Friday, October 14, 2011

OSK Research has Trading Buy on CSC Steel, FV RM1.78

KUALA LUMPUR: OSK Research has a trading buy call on CSC Steel with a fair value of RM1.78, which is 43 sen above the last closing price of RM1.35.

It said on Friday, Oct 14 CSC is experiencing a narrowing price spread between hot-rolled coils (HRC) and cold-rolled coils (CRC) which has tapered further to below US$100 a tonne.

Other than that, a prolonged inconsistent supply of HRC by a sole local producer also poses a challenge to its production planning.

The demand for and margin of galvanised iron (GI) and pre-painted GI held up better than CRC and the intensifying competition from new CRC lines entering the local market in past few years has prompt management decided to increase its exports of CRC to 20% recently from 5% in 2010 to optimise plant utilisation although the margin for exports is low.

'We maintain our Trading BUY recommendation with a fair value of RM1.78 on the back of its solid balance sheet, decent dividend yield and the possibility of CSC becoming a privatisation candidate,' it said.

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