Thursday, October 08, 2009

Why I Like CSC Steel




The stock is not well known but has held up very well over the past 12 months. Its 52 week high-low range was 1.20 - 0.75. I like the build up in volume and looks even better when it breaks past its 52 week high (soon, I think).

Shares Issued: 373m

Major Shareholders (%)
China Steel Asia Pacific Holding Pte Ltd 45.0
Lembaga Tabung Angkatan Tentera 10.0
Lembaga Tabung Haji 7.7

As mentioned in my posting for Ann Joo, the outlook for steel stocks are brighter for the next 2-3 quarters at least. This stock is pretty solid but is always under the radar because of its size. Well, you look at the major shareholders, its not a stock in play for sure but I have heard a few funds are secretly accumulating already.

Looking at its share price of around RM1.12, its net EPS for o6 was 18.8 sen, for 07 was 21.0 sen, for 08 was 15.5 sen, and is estimated to still rake in 14.0 sen this year. Crisis, what crisis. Solid net profit figures from 2006-2008: 71.4m, 79.7m, 58.7m. This year should come in between 48m-52m.

Steel manufacturing licences were granted “without restriction” effective Aug 1 “to meet the demand for domestic and export markets. By granting “free” steel manufacturing licences, steel millers would be able to produce any type of flat or long steel products that are in short supply at home, or in demand overseas. Import controls on flat products – hot-rolled coils (HRC), cold-rolled coils (CRC) and electro-galvanised iron (EGI) – that are used for production of finished products for export market would also be lifted from Aug 1. CSC also may see a bigger market now because local buyers of secondary flat steel products who had previously enjoyed a 40% duty exemption on their CRC requirements may now prefer to buy from local producers as imported CRC will be taxed at 25% from Aug 1, ‘09.

On such low valuations and probably accumulation by funds, the stock should breach its 52 week high of RM1.20 as an initial target and then make a move for its 2008 high of RM1.40.




p/s photo: Mizukawa Asami

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