Regarding CSC Steel'sCurrent Earnings And Its Investments In Marketable Securities

Blogged just the other day: Apollo Food's'Investments' In The Share Market ( See also Listed Companies Investments: Yung Kong Galvanised Steel )

My point was:

• I have always felt uneasy seeing our local listed companies dabbling with their excess money. Sometimes they invest in the share market and sometimes they just invest! And one of the most disturbing issue is that there is ZERO transparency!

Today, one of the stocks that I had blogged on before, Ornasteel (now known as CSC Steel), had just reported its earnings. Yes, its Q-Q earnings declined drastically but that's not what I want to focus on.

Back in May, I made an update on this company, Update on OrnaSteel

In which, I wrote the following issue as a concern:

Now in yesterday earnings notes, CSC Steel has made much more investments!

• The status of the Group’s investment in marketable securities as at the end of the reporting quarter is as follows:-
  
  (i) at cost: RM56.240 million;
  
  (ii) at carrying value: RM56.956 million; and
  
  (iii) at market value: RM56.956 million
  

I argued then the amount which CSC Steel (Ornasteel) dumped into the marketable securities were getting out of hand because the previous quarter, Ornasteel only had some 30+ million invested.

On Aug, CSC Steel announced the following set of earnings: Quarterly rpt on consolidated results for the financial period ended 30/6/2008

Note at market value, the investment was worth some 57.159 million and its cost was 56.240 million.

And of course, the transparency issue sticks out for CSC does NOT state what these marketable securities are.

Surely, if one is a shareholder, this is a deep concern yes? 56.240 million and CSC Steel does not even want to state what exactly these marketable securities are.

With the current global decline in market securities, I was most interested to check out how CSC Steel fared in their latest quarterly earnings report.

Yet once more, I was shocked at the lack of transparency.

Look at the issues to be considered.

1. CSC was extremely active in this quarter. It purchased some 9.9 million worth of marketable securities and disposed some 10 million worth of marketable securities! But what exactly are these marketable securities?

2. Look at the current market value. I find it 'strange' to see that these marketable securities, despite plunging global market prices, to be the same as what it had reported the previous quarter.

3. Under CSC Steel's cash flow, it states the following:

Ah. The marketable securities appears to be Unit Trust Funds! Now don't you want to know what kind of funds these are? What if there are commodity-linked funds?

4. But look at the size of their investment in these Unit Trust Funds. CSC has cash balances of 7.361 million and bank deposits of 9.5 million but it's Unit Trust Funds investments totals a whopping 57.336 million!!!! Surely, one has the rights to question if CSC Steel management has got their priorities correct or not! Is CSC an investment company or is it a steel manufacturer?Why is CSC investing such a big portion of their total cash into Unit Trusts given the current global credit crisis? Why?

5. The current quarterly earnings is for quarter ending 30th Sept 2008. Most Unit Trust Funds are down since then. As mentioned earlier, what if there are commodity-linked funds?

Come next quarter, what can the shareholder expect of CSC Steel?