Stock focus of the day
CSC Steel Holdings : Value has emerged Buy
We upgrade CSC Steel from HOLD to BUY, while maintaining our forecast and FV of RM1.83 based on 10x FY18F EPS, in line with the average forward PE of major global key steel producers. This is because value has emerged after the steep fall in share price in recent months. CSC Steel's FY17 core net profit of RM62.3mil (excluding RM2.5mil inventory write-down) met our forecast and consensus estimates.
The company’s FY17 turnover increased 28% YoY mainly driven by higher selling prices, partially offset by marginally lower sales volume. Meanwhile, its FY17 core net profit dropped 10% YoY as higher sales were more than offset by a sharp increase in production costs (HRC and overhead costs) and distribution cost. There was also an increase in exports that command thinner margins.
We forecast earnings in FY18 to increase by 8.3% as margins normalise. Recall that CSC experienced margin squeeze in FY17 on the back of rising prices of input HRC. Prices of end-product cold rolled coils (CRC) normally lag those of input HRC when HRC prices are on an uptrend. We expect more stable HRC prices in FY18 vs. FY17.
Others :
KL Kepong : Strong recovery in manufacturing earnings Hold
Plantation Sector : Inventory down 6.8% MoM in January Neutral
QUICK TAKE
MBM Resources : Consolidating ownership of OMI Hold
STOCKS ON RADAR
Serba Dinamik Holdings, Ekovest, Scicom MSC, Uchi Technologies
RETAIL RESEARCH
FBM KLCI Outlook
NEWS HIGHLIGHTS
Investment : EPF sees buying opportunities in bumpy stock market
George Kent : Consortium to bid for HSR project
Parkson Holdings : Legal tussle over mall reaches settlement
Guan Chong : Net profit surges
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The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.
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