bsl

Australian Stock Report 3-3-07

Steel got the blues


EVENT


Bluescope Steel (BSL) result good, forecast strong, but share price full


KEY POINTS


First half profit up 24%

Says full-year will be significantly above last year

Quiet on its ambitions for Smorgon

COMMENTARY


Bluescope had a storming few months in the lead-up to its half-year results. In fact, the stock was up about 50% in four months. We don’t think the company can keep this up.


The company’s result was much better than recent times, but the second-half is expected to be weaker.


The stock’s recent run was due expectations of a bumper result, so a lacklustre in the next half is unlikely to provoke much excitement from investors.


More worries than hopes


Looking ahead, we see more to worry about than reasons to be hopeful. The company’s Asian operations are improving, but unlikely to achieve their targets in the medium term.


Meanwhile, in Australia, the merger of Smorgon and OneSteel, if approved by the regulators, is likely to cause more headaches for BlueScope.


In short, we see BSL as a company with too many hopes built into the share price.


We have a six-month price target of $9.00 on this stock, which makes BSL an UNDERPERFORM.