Turnall released an impressive set of results for the year ended 31 December 2009 in which they achieved revenues of $16,5m. They incurred $10,4m production costs to post $6,1m gross profits. Operating expenses of $3,5m saw the group post a profit from continuing operations of $2,6m. They then incurred net finance costs of $185,226 to attain a PBT of $2,4m. A tax expense of $851,874 for the year gave the group PAT of $1,5m. Gains on assets revaluation totalling $6,6m saw them posting total comprehensive income for the year of $8,1m (basic EPS: 0,32c). Turnall had $32,8m total assets and $20,6m NAV. They closed in a net cash position of $746,138.

Operational review. Limited credit lines and liquidity problems hampered the company’s operations in Q1. However capacity utilisation rose from 12% to 40% through the year. Sales volumes were at 43,000 ton, which was 1000 ton shy of the prior year’s volume. The product volume sales for the local market grew by 58%, contributing 93,9% to total revenue. The asbestos ban in South Africa saw the export sales volumes come down to 10% of volumes, compared to traditional levels of 20%, while export contribution to revenues was 6,1% with selling prices averaging $450 per ton for pipes and $383 per ton for roofing products.

Trade Update and Outlook. Volumes for the first two months to 28 February were up 440% y/y. Capacity utilization by the end of the first two months stood at 60%. The company has since paid $629,545 for the manufacturing of the non-asbestos machine for its plant in Bulawayo plant by drawing down from the secured $5m loan facility. The new plant is expected to be commissioned in Q4 and the group hopes that once the non asbestos plant becomes operational export sales could increase to 30% by selling to SA, Botswana and Namibia. For FY2010 the company forecasts sales volumes of 50,000 ton while supply side constraints stemming from the

problems at Shabani Mine are expected to be mitigated by importing from Brazil and Russia. This comes though at higher landing cost of $1,100 per ton against $700 from local supply. The advent of a non asbestos plant (one of the three targeted over the next 5 years) puts to rest the worries of the long term sustainability of Turnall's operations once resistance on asbestos based products strengthens internationally.

Value and Recommendation. To value Turnall, we assume that Turnal produces 50,000 ton on average sell off price of $416 per ton and the group maintains the cost levels of F2009. Our forecasts of the company’s turnover, EBITDA, and earnings therefore are $20,8m, $3,2m and $2,3m respectively. Applying an EV/EBITDA multiple of 8,6x, Turnall's target EV stands at $27,2m, giving rise to a market cap of $15,8m, 3,3c per share (assuming they maintain their 2009 balance sheet). Notwithstanding the current ban on asbestos based products by their prime export market, Turnall’s operations are already profitable. With non asbestos products on the horizon, we should expect higher export based sales volumes and thus believe that at a price hovering around 2c Turnall is a definite BUY.