Plantation Sector : Key takeaways from IndoAgri’s conference call NEUTRAL

STOCK FOCUS OF THE DAY

CSC Steel Holdings : Leading CRC producer in town                                           BUY

We initiate coverage on CSC Steel Holdings (CSCM) with a BUY call and FV of RM2.14 based on 10x FY18F EPS, in line with the average forward PE of major global key steel producers. Global steel demand is expected to grow marginally by 0.5% (FY17F) and 1.0% (FY18F) from 1.5bil MT currently, underpinned by economic growth in some regions, particularly in the emerging economies driven by the construction sector. Meanwhile, global production supply is expected to remain flat at 1.6bil MT FY17F/FY18F, with an estimated 2.3bil MT annual capacity and average capacity utilisation of ~70%. The ongoing cuts in China steel production as well the imposition of safeguard duties by the Malaysian government for imports from China has shown positive sign to local steel players.

The positive outlook for steel as well as strong local demand is a major boost to CSCM earnings outlook. We project its FY17/18 earnings to grow 5%/10% underpinned by: 1) it is one of the dominant local CRC players in the market; 2) ASP is expected to improve with the ongoing reforms in China as well the imposition of safeguard duties from 2016 till 2021; 3) cost optimisation in production enables it to maintain better margin than its peers.

Other :

Boilermech : On track towards first profit growth in two years                    HOLD

QUICK TAKES

Plantation Sector : Key takeaways from IndoAgri’s conference call           NEUTRAL

Plantation Sector : News flow for week 24 – 28 July                                         NEUTRAL

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