IBD看好General Steel

7/11

对于General Steel Holdings(代號:GSI) 来说，在中国生产什么就在中国销售什么是不变的真理。中国目前从高架、地铁、机场到发电站、大坝以及其它能源项目都在热火朝天的动工当中，作为一家位于北京的公司，General Steel已经跻身于中国钢铁行业巨头之林。中国中央政府计划整合目前处于涣散状态的国内钢铁生产商，将尾大不掉的国企单位整合成更加现代化和高效的钢铁巨头。政府的目标是：到2010年，至少50%的国内生产力要达到前十位，2020年要达到70% 。General Steel表示，弱小钢铁企业将被裁剪，而实力雄厚的钢铁公司也会有所削弱，目前在中国由超过1000家钢铁企业。公司计划扮演支持中国政府的左翼角色，目前其在钢铁行业的地位处于前30位。

仅仅几年前，General Steel还是刚刚登记注册的“初生牛犊”，这家由Henry Yu一手创建的企业主要生产使用于为小型农场设备的碳钢。但是在05年，公司与宝山钢铁集团联合组建了一家合资企业，为能源行业提供钢铁运输管道。去年，公司斥资3900万美元控股国有企业陕西龙门钢铁集团，并获利丰厚。龙门集团是陕西最大的钢铁生产商，年钢铁产量达到250万吨。同时，三峡大坝的修建也需要大量的设备钢铁，包括西安城市地铁建设等项目都需要大量设备钢铁生产。龙门集团为General Steel带来销售额的大幅上升，去年销售额上涨至7.72亿美元，同比为1.4亿美元。

今年一季度营收飙升了675%至2916亿美元；每股收益上涨了200%为0.06美元。然而公司的业务并没有松懈，由于公司拥有自己的铁矿石和炼焦煤原料，其能够有效控制原材料成本开支。

中国最近的五年计划将重点投降中国西部地区，恰恰处于西部核心地区陕西的龙门集团就能够发挥“好望角”的作用了。同时，陕西省也要致力于本省的发展：新高速、机场、大坝以及新帖系统的营建。这还不止，General Steel宣布收购广东省茂名恒大钢铁集团有限公司99%的股权，这是一家年产量180万吨钢铁的企业，这仅仅是恒大生产能力的10% 。Roth Capital Partners分析师Kun Tao表示：“这是一家其潜力巨大的企业。”预计恒大能够达到40%的生产力，每季度净收益将达到200-300万美元。General Steel计划在恒大投资2000-3000万美元，并支付720万美元现金以及1500万美元的银行债务。

虽然Roth Capital的分析师Tao并不怀疑中国南部沿海地区的建筑钢铁需求量将是“巨大的”，但是他质疑的是这些地区营建的日期尚未确定，“说的容易，但是在目前的水平，信息仍然是有限的。”

同时，General Steel还在考虑进行更多的收购，“这绝不是最后一次收购计划，我们将发展成为合并收购的平台。”加上内部的现金流量，General Steel将在美国市场中展翅翱翔。“如果我们的业绩出现丰收，市场也将青睐于我们。”

但是目前公司股票市场拥有率仍然较低，管理层就拥有了65%的股权。Thomson Reuters poll预期今年的每股收益将上涨10%至0.69美元，09年将上涨74%至1.32美元。

Investor's Business Daily
China Consolidates Its Fragmented, Partly State-Owned Steel Industry
Thursday July 10, 6:17 pm ET
Marilyn Alva

For General Steel Holdings, what's made in China is sold in China.

That can be a powerful combination. China is building everything from highways, subways and airports to power plants, dams and other energy projects.

And so it is for Beijing-based General Steel (NYSEArca:GSI - News), which has stepped onto the country's steel stage to help meet demand for all things steel.

It does so as the central government aims to consolidate fragmented domestic steel makers -- many of them state-owned -- into a more modern and efficient industry.

The government's goal: bring 50% of domestic production under the helm of the top 10 steel outfits by 2010, and 70% by 2020.

General Steel says that as excess capacity from weaker players is removed, the stronger steel companies will gain clout. More than 1,000 steel firms of all sizes now operate in China.

General Steel aims to be one of the stronger players left standing. It figures it now keeps company with the top 30.

Humble Beginnings

But until a few years ago, General Steel barely registered. The small predecessor firm -- founded by Henry Yu, who is the current chief executive as well -- made carbon steel for small farm vehicles, many of them used by peasant farmers.

Then, in 2005, General Steel and the state-owned Baotou Iron and Steel Group forged a joint venture to make steel pipes for the energy sector.

Last year, it got hugely bigger when it paid $39 million for a controlling interest in a state-owned business in Central China called Shaanxi Longmen Iron and Steel.

Longmen, the largest steel producer in Shaanxi province, can turn out 2.5 million tons of crude steel a year. Most is bar steel for reinforcing concrete.

Products rolling out of the facility have helped build the massive Three Gorges Dam on the Yangtze River. Newer uses include construction of a subway system in the regional capital of Xi'an, among other projects.

With Longmen on board last year, General Steel's sales rose sharply, to say the least, to $772 million from just $140 million in 2006.

In the first quarter, revenue soared 675% from the year-ago period to $291.6 billion. Per-share earnings rose 200%, but to a still-small 6 cents per share.

Business isn't likely to slack off, analysts say. General Steel is able to control high raw-materials costs somewhat since it owns some of the iron ore and coking coal used to make steel.

China's latest Five-Year Plan (2006 to 2010) views development of China's western region as a top priority.

Longmen is located in the province designated as the bridgehead for development into the western regions.

And the province itself and its capital are focal points for development. In the works: new highways, an airport, dams and a subway system, according to a government report cited by the company.

If that weren't enough, on June 30 General Steel announced still another big deal. It acquired a 99% interest in the privately owned Maoming Hengda Steel Group, or Hengda for short.

Located in the highly developed southern coastal province of Guangdong, Hengda has the means to produce 1.8 million tons of steel a year.

That's less than Longmen, but Hengda operates at only 10% capacity. Longmen runs at nearly full tilt.

"So it has higher potential to grow," said Kun Tao, an analyst at Roth Capital Partners.

He estimates that if Hengda were to operate at 40% capacity, it would generate $2 million to $3 million in net income per quarter.

That's in the same ballpark as General Steel's total net income in the first quarter alone.

"If it runs at 80%, the upside could be double," Tao said.

And grow it will, vows General Steel's management. Chief Financial Officer John Chen says the firm plans to boost production at Hengda from 180,000 tons a year to 1 million tons by the fourth quarter.

General Steel plans to invest $20 million to $30 million to boost capacity at Hengda, Chen says.

"We got in at a bargain price -- 40% discount of net equity value," he said, noting that Hengda's parent company wanted to focus on real estate, its core business.

General Steel paid $7.2 million in cash and assumed $15 million in bank debt.

Even though the facility had state-of-the-art equipment, the operation had lost money.

Early Stages

Roth Capital's Tao doesn't doubt that demand for construction steel in the southern coastal region is "huge," but he questions how long it will take the facility to ramp up.

"It's too early to say," he said. "At this stage, the information is very limited."

Only two other steel makers operate in the coastal province, but they are much bigger than Hengda.

Meanwhile, the company has its eye on more acquisitions.

"This is by no means the last one," Chen said. "We are a merger and acquisition platform."

In addition to internally generated cash, it will fund expansion through U.S. capital markets, he says.

"If we are able to pull off financial results, the market should reward us," he said.

But the stock is thinly traded by the public. Management owns about 65% of shares.

Earnings are forecast to rise 10% this year, to 69 cents a share, according to a Thomson Reuters poll. They're expected to rise much more in 2009 -- by 74%, to $1.32 a share.