While there are many well-intentioned contents published on stock forums, some of them are simply based on writers' opinion and understanding may end up become inaccurate or mispresented, so to speak.
That being said, I do not wish to point fingers or lay blames to any parties, and I hope whatever I shared in this article could brighten up our reader’s mind.
To begin with, there are generally two types of steel industries player in Malaysia, namely the manufacturers and/or value add companies, and those who involved mainly in the trading and wholesaling business.
As for the value chain, the photo taken from Bulatlat had presented well on how it works.
enlistcapitalGenerally, Malaysia did not involve much in the iron ore mining industry, as our country’s mineral mining sector recorded a gross output value of MYR3.5 billion, out of which RM1.7 billion is attributable to bauxite and ilmenite mining (2016, Mining and Quarrying Economic Census).
And according to Trading Economics, https://tradingeconomics.com/malaysia/mining-production the mining production in Malaysia had averaged a 0.75% drop from 2011 until 2021. Hence, we do not see much iron mining activities ongoing on Bursa.
06/08/2022 5:11 PM
enlistcapitalWhile investors would generally refer “steel” prices on CNY-based rebar, which is the first search result one could find when you googled “steel prices”, flat steel and value-added products such as hot rolled coil and cold rolled coil data is relatively harder to be found. Hence, there are many misunderstood on the pricing – which is completely understandable especially for those who are new to the market. You could also see that the application of long steel such as rebar and flat steel are much different.
Understandably, the prices for “steel” are constantly fluctuating alongside with supply and demand.
While many could argue that “steel” prices had went down from its high, the value of construction work done alone in 2022 Q1 in Malaysia had amounted to RM29.5 billion – steel, being one of the key construction materials, is poised to see an increase of demand, and at the current juncture, it is still considerably profitable for steel players in Malaysia.
For manufacturers in Malaysia, they are generally applying to a costs-plus model in terms of factoring their prices. In other words, as long as the management had been keeping a close eye on steel prices and manage their inventories well, the company should remain buoyant against the price fluctuation headwinds, while preparing rigorously for the next upcycle.
For number crunchers, we need to relook at the term “Revenue” , which obviously was made up of 2 aspects for steel companies, namely the volume supplied and selling price of the products.
In weaker steel prices time, the manufacturer or trader could rack up their volume to cover up fixed costs as well as enhance their margins, and during the steel upcycle, they could enjoy both at once. It all comes down to how well the company was managed, especially on the inventory level.
06/08/2022 5:12 PM
enlistcapitalSpeaking of which – inventories could make a difference on the profit and loss statement, but for obvious reasons it would depend on when the goods were sold. Do bear in mind, that these inventories are not like your properties, which one could revalue to inflate its bottom line, but instead, it needs to be sold then only its bottom line can be concluded which is always tied back to the timing of sales.
Of course, for slow moving inventories and those inventories which are below its net realisable value, the steel manufacturers and/or traders may even need to impair or setting up an allowance for impairment on the books!
Therefore, I was amazed when investors are touting the idea of steel companies inflating their numbers by not doing anything on their inventories.
However, for investors, it is always about the return on investment. We all know that the stock market generally had a 6-12 months forward nature in pricing and valuation, and that would very well explain the current valuation of the steel companies. Coupled with hampered investors sentiment, there you go, low single digit PE steel companies.
It is wise for investors to normalize the company profit, and to certain extent – try to wait out for a low for companies who managed their cash flow well.
06/08/2022 5:12 PM
enlistcapitalOh! Speaking of which, cash flow and debt is another commonly debated issue in the steel industry.
I think many investors may understand the basics of working capital, but not the concept of trade financing. You see, in a capital-intensive business, it is sometimes cheaper to raise a super short-term borrowing of 30 to 120 days in order to secure customers and better margins.
This is common that steel industry, or commodities related companies on Bursa had over a great deal of their debt in short-term trade financing, which is lower in financing costs, as it was prorated.
It is just sad to see that investors are injudiciously and blatantly claiming that steel makers would raise borrowings just to pay dividends to attract investors. Dividends are generally approved by the board members while for final dividends, shareholders’ approval need to be sought. The board members which also consists of independent directors must have closely monitor the cash flow of the company before approving it.
So much for saying debt-for-dividend.
I think investors need to be fair in justifying the profit and loss, as well as cash flow movement of any steel companies in Malaysia before crowning an undervalued or overvalued statement over them. It is simply irresponsible.
Remember, what is undervalued now can be overvalued in 6-12 months’ time, and vice-versa.
Cheers!
06/08/2022 5:12 PM
DickyMeSo long in the business, why the need to borrow? What happened to past profits?
15/11/2022 6:20 PM
fruitcaketime to revisit. light up your firecrackers
mlmkcomichttps://focusmalaysia.my/markets/csc-steel-when-you-have-a-good-horse-the-jockey-is-not-critical/ If you go by this article, management may come and go but the business model will ensure that the company will always profitable.
prudentinvestorBought at around RM1.20, how to take profit? This year's eps should be at least 15 sen and dividend shouldn't be less than 8 sen a share.
23/08/2023 9:11 AM
prudentinvestorTime to wake up and move ahead. Come on, you are worth much more than RM1.19 a share.
15/11/2023 10:26 AM
DividendGuy67Nice move today. +5.12%, with nice volume. Majority odds swing low has been printed on 27/10. There's a gap fill near 1.45. Very ambitious and minority odds it'll get there this year with KLCI markets in zig zag mode. But if KLCI can do a strong run for several weeks, then, odds improve. Unfortunately, I didn't manage to get my standard position, the position size is smaller than target, but still nice to see my holdings rise by 5.17% today.
16/11/2023 12:42 AM
DividendGuy67Helps cover some of the red moves on the other parts of my portfolio, to allow my portfolio to hit all time new high again today! Thanks ANNJOO and thanks CSCSTEL!
16/11/2023 12:43 AM
prudentinvestorI bought this counter for the dividend. Never expect the final dividend to drop from 14 sen in 2021 to just 3 sen last year. Should be able to pay more this year. Just keep, it only constitutes a small fraction of my portfolio.
17/11/2023 5:20 PM
LubeTraderIf they keep up the good performance qtr to qtr basis, expect to be incentivized for holding or adding to your portfolio because price is still attractive to enter.
25/11/2023 11:30 AM
investopologySteel counter is the next theme to goreng. Upcoming Construction Tender Jobs that have been delayed for awarding and expected to be announced, inclusive of existing contracts... - MRT3 - LRT - ECRL - Penang Mega Infra - Subang Airport - Mega Flood Projects - Johor Catalyst, RTS & HSR - Pan Borneo - Indonesia new capital in Nusantara, Kalimantan
31/12/2023 9:30 AM
stockraiderCSC is a well manage co loh! It will benefit from the next upturn with TP Rm 1.60 to Rm 1.80 loh!
DividendGuy67CSCSTEL EPS is cyclical, and we just came off a cycle low last year. Maybe I think 70%-90% chance that over the next 5 years, we'll see double digit EPS again, with prices in the range between 1.5 to 2. My cost price is around RM1.15. Assuming it takes 5 years to hit these prices, the annualized Price returns ignoring Dividends are: RM1.5 = 5.5% per annum RM2 = 11.7% per annum
It's lowest dividend yield is 2.4%.
Thus, its good odds that if you can buy CSCSTEL cheap, the odds of getting a total returns of 8% to 14% per annum over 5 years or higher is very decent.
If own, no need to stress when prices will go above RM1.5 - it could take many years or next year. Nobody knows. The key is diversify, own small, and just relax. One day over next 5 years, it should get there and these kind of returns should be EPF over the period. Don't do active trading, commissions will just eat a huge chunk and if you play the buy high, sell higher price, inevitably, some of your trades will have losses that will eat into your cumulative profits, where after commissions, you may end up losing to FD rates if you do nothing.
07/01/2024 2:31 PM
Dehcomic01Ternium is a South American steel company. Although it has some mining operations, these serve mainly in-house and are a small component relative to the steel output. It achieved revenue and profit growth through organic growth and acquisitions over the past 11 years. It has a strong financial position and a good capital allocation plan, creating value for shareholders. A Valuation based on the steel price cycle shows a sufficient margin of safety, making it an investment opportunity. https://i.postimg.cc/kgw7QWJk/Ternium.png
If you are already invested in Bursa steel companies, this might be a good geographical diversification. https://www.youtube.com/watch?v=_O8B0TJGwfs
31/01/2024 7:33 AM
stockraiderCsc undervalue rock solid long term high div investment loh!
01/02/2024 12:37 PM
prudentinvestorLast year's final dividend shouldn't be less than 6 sen per share.
prudentinvestorThe company still hasn't announced its final quarter financial results for last year. It would pay its final dividend for last financial year only this year, likely in early July as in previous years. It is possible that it may pay 8 to 10 sen a share.
09/02/2024 5:05 PM
prudentinvestorShould perform much, much better last year than it did in 2022 but its share price has not reflected this. Hope investors don't have to wait for too long to see its share price move upwards.
13/02/2024 10:58 AM
prudentinvestorFinal dividend at 9.4 sen a share, translating into a dividend yield of more than 7.5%. Hurrah!
22/02/2024 7:54 PM
prudentinvestorGood stocks people don't buy, speculative stocks a lot of people chase. What a pity!
prudentinvestorCSC Steel is trading at a PE of under 10, a dividend yield of over 7% and has net cash of RM350 million or over 80 sen a share. TSH is trading at a PE of over 15, a dividend yield of only 2.5% and after deducting loans and borrowings, its net cash position is -RM50 million. Malaysia is under the single-tier tax system. Malaysian shareholders are not required to pay income tax on dividends received.
prudentinvestorConstruction activities should pick up, meaning more demand for steel products. Government can impose duties on imported products to protect local steel industries.
28/02/2024 4:30 PM
Dehcomic01According to Damodaran, projecting the performance of cyclical companies based on the current performance can lead to mis-valuations. He opined that for such companies we should look at the performance over the cycle – the normalized performance When I carried out such an analysis of CSC Steel, I found that there is still a margin of safety based on its current price. Refer to page 20 of the article. https://notice.shareinvestor.com/email/newsletter/invest/pdf/Vol197_Invest-01Mar.pdf
