Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD
Research House: OSK
CSC Steel Holdings Bhd
(May 10, RM1.88)
Maintain buy at RM1.85 with target price of RM2.22: CSC Steel's 1Q numbers were above our and consensus estimates. 1Q earnings were down 17.6% from the previous corresponding quarter, mainly due to lower average selling prices as well as higher taxes paid. Nonetheless, we are positive on the upcoming one or two quarters as we see higher selling prices boosting the company's top line.
As such, we maintain our FY10 and FY11 numbers, which keep our target price unchanged at RM2.22. Maintain buy.
CSC Steel's 1Q numbers were 8% above our expectation and also beat consensus estimates. Quarter-on-quarter top line was flat but net profit fell 17.6%.
Although there was small growth in sales, the average selling prices of its finished goods were lower at US$680 (RM2,176) to US$780 per tonne (based on Steel Business Briefing's East Asia prices) during the quarter. This was partly due to Chinese New Year celebrations falling in mid-February 2010, during which steel demand was somewhat quiet. The decline was also partly due to the higher tax paid of RM8.6 million, which was 45% higher than that paid in 1Q.
On a year-on-year basis, net profit and revenue surged 435.9% and 62.6% respectively as stockists had held back on purchases last year as well as the higher inventory then.
We see higher CRC (cold rolled coils) prices as we believe the higher priced iron ore may have exerted cost pressure on prices. With the momentum set to gain pace, we think the company is poised to reap higher revenue over the next one or two quarters as downstream steel traders begin to stock up on inventory in anticipation of a further price hike in the CRC market.
However, we remain cautious for 2H as the improved sentiment may reverse, as there is an over-production of flat steel products. We maintain our forecasts for FY10 and FY11 and arrive at a target price of RM2.22 on adding our projected net cash per share forecast for FY10 to our six times FY10 EPS (earnings per share) valuation.
We are impressed with its strong balance sheet as the company pared down its debt during the quarter by RM4.5 million, which translated into net cash of RM288.3 million as at March 31, 2010. - OSK Research, May 10
This article appeared in The Edge Financial Daily, May 11, 2010.
Company Name: CSC STEEL HOLDINGS BERHAD
Research House: OSK
CSC Steel Holdings Bhd
(May 10, RM1.88)
Maintain buy at RM1.85 with target price of RM2.22: CSC Steel's 1Q numbers were above our and consensus estimates. 1Q earnings were down 17.6% from the previous corresponding quarter, mainly due to lower average selling prices as well as higher taxes paid. Nonetheless, we are positive on the upcoming one or two quarters as we see higher selling prices boosting the company's top line.
As such, we maintain our FY10 and FY11 numbers, which keep our target price unchanged at RM2.22. Maintain buy.
CSC Steel's 1Q numbers were 8% above our expectation and also beat consensus estimates. Quarter-on-quarter top line was flat but net profit fell 17.6%.
Although there was small growth in sales, the average selling prices of its finished goods were lower at US$680 (RM2,176) to US$780 per tonne (based on Steel Business Briefing's East Asia prices) during the quarter. This was partly due to Chinese New Year celebrations falling in mid-February 2010, during which steel demand was somewhat quiet. The decline was also partly due to the higher tax paid of RM8.6 million, which was 45% higher than that paid in 1Q.
On a year-on-year basis, net profit and revenue surged 435.9% and 62.6% respectively as stockists had held back on purchases last year as well as the higher inventory then.
We see higher CRC (cold rolled coils) prices as we believe the higher priced iron ore may have exerted cost pressure on prices. With the momentum set to gain pace, we think the company is poised to reap higher revenue over the next one or two quarters as downstream steel traders begin to stock up on inventory in anticipation of a further price hike in the CRC market.
However, we remain cautious for 2H as the improved sentiment may reverse, as there is an over-production of flat steel products. We maintain our forecasts for FY10 and FY11 and arrive at a target price of RM2.22 on adding our projected net cash per share forecast for FY10 to our six times FY10 EPS (earnings per share) valuation.
We are impressed with its strong balance sheet as the company pared down its debt during the quarter by RM4.5 million, which translated into net cash of RM288.3 million as at March 31, 2010. - OSK Research, May 10
This article appeared in The Edge Financial Daily, May 11, 2010.
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