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CSCSTEL (5094) - Why Cscstel? Pure cash steel manufacturing company (281% increase in profit)


CSCSTEL (5094) - Why Cscstel? Pure cash steel manufacturing company (281% increase in profit)
 
Latest quarter result:
 
30/6/2016 - 7.95sen
31/3/2016 - 2.43sen
31/12/2015 - 7.47sen
30/9/2015 - 2.77sen
Total - 20.88sen
 
Current PE ratio : 6.94 (RM1.45)
Net assets: RM2.11
 

 
Company background
CSC Steel Holdings Berhad(formerly known as Ornasteel Holdings Bhd), was incorporated in Malaysia on 20 January 2004. After acquiring the 100% equity of both CSC Steel Sdn. Bhd. (formerly known as Ornasteel Enterprise Corporation (M) Sdn Bhd) and Group Steel Corporation (M) Sdn Bhd., CSC Steel Holdings was successfully listed on the Main Board of Bursa Malaysia Securities Berhad on 30 December 2004. 

CSC Steel Holdings Berhad mainly owned by China Steel Corporation (46.374%) via its subsidiary, China Steel Asia Pacific Holdings Pte. Ltd.. China Steel Corporation currently is the
largest integrated steel maker in Taiwan and 23rd largest steel producer in the world.

 

Product:
1) Hot rolled pickled and Oiled Steel
2) Cold Rolled Steel
3) Realzinc / Hot-Dipped Galvanized Steel
4) Realcolor / Pre-painted galvanized steel
 
For more information, you can refer to the corporate video on the link below:
http://www.cscmalaysia.com/video.asp
 
 
I am here to ANSWER a simple question.
Why CSCSTEL?
 
1)Net profit jumped by 281% for the
quarter ended 30 Jun 2015
 
2)Pure cash company (RM321mil or
equivalent to RM0.84 per share) and best
fundamental among other steel company
 
3) China government's policy to cut steel
capacity
 
4) Others
 
 
 
1) Net profit jumped by 281% compared to
previous year
 

As per quarter report released on last week, the company's profit have significantly improved from 10.4mil to 29.3mil (281% increased from last year)

According the quarter report, the increase in revenue is primarily due to significant increase in sales volume at substantially lower selling prices. Also the significant improvement in profit is due to lower cost of production experienced during the quarter as a result of lower Hot Rolled Steel prices. 
 
2)Pure cash company (RM321mil or
equivalent to RM0.84 per share) and best 
fundamental among other steel company
 
As per 30 June 2016, the company owned RM321mil of cash with zero borrowing, which translated into RM0.84 per share. With the current share price of RM1.45, you paid the company business with RM0.61.
Also, the company net assets is stood at RM2.11, which is 45% discounted from the current share price of RM1.45.
 
Year Earning per share Dividend per share Dividend payout
2015 14.52sen 8sen 55.1%
2014 -5.72sen 3sen N/A
2013 7.81sen 7sen 89.6%
2012 7.51sen 7sen 93.2%
2011 7.92sen 7sen 88.4%
 
Refer to the table above, for the past 5 years, the company have consistently paid out more than 55.1% of profit to their shareholders.
Company PE ratio Dividend yield Profit margin (latest quarter)
Cscsteel 6.94 5.52% 10.87%
Annjoo -26.87 4.07% 15.80%
Masteel -15.30 1.00% 3.98%
Lsteel -14.97 N/A 2.66%
Kinstel -1.55 N/A 3.17%
Ssteel -1.8 N/A N/A (Loss)
 
Refer to the table above, Cscsteel have the lowest PE ratio and highest dividend yield among other steel company. For the profit margin, Cscsteel have the second highest among other competitor.
Also, Cscsteel is the only net cash and zero borrowing company among other steel company.
 
 
3) China government's policy to cut steel
capacity
 

 

As per bloomberg's news attached, China's have plans to cut steel capacity by 45million by allocate a total of 100billion yuan to help local authorities and state-owned firms. With the capacity cut, the supply of steel will be decreased. It is good for the company as most of the steel in Malaysia imported from China.
 
Refer to the quarter report stated in point 1, sales volume of the company have been significantly increased. As China's government have plans to cut steel capacity, i foresee that the sales volume will maintain or increased for the outcoming quarter.

 
 
 
4) Others
 
- Disposal from second largest
shareholder, Mr Gan Thian Chin
 
 

 
 
 
Let's talk about some history of Mr Gan Thian Chin. 
On 21/6/2011, Mr Gan Thian Chin have become the substantial shareholder for the company. 
According to the bursa annoucement, he have purchased the company's share from early 2011 until 13/1/2012. 

During the period, the share price have been dropping after the release of quarter result on 30 Jun 2012. The share price have not recovered since then until recently the share price have been spiked to above RM1.30.
I have read throught the annual report since 2011 to 2015 and find out that Mr Gan did not have any relation to the management of the company. 
The reason of disposing the share might be due to the share price increased near to the his entry price during 2011 and 2012.
Hence in my opinion, the disposal of Mr Gan recently provided us a good oppurtunity to collect the share at cheap price.
 

Trade at your own risk!!! Do research before any investment decision!! Happy trading :-)

CSCSTEL (5094) - Why Cscstel? Pure cash steel manufacturing company (281% increase in profit)
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