commsec bearish, page-15

This artical was in todays Eureka Report.

Arrium (ARI)

Arrium is certainly not for the fainthearted. For those who haven’t already offloaded their Arrium shares, now is the time to do so, the newsletters say. With the company holding on to more than $2 billion in debt, and the share price above $1.02, it’s not hard to see why.

Although Arrium may have been hoping for a new beginning with its name change (from OneSteel), the fundamentals of the business are the same, and should be just as much of a worry for investors. The company is making a $474 million goodwill write-down against its manufacturing and distribution divisions, but that’s just the beginning, the newsletters say. One source notes that the company is still holding on to $7 billion of assets that earned absolutely nothing in the three years to 2012 and that more write-downs will likely be on the way.

The company’s share price has bounced around in the past six months, hitting as low as 55 cents just before it received a takeover tilt from Steelmakers Australia, a consortium made up of Noble Group, POSCO, and South Korean pension funds. The consortium walked away late last year after Arrium rejected its bid of 88 cents. With shares now trading at $1.02, it is looking lofty right now.

The massive debt that Arrium is carrying, combined with the fact that its business is vulnerable to exchange rates and changes in steel and commodity prices, makes it a stock that is ticking very few boxes right now. Consider moving on from this one, the newsletters say.

•Investors are advised to sell Arrium at current levels.