News

BHP Billiton Limited (NYSE:BHP) announced an agreement to sell its shuttered Ravensthorpe nickel mine to First Quantum Minerals Ltd (First Quantum) on 09 December 2009 for US$340 mn and expects to complete the sale by 1Q 10. However, we do not expect a significant change in our fundamental outlook. Hence, we believe that the stock is overvalued at current price levels and we therefore maintain our SELL rating. We will reassess our ADR rating (1 ADR = 2 Australian shares) after the company releases its 1H 10 results in February 2010. We now anticipate a positive currency impact on the Australian stock over the next 6-12 months. However, given our outlook for the company's fundamental stock and the Australian stock's current price levels, we maintain our SELL rating for Australian stock We will reassess our Australian stock rating for BHPB after the company releases its 1H 10 results in February 2010.

BHP Billiton PLC (NYSE:BBL) announced an agreement to sell its shuttered Ravensthorpe nickel mine to First Quantum Minerals Ltd (First Quantum) on 09 December 2009 for US$340 mn and expects to complete the sale by 1Q 10. We expect the company to report improved production in FY 2010, led by improved demand conditions and start-up of the company's various developmental projects. However, at current price levels, the company's ADR looks fairly valued and we therefore maintain our HOLD rating. We will reassess our ADR rating (1 ADR = 2 UK shares) after the company releases its 1H 10 results in February 2010. We now anticipate a significant negative currency impact on the UK stock over the next 6-12 months. Therefore, we downgrade the UK stock from our previous HOLD rating to a SELL. We will reassess our UK stock rating for BHPB after the company releases its 1H 10 results in February 2010.

New Valuations

Fresenius Medical Care AG Co & KGaA (NYSE:FMS)revenues are expected to continue growing modestly, benefiting from an increase in revenues per treatment in the North American market as well as the International market going forward. Increasing numbers of dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa are expected to increase the number of treatments per year, resulting in incremental revenues from the Dialysis Care business, going forward. The company is continuing its efforts to provide night dialysis services at more than 100 dialysis centers (de novos) in North America which is also expected to support the increase in the number of treatments, going forward. We continue to expect the Dialysis Products segment to report modest growth, driven by demand in international markets for dialyzers, dialysis machines, renal drugs and concentrates, going forward. An increase in the number of clinics is expected to continue putting pressure on margins over the medium term. The company has greatly reduced its Debt/EBITDA ratio to 2.13 in 3Q 09 compared to 2.92 in 2Q 09. Management is continuously making efforts to lower its Debt/EBITDA ratio and we believe the company will be able to fulfill its debt repayment requirements in future. Consequently, our overall fundamental outlook for the company is neutral.

POSCO (NYSE:PKX) We continue to believe that steel prices bottomed out in 2Q 09 and expect average steel prices through 2010 to be higher than current levels. Tightening of steel supply due to production cuts by major steel producers and boost in consumption due to massive stimulus spending by various governments on infrastructure and construction will support steel prices over the near to medium term. Although resumption of production from idle plants in Europe and the US and capacity expansion in China will restrict upside potential in steel prices, revisiting 1Q 09 low levels seems unlikely. Steel demand in South Korea will be supported by the improving prospects of its largest steel consuming industries, automobile and shipbuilding, with its GDP forecast by the World Bank in November 2009 to increase by 3.7% in 2010. We expect POSCO's sales volumes to increase y-o-y in FY 2010 as the company benefits more than its competitors from its low cost structure. However, the anticipated increase in prices of key inputs, coking coal and iron ore, will limit the positive impact of rising steel prices and volumes on POSCO's financial performance in the coming fiscal year. In December 2009, the company entered into an agreement with Indonesian steel giant PT Krakatau Steel to build a steel plant with nameplate capacity of 5 MT, with 2.5 MT scheduled to come on stream in 2013. While this, and its plans in India, bode well for long term growth, the ongoing delays in project execution on its 12 MT steel plant in India due to opposition from the local community, the postponement of domestic capacity expansion plans, and the deferral of the public offering for its engineering and construction unit due to poor response, dampen the outlook for what remains a fundamentally sound company. Considering this, and the dramatic increase in common stock prices over the last 6 months, we view the stock as fairly valued at current price levels.

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