buy recommendation issued. target $0.07

Please see attached research released by Veritas Securities on Gulf Industrials(ASX:GLF) with a BUY Recommendation

Gulf Industrials Limited (GLF.ASX)
Recommendation BUY
Share Price A$0.02
Price Target A$0.07
Valuation A$0.15
Market capitalisation A$m 9
Shares on Issue* 401m
Enterprise value A$m 9
Previous rating Initial
* Partially diluted for options
Low risk industrial minerals strategy
? GLF is a focused Industrial Minerals company with a strategy to develop into a diversified producer in the foreseeable future.

? The company has recently become a producer with the commencement of production at its East African Vermiculite (EAV) project in eastern Uganda.

? The project will supply a premium grade product into a vermiculite market which is experiencing a natural demand increase and also shortfall in mine supply.

? GLF have also acquired the high grade Soalara limestone project in south west Madagascar targeting first production in 2012.

Investment drivers
? GLF plans to increase production from the current 18ktpa to 115ktpa of vermiculite concentrates by 2014 to capitalise on the natural demand increase for vermiculite and to replace a shortfall of mine production from Rio Tinto?s Palabora mine in South Africa.

? The Namekara vermiculite deposit has sufficient reserves and resources for +50 years at the expanded rate.

? GLF has secured a 25 year sales contract for all production with an industrial minerals specialist, Dupre Minerals, who will market and distribute the product to its customers.

? GLF have acquired a 100% interest in the Soalara limestone project in Madagascar and have commenced a feasibility study. The project has the potential to substantially increase revenue and cashflow for GLF with first production slated for 2012.

? Our earnings forecast highlight a re-rating of the GLF share price in the short term as we see GLF trading on a PE multiple of 3.1 x 2012FY and 1.5 x 2013FY.

Recommendation
? We see significant value upside from the expansion of production to 115ktpa by 2014.

? Our NAV includes the EAV only as we await newsflow on the Soalara limestone project.

? Based on our NAV of $0.15 per share we place a medium term price target of $0.07 per share on a partly diluted basis as we await ongoing news on EAV production and planned upgrades.

? We recommend a BUY.