Investing

Why Lion Industry share price is continuously going higher?

One of the subjects I studied in my civil engineering course is metallurgy, the study of making metals which includes iron, steel, copper and other metals.

China has been producing more than 50% of the total production of steel in the world and China was the biggest exporter of steel.

China bought iron ore from Australia and coal from Indonesia. The iron ore can be changed to iron by burning coal. By adding carbon the iron can be changed to steel. Adding carbon to iron to make steel stronger and tougher, up to a point. Then it will get stronger but less tough, like cast iron which is tough but brittle. That means it will crack if it is bend. Carbon strengthens iron by distorting its crystal lattice.

You can make steel stronger by tempering. If you heat up a piece of steel and deep it in water, it become stronger. If you heat up a piece of steel and deep it in oil, it becomes stronger and tougher.

In the process of burning coal, a lot of carbon dioxide and other impurities are produced into the atmosphere. As a result, the sky over Beijing, Shanghai and other cities is always dark and the air is always polluted.

Since almost all the steel factories are State own, the Government has terminated most of the steel factories.

Currently, China uses scrap iron and imported iron baguettes to make steel for its own use. China does not export any more steel.

Malaysia used to import steel from China and to protect the local steel manufacturers, the Government imposed an import duty.

That is why Lion Industry has been making increasing profit in last few quarters. Its 1st Q EPS 4.08 sen, 2nd Q EPS 8.20 sen and 3rd Q ending March 2018 EPS 8.91 sen. The total EPS for 3 quarters is 21.19 sen. Assuming its 4h Q is the same as its 3rd Q, its total EPS for the full year will be about 30 sen.

Based on the last traded share price of Rm 1.25, its P/E ratio is about 4. It should be considered very cheap especially it has very good profit growth prospect which is following my share selection golden rule. I expect its 4th Q will be better than its 3rd Q.

The above chart shows that the price has gone up from 63 sen to close at Rm 1.23, an increase of 60 sen, nearly 100% increase in less than 2 months.

Many of my friends have asked me if they should sell to take profit or continue to buy.

My selling rule is I will start to sell as soon as I see the company is showing reduced profit. That is how to maximise profit.

Many of my friend have also asked me if they should buy back at higher price if they have sold earlier. Of course, many shareholders would have sold too early and regret. A few smart one will dare to admit their mistake and buy back at higher price. In view of its good increasing profit growth, if you have sold, you should buy back.

Many of my friend have asked if they have some more buying facilities, should they take the risk to buy some more.

This question is a bit tricky for me to answer. It really depends on your risk appetite. Can you afford to lose some money? Or are you willing to take the risk of earning less money in case the price falls lower instead of going higher.

I am obliged to inform you that Lion Industry is one of my major investment. I am posting this is to share my knowledge and I am not encouraging readers to buy or to sell this counter.

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