Falling steel prices. Besides doing large scale projects, SSH has also secured smaller orders where it buys in anticipation of demand, and margins here will be negatively affected by a decline in steel prices. With a shipping slump and a slowing global economy, steel consumption is likely to decline, leading to downward price pressure which may affect SSH’s profits.

Given the current credit crunch, companies are experiencing difficulties
securing funds and those that are able to will probably have to pay higher
finance charges. However, SSH’s management said its current finance
charges are competitive relative to the market.

Resume with HOLD. While SSH is expected to reap synergies from its
tripartite relationship, it is prudent to focus on a company’s balance sheet
in light of the current severe credit crunch situation. Based on a 2x blended
FY09/10 earnings which is in line with the industry average, OCBC Bk derive a
fair value estimate of S$0.12 and resume coverage on SSH with a HOLD
rating.