Here is what Wilson HTM has to say about OST:22 February...

Here is what Wilson HTM has to say about OST:
22 February 2012
OneSteel's 1HFY12 result was in line at the EBIT level, however ahead of WHTM and consensus NPAT ($78m vs WHTM $64m) due to lower tax. Excluding lower tax, the result was in line with our expectations. We believe the large increase in the share price today may have related to the
significant short positions in the stock, which have doubled since the start of 2012. We continue to rate OST a Hold (target price=0.84) given the current share price is trading in line with our target price.

Outside of Iron Ore and Mining consumables, EBIT was disappointing:
Manufacturing and Distribution EBIT continued to disappoint with combined losses of -$84m in 1HFY12. While management outlined its “steel review” continues, we are yet to see any major announcement and suspect further writedowns and restructuring is likely – we believe these costs could be significant.

Debt levels remain a concern for us:
We forecast OneSteel FY12 net debt/equity of 51% and EBIT/interest cover of 2.4x. Should iron ore prices fall from here, we believe OneSteel’s balance sheet could be challenged – particularly given the $475m capex spend in FY12. Due to uncertainty, management provided no FY12 NPAT
guidance - as a result of this uncertainty, we were surprised the Board elected to pay an interim dividend.

Target price changed in line with EPS changes:
Given the cash-generative nature of OST’s business, we value OST using a 3-stage DCF (WACC 10%, COD 5.8%, COE 13.45%, RFR 6.25%, Beta 1.2x, TGR of 3%). In anticipation of a possible equity raising, we apply a 34% discount to our TP. Downside risks: continued appreciation of AUD and softer steel prices. Key upside risks include: stabilisation in Australian steel prices, stabilisation of iron ore prices and a faster-than-expected increase in residential and non-residential construction activity

I followed/hold both stocks, BSL and OST and was quite surpsised by the fact that investors (until now) treated OST like a pure steel manufacturer (BSL) with no diversification.

So I guess I'll sit back and watch the shorts cover but I'll have my finger on the launch button.

Good luck!