Separately, Kenanga Research said Ann Joo’s core net profit for the nine-month period came in within expectations.

       Going forward, the research house said it anticipates a “mixed and highly uncertain” outlook for steel.

       “With the recent housing market crisis in China, prospects for property demand in China are likely to wane and this would indirectly affect the prices for long steel products.”

       Kenanga Research noted that China’s long steel prices saw a sharp drop in October 2021.

       “However, on the supply side, China’s long-term policy to achieve carbon neutrality by 2060 would contribute to a tighter supply in the mid-long term, which means steel prices would be somewhat supported.

       “All in, we believe steel prices would likely see downward pressure in the short term but stabilise thereafter,” it said.