Update On CSC Steel

I wasn't going to write about CS Steel. Seriously.

Yes, I have written quite a fair number of times on CS Steel earnings and I wasn't really motivated to write about it because nothing much as changed. Yes, it was a flat set of earnings.

My past postings on CS Steel can be found here: CSC Steel

This was my previous posting on it, CSC Steel Earnings And Its Unit Trust Investments

• (ps: Nov 2009, CSC made 39 mil, Feb 2010 CSC made 32 mil, May 2010 CSC only made 30.5 mil. )

Last night CSC announced it made 31.6 million.

Now when you look how much CSC Steel has made since Nov 2009, its earnings have been really flat, yes? 39 -> 32 -> 30.5 -> 31.6

And CSC Steel's unit trust investments?

• · at cost: RM73.1 million;
  · at carrying value: RM76.6 million; and
  · at market value: RM76.6 million.

Current market value 76.6 million. (Isn't this a lot? Mind boggling?)

Nothing much to write home about, yes?

Then I saw the following news clip!

• CSC Steel climbs on profit jump
  
  Published: 2010/08/10
  
  CSC Steel Holdings Bhd, a Malaysian steel product producer, rose to its highest level in more than six weeks after second-quarter profit more than tripled from a year earlier.
  
  The stock climbed 2.3 per cent to RM1.82 at 9:03 am local time in Kuala Lumpur, set for its highest close since June 25. -- Bloomberg
  

Ah... Bloomberg news made the comparison of CSC steel earnings versus CSC's 2009 numbers.

:D

Read more...

CSC Steel Earnings And Its Unit Trust Investments

Yesterday CSC Steel announced its earnings. The Financial Daily had this: CSC Steel earnings surge in 1Q

• CSC Steel earnings surge in 1Q
  Written by Joseph Chin
  Saturday, 08 May 2010 07:28
  
  KUALA LUMPUR: CSC Steel Holdings Bhd’s earnings surged to RM30.59 million in the first quarter ended March 31, 2010 from RM5.71 million a year ago following favourable prices for steel products and it expects to continue to stay profitable this financial year.
  
  It reported on Friday, May 7 that revenue rose 63% to RM281.59 million from RM173.16 million a year ago. Earnings per share were 8.2 sen versus 1.53 sen.
  
  “The better performance in revenue is driven by higher sales volume and favourable selling prices of our steel products. The improvement in revenue has increased the profit before tax as well,” it said.
  
  When compared with the fourth quarter ended Dec 31, 2009, CSC said revenue increased by 2.9% from RM273.7 million to RM281.6 million mainly due to higher sales volume of its steel products.
  
  “Despite the higher revenue, profit before tax reduced by RM3.8 million or 8.9% to RM39.1 million. This is mainly due to the lower selling prices of our steel products for the quarter under review,” it said.
  
  On the prospects, CSC said although the selling prices of its steel products for this quarter were lower than for the preceding quarter, the steel market had performed credibly in the first quarter of 2010 and steel prices were rising progressively as the global economy move towards positive growth and out of the economic recession.
  
  “As the prices of raw materials such as iron ore and coal have risen significantly, it would certainly be the main driver for the steel prices to move upward. Although steel prices in the domestic market are expected to follow the upward trend, however, it would be a challenging task for the company to pass on the increased costs to the downstream customers,” it said.
  
  CSC said as for the rest of this year, under the present rational market conditions, both the supply and demand of steel were not expected to experience great volatility.
  
  It said small healthy corrections in prices may be inevitable but in the long run, the market trend was moving up gradually due to the cost push pressure from increasing raw material prices a result of limited resources and oligopoly in the iron ore industry.
  
  “Barring any unforeseen circumstances, the group is cautiously optimistic that the second quarter and the rest of 2010 will continue to be profitable,” it said.

Yeah compared to previous year's wash out numbers or recession numbers, CSC's earnings this quarter does look impressive.

But as CORRECTLY stated in the article, current earnings dropped some 8.9% when compared to previous quarter.

How?

Did CSC Steel earnings really surge? Hhmm.. don't you love all these BEST SOUNDING financial news headers?

Anyway, my last blog posting on CSC Steel was in Feb 2010. Review Of CSC Steel Earnings

(ps: Nov 2009, CSC made 39 mil, Feb 2010 CSC made 32 mil, May 2010 CSC only made 30.5 mil. )

Anyway in that posting, I highlighted CSC unit trust investment.

• CSC Steel has some 58.506 million in Unit Trust Funds!

Is that too much?

Now before I post the numbers from CSC current earnings, do have a guesstimate.

How?

I went HOLY COWPITALIST COW the very instant I saw them figures!!!!!

CSC purchased another 15 million worth of securities!!!!!!!!!!!!!!!!!!

In its cash flow statements CSC had classified them as unit trust funds.

And as at yesterday's earnings, CSC were holding some 76.2 million worth of unit trust funds.

Seriously... don't you think the management should stop and ask themselves if they are over doing this???

When market is hot, companies who dabbles in such activities might make money but what if the market goes terribly wrong? Do you trust the company management to make the correct decision? Do they know if they are wrong? Or would they stubbornly hold on to their wrongness?

And yes, I am always not in favour of Listed Companies OTHER Investments

4 years ago (LOL! yeah that long ago), I wrote the following: Local listed companies dabbling in the share market

I mentioned the following points:

• When we see 'marketable securities' in the balance sheet, we, the minority investor is really at risk for the following reasons:
  
  1. what types of marketable securities are we talking about?
  
  The term marketable securities is simply so vague. So what kind of marketable securities are we talking about?
  
  Bonds? What kind of bonds? What if it is a junk bond that is tanking?
  Unit trusts? What kind?
  Stocks? What kind of stocks? Investment grade stocks or speculative stocks?
  
  2. Who is making the investing decisions?
  
  Fund managers? Who? And what sort of investments are we talking about?
  Or are the management/owners on a DIY? That's even worse. What divine skills do they have?
  
  3. Transparency.
  
  There is simply no transparency involved, and everything is simply based on blind faith that such investments should generate some sort of income. And there is no way the minority investor can be sure if the management/owner of the listed company is abusing the company's funds to buy shares in another listed company for personal vested interests or reasoning.
  
  4. Management focus.
  
  Once they dabble in the stock market, the management/owner focus is being diverted. How could the minority investor expect the management/owner to remain focus on the core business when they are burdened with the extra responsibility of ensuring good results from their investment?

Read more...

Review Of CSC Steel Earnings

Here's an update of CSC Steel earnings reported last night.

Firstly before I look at the earnings, I wanted to remind myself what CSC earned the previous quarter as any comparison with previous year would distorted because the previous year was simply a total wipeout for the steel industry.

Last November 2009, from the posting Review Of CSC Steel Latest Earnings

• CSC Steel 3Q net profit up 42% to RM39m
  Written by Joseph Chin
  Friday, 13 November 2009 19:57
  
  KUALA LUMPUR: CSC Steel Holdings Bhd posted net profit of RM38.89 million in the third quarter ended Sept 30, an improvement of 42% from RM27.32 million a year, mainly due to the absence of the write-down in inventories.
  

Absence of inventories CSC posted an impressive earnings of rm 38.89 million.

So how did CSC fared last night?

This is where one have to be honest with oneself as it is imperious not to read what's not there.

Anyway, earnings came in at 37 million. How do you want to view this 37 million in earnings?

Well, against previous year, needles to say, its way too impressive.
Against previous quarter earnings of 39 million, this is a slight decline in earnings, no?
And since if it's a slight decline, one would be left wondering about the sustainability of the earnings.

As many know, I do NOT like to focus on sales revenue. However, sometimes I do take a peep. This peeping exercise assist me in gauging what is happening. Previous year it did 1.3 billion in sales. This year it only did 869 million. How would you assess this? Would you say that despite the improvement in earnings, the steel sector is clearly indicating that business in the sector isn't really booming? Some would say that this is too negative thinking, garbage. They would rather say that if sales improve, earnings would surely be more fantastic for CSC! How?

Anyway, here's the balance sheet.


Compared to the balance sheet in the posting Review Of CSC Steel Latest Earnings, what could I say but it's impressive?

And the main concern or issue against CSC was the unit trust investments. Mentioned previously.

• CSC Steel has some 58.506 million in Unit Trust Funds!Is it too much?

Here's what CSC said it's holding last night.

How?
Same old same old eh?

Read more...

Review Of CSC Steel Latest Earnings

CSC Steel recent announced quarterly earnings was rather decent.

But before I get into that, let's review the past postings.

In Feb 2009, I highlighted the massive losses posted by CSC Steel: A Look At CSC Steel Latest Quarterly Earnings. Quarterly losses announced by CSC Steel were around some 42 million.

On 11th May 2009, CSC gave a profit warning saying that flat steel products used in cars and home appliances had deteriorated since the fourth quarter of last year and expects its profit downtrend to continue because of falling steel prices and production cuts arising from lower demand. ( LOL! As you know, sometimes in a hot market, anything can and will happen! That very same morning, CSC Steel Soars Despite Profit Warning! )

A week later, on 18th May 2009, CSC announced its 2009 Q1 earnings. It made some 5.709 million. A turnaround perhaps.

From the company earnings notes.

• B1. Review of performance
  The Group achieved revenue and profit before tax for the current quarter of RM173.2 million and RM7.5 million respectively. This represents a reduction of RM169.8 million or 49.5% lower in revenue than that of its corresponding quarter. As a result of the revenue contraction, profit before tax of RM27.1 million in the corresponding quarter was reduced by RM19.6 million or 72.5% to RM7.5 million.
  
  The significant drop in revenue is due to sales volume contraction and lower selling prices of our steel products. The lower profit before tax was mainly due to lower revenue achieved in the current quarter.
  
  B2. Variation of results against preceding quarter
  The Group’s revenue has decreased by 15.6%, from RM205.1 million in the preceding quarter to RM173.2 million in this quarter. The decrease in revenue is due to significant drop in the selling prices of our steel products.
  
  Despite the decrease in revenue, the Group’s profit before tax increased by RM66 million from a loss of RM58.5 million in the preceding quarter to a profit of RM7.5 million this quarter due to the absence of charges made in respect of inventory write-down and impairment loss on plant and equipment totalling RM65.6 million during the previous quarter and the recovery of doubtful debts of RM4.9 million during the quarter.

Aug 2009: Quarterly rpt on consolidated results for the financial period ended 30/6/2009. Net profit improved to 9.434 million. Half year earnings 15.142 million. Great quarter-to-quarter improvement again but like many other companies, these numbers paled in comparison to what CSC did the previous year. Previous year, CSC made 75.533 million.

13th November 2009, CSC announced its Q3 earnings. Most were impressed. The Edge Financial Daily had this article: CSC Steel 3Q net profit up 42% to RM39m

• CSC Steel 3Q net profit up 42% to RM39m
  Written by Joseph Chin
  Friday, 13 November 2009 19:57
  
  KUALA LUMPUR: CSC Steel Holdings Bhd posted net profit of RM38.89 million in the third quarter ended Sept 30, an improvement of 42% from RM27.32 million a year, mainly due to the absence of the write-down in inventories.
  
  It said on Friday, Nov 13 that revenue was RM261.48 million, down 31.4% from RM381.17 million a year ago. Earnings per share was 10.42 sen compared with 7.29 sen.
  
  "The significant drop in revenue is due to lower selling prices of our steel products although sale volume improved marginally," it said.
  
  "Despite the lower revenue, profit before tax increased by RM25.1 million or 88.2% to RM53.6 million. This is mainly due to the absence of the write-down of inventories to net realisable value amounted to RM30 million made in the corresponding quarter," it added.
  
  When compared with the second quarter ended June 30, 2009, the group's revenue rose 61.9% from RM161.6 million to RM261.5 million in 3Q. Profit before tax increased by RM41.1 million or 328% from RM12.5 million in 2Q.
  
  CSC Steel said the better performances in revenue and profit before tax were driven by both higher sales volume and favourable selling prices of its steel products.
  
  "The improved sale volume was supported by the timely increase in supply of hot rolled steel (HRC) from our ultimate parent company, China Steel Corporation, to make up for the delay in local HRC supply," it added.
  
  For the January-September period, net profit was RM54.03 million compared with RM100.85 million the previous corresponding period. Revenue also fell, down to RM596.19 million compared with RM1.167 billion a year ago.
  
  On the current year prospects, it said the local steel market has slowed down since October 2009 after a series of price increases since second quarter 2009.
  
  CSC Steel said overcapacity and high inventory which caused steel prices falling in China since August 2009 was the main factor that made local buyers cautious in re-stocking activities.
  
  However, from mid October 2009, steel prices in China had begun to increase. CSC said the group expects steel market to recover by end of the year or beginning of 2010 as the stimulus packages introduced by many countries, especially China, with forecast GDP growth of above 8.0% this year, performed excellently.
  
  As for Malaysia, it said domestic steel demand was increasing as projects under the stimulus packages, are being gradually implemented.
  
  "Coupled with the current low inventory level, we expect greater re-ordering activities to take place once international steel market starts to recover," it said.

From the company's earnings notes. The cash balance.

It's impressive, no?

Its total borrowings were 13.705 million.

How can I not say it's impressive?

However, nothing is perfect. Such is life. LOL!

Posted a year ago, November 2008 Regarding CSC Steel'sCurrent Earnings And Its Investments In Marketable Securities. Some of the issues mentioned were:

• 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?

The following screen shot was taken from CSC latest Cash Flow statement from its latest quarterly earnings.

CSC Steel has some 58.506 million in Unit Trust Funds!
Is it too much?

Me? My answer is an astounding YES!

CSC Steel should realise that some investors simply DO NOT like to see such practice. If CSC has ample cash in its piggy bank, it would create more shareholder value if it returns more back to its shareholders! Yes, pay more back to the shareholders in the form of dividends and stop SCREWING around trying to make money in the Unit Trust markets. Stop dabbling in the market!

Of course, you might not argee but that above is my flawed opinion.

The following screen shot is taken from CSC earnings notes.



As can be seen, CSC is not losing making money but the money it is making is rather smallish, no? And if I were a shareholder, surely I would ask where is the justification in investing so much money in these Unit Trust funds?

Got extra moolah, share with the shareholders would certainly be a much viable option, no?

How?

ps: this is not your weekend tipsy la.

Read more...

CSC Steel Soars Despite Profit Warning!

I highlighted on the profit warning from CSC Steel this morning. Profit Warning From CSC Steel

CSC Steel is up some 5.8% or 6 sen!

When a company issues a profit warning saying that "net profit and revenue will be lower than in the same period last year due to lower selling prices and demand" and the stock shoots for the moon, you know something has gone out of whack!

So how brown cow?

On one hand, you know the trend is your bestest friend in the market.

However, when the trend goes totally out of whack and against common sense, do know what is best for your money.

:D

Read more...

Profit Warning From CSC Steel

On Today's Business Times: CSC Steel expects net profit to erode further

• CSC Steel says prices of flat steel products used in cars and home appliances had deteriorated since the fourth quarter of last year
  
  CSC Steel Holdings Bhd (5094), the country's largest producer of cold rolled steel by volume, expects its profit downtrend to continue because of falling steel prices and production cuts arising from lower demand.
  
  Its RM58.8 million net profit in the fiscal year ended December 31 2008, down 26 per cent from the previous year, was below expectations.
  
  Revenue, however, rose to RM1.37 billion from RM1.3 billion.
  
  Managing director Su Wei Jin said that prices of flat steel products used in cars and home appliances had deteriorated since the fourth quarter of last year as demand slowed along with the world economy.
  
  Like other steel producers worldwide, CSC Steel has cut production in response to the weaker demand.
  
  Su said its plants have been operating at 40-50 per cent capacity since the fourth quarter of last year compared with 100 per cent in March-July.
  
  "We will try our best to stay profitable, but it's hard to predict. Even if prices were to go up, we don't know how long they will stay high," he told Business Times in an interview in Malacca.
  
  "The problem is China's demand for steel (during the boom years) led to an oversupply situation in the flat products segment and weak demand today. It is not easy to reverse the situation."
  
  Nevertheless, the company has no plans to lay off its 600-odd workers in the country, but has embarked on cost-cutting measures instead.
  
  CSC Steel is a 45 per cent-owned subsidiary of China Steel Corp, Taiwan's largest steelmaker.
  
  CSC Steel fell into the red in the fourth quarter of last year because of sudden drops in demand and selling prices of its steel products as well as inventory writedowns of RM58.3 million caused by the global financial crisis.
  
  Fortunately, the loss was offset by its good performance in the first nine months.
  
  Su foresees that steel prices and global demand may improve in the remaining months given the fall in prices of crude oil and raw materials, the bailout plans for restructuring the financial market and the various economic stimulus packages.
  
  "We are optimistic of achieving profitability in the first quarter of 2009 as we have brought our inventory under control and saw a recovery in demand for flat rolled steel in February.
  "Still, net profit and revenue will be lower than in the same period last year due to lower selling prices and demand," he said.
  
  CSC Steel is due to release its first-quarter results next Monday.

CSC Steel previous blog postings:

• A Look At CSC Steel Latest Quarterly Earnings
• More Views On CSC Steel
• Regarding CSC Steel'sCurrent Earnings And Its Investments In Marketable Securities

CSC Steel was used to be known as Onarsteel.

• Update on OrnaSteel
• Ornasteel IV
• Review on OrnaSteel Again
• Review on OrnaSteel
• Ornasteel
  

Read more...

A Look At CSC Steel Latest Quarterly Earnings

CSC Steel announced its earnings tonight.

It suffered massive losses!

However, one really should not be to shocked given the massive plunge in steel prices and its demand. And as suggested in the posting More Views On CSC Steel, losses could be expected.

What interest me was what CSC Steel has to say in its earnings note.

• B1. Review of performance
  The Group achieved revenue and loss before tax for the current quarter of RM205.1 million and RM58.5 million respectively. This represents a reduction of RM94.0 million or 31.4% lower in revenue than that of its corresponding quarter. As a result of the revenue contraction, profit before tax of RM16.3 million in the corresponding quarter was reduced by RM74.9 million or 458.3% lower to a loss before tax of RM58.5 million.
  
  Despite the drastic drop in demand and selling prices of our steel products as a result of the global financial crisis and the inventory write-downs of RM58.3 million, the Group still achieved profit before tax of RM52.0 million for the whole year.
  
  B2. Variation of results against preceding quarter
  The Group’s revenue has decreased drastically by 47.3%, from RM389.2 million in the preceding quarter to RM205.1 million in this quarter. The decrease in revenue is due to sales volume contraction and lower selling prices of our steel products.
  
  The decrease in revenue together with inventories write-down have resulted Group’s profit before tax to reduce by 305.5% from RM28.5 million in the preceding quarter to a loss of RM58.5 million this quarter.
  
  B3. Current year prospects
  The credit crisis triggered in the United States since September 2008 has badly hit the confidence of consumers and world economy, which has resulted in steel prices in the fourth quarter 2008 dropping drastically after it reached historical high in third quarter 2008. As the demand for steel products was also shrinking significantly, most of the steel manufacturers worldwide have suffered substantial losses.
  
  However, we foresee that the steel prices and demand may improve in view of the decrease in oil and raw material prices, the bailout plans for restructuring the financial market and economic stimulus packages instituted. The steel market in China has already shown signs of improvement lately.
  
  Demand for steel in China has increased and this has brought about increases in steel prices. If the supply of steel could be controlled to match demand, the global steel market may stage a rebound in the near future. Based on the Group’s performance since early 2009, the Group is optimistic of achieving profitability for first quarter 2009, barring unforeseen circumstances. The rest of the year remains unpredictable.

It's balance sheet is commendable. Really. Do please have a look yourself. :P

However what I did not like about CSC remains.

Back in November, I wrote the following: Regarding CSC Steel'sCurrent Earnings And Its Investments In Marketable Securities

Yes another of them local corporate who dabbles too much! (see Pintaras Jaya Announced Massive Losses In Their 'Investments' as another example!)

The following is from today's earnings notes.


And CSC continued to be overly aggressive with these marketable securities!

It sold some 19.5 million worth of securities and purchased some 19.3 million worth of securities!

Yup, holy cow!

Does CSC Steel management reckon that they are super duper investor/traders or what????

What is happening? Arghhhhhhhhhhhh!!!!

Now what I am failing to understand is that CSC now states its marketable securities now has a market cost of 46.12 million with a market value of 47.57 million. (It has paper profits what! So what on earth am I mumbling about?) With a total loss of only 89 thousand.

Now look at what's stated in its quarterly earnings last November, Quarterly rpt on consolidated results for the financial period ended 30/9/2008.

Now compare this screen shot taken from CSC quarterly earnings notes in November

with this.

The market cost of these securities went down from 56.16 million (market value of 57.3 million) to a market cost of 46.12 million (market value of 47.57 million).

And CSC achieved this with a loss of 89 thousand!

WOW!

CSC Steel management must have super duper hindsight and super duper trading skills yes?

How?

Read more...

More Views On CSC Steel

Here's an update on CSC Steel from OSK Research.

• A Bumpy Ride Ahead
  
  With the steel sector’s outlook turning gloomy and the Chinese Government’s recent moves expected to make things worse for the flat steel market, we are revising downwards CSC Steel’s numbers by 47.8% for FY08 and 37% for FY09. Nevertheless, as its share price has halved from its year peak, we think the market has already priced in the potential losses, hence we are only downgrading our call to NEUTRAL. We have toned down our valuation parameters to 5x FY09 EPS, in line with our newly revised steel sector PER, translating to a lower TP of RM0.91.
  
  Hiccups. When annualised, CSC Steel’s 9M figures came in well within our original projection, even surpassing our full-year projection after incorporating a provision of RM30.2m on diminution in value of inventory. The performance is attributed to (i) the peak in average selling prices (ASP) in July ’08 expanded margin in the early part of 3Q but quickly turned into the red after a sharp plunge in ASP, (ii) customers holding back on purchases in anticipation of a further drop in ASP, thus overall sales fell 10.7% q-o-q, and (iii) the utilisation of investment tax allowance and other incentives lower the effective tax rate to 4.1%.
  
  4Q likely in the red. While we had earlier expected a challenging 2H given the traditional summer season correction (refer to our last results review), the sector outlook is now worse than originally projected due to the worsening financial turmoil. Compared with integrated long steel players that need to write down approximately 10% of their inventory value, we suspect CSC Steel may need to provide for 15% to 20% based on a sharper drop on flat steel’s ASP. Thus, the RM30.2m provision in 3Q which translates into 8.9% of the company’s inventory before provision, suggests that there would be more write-downs in the upcoming quarter. As sluggish steel demand suggests the company’s operation will merely break even at best in 4Q, we have revised downwards our FY08 profit estimates by 47.8%, or a potential RM32.9m loss in the next quarter.
  
  Outlook for 2009 murky. We also suspect that the losses could possibly extend into the following quarter if ASP weakens further should global steel giants manage to secure a significant discount for their contracted iron ore. Although spot iron ore, steel scrap, other ASP and its demand rebounded slightly the past few days, the abolishment of export tax for hot rolled coil (HRC) by China’s Government may put further pressure on the company’s product ASP. We have high expectation that the company’s new rolling plant commissioned last year will enhance CSC Steel’s profitability.

Ooh. OSK expects CSC to report losses for the next quarter and as expected, OSK did not comment on CSC larger than normal investment in marketable securities as mentioned in earlier blog posting: Regarding CSC Steel'sCurrent Earnings And Its Investments In Marketable Securities

RHB Research on the other hand was less than optimistic with CSC. It has CSC as underperform with a much lower target price of only 69 sen! OSK TP is at 91 sen!

• ♦ Within expectation. 9MFY12/08 net profit came in at 93.7% of our fullyear forecast. However, we consider this within our expectation as we expect 4Q to weaken significantly on the back of weaker re-stocking activities by steel stockists, who tend to hold back on buying when steel prices are trending down.
  
  ♦ YoY. Despite RM30.2m inventory writedown during 3QFY12/08, 9MFY12/08 net profit still rose 55.9% to RM100.9m thanks to higher CRC price, particularly during 2QFY12/08 that also boosted buying activities.
  
  ♦ QoQ. On a qoq basis, net profit fell 44.8% to RM27.3m mainly due to RM30.2m inventory writedown to reflect a sharp decrease in CSC’s inventory value.
  
  ♦ Future prospect. Looking forward, we expect CSC’s performance to deteriorate over the near term as price outlook for flat steel products in the international market has weakened on the back of global economic slowdown.
  
  ♦ Risks. The risks include: (1) Worse-than-expected dumping activities by steel producers from China in the international market; and (2) Weakerthan- expected steel consumption.
  
  ♦ Forecasts. Unchanged.
  
  ♦ Investment case. Indicative fair value remains unchanged at RM0.69 based on 5x FY12/09 EPS, in line with our benchmark 1-year target forward PER of 5x for the steel sub-sector. Maintain Underperform.

Read more...

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?

Read more...

Update on OrnaSteel

Since the steel stocks are so hot and I had blogged on a steel stock before, here's an update to Review on OrnaSteel Again

Q-Q earnings have improved a lot from its dismal fy 2007 Q4 Earnings. Rather impressive considering the company only made 14.9 million the previous quarter.

Same quarter previous comparison.

Earnings improved marginally from 22.6 million to 24 million.

However, surely some would be disappointed. For other stock leaders like Ann Joo and Southern Steel showed darn impressive earnings recently.

Balance sheet is still as impressive as ever. Total net cash balances have increased yet again.

Understanding My Investment Risks. Every stock has it minus points or risks. So does Ornasteel.

If you refer to my earlier postings, my concerns were on the marketable securities issues with Ornasteel. Yeah, I absolutely hate it when our local corporate leaders dabbles in such investments. Why can't they return the extra cash baack to the shareholders?

And in their last reported earnings on Feb 2007, Quarterly rpt on consolidated results for the financial period ended 31/12/2006

• The status of the Group’s investment in marketable securities as at the end of the reporting quarter is as follows:-
  (i) at cost: RM30.240 million;
  (ii) at carrying value: RM30.388 million; and
  (iii) at market value: RM30.388 million .

Now in yesterday earnings notes, Ornasteel 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

56.2 million in marketable securites???

Seriously, that's massive yes?

This is a concern yes?

Is this getting out of hand?

Read more...

Ornasteel IV

My Dearest Ngok Yee,

Ornasteel reported its earnings last night.

This is their updated earnings table.



I would like to compare the current earnings with the issues brought up in the last posting Review on OrnaSteel Again. (So what I will do is, I will repeat the old comments here and add in new comments in purple italic fonts again)

First the minus point.

1. As you know, OrnaSteel belongs in the highly cyclical steel industry. And as seen above, the past 2 years were rather disappointing in terms of earnings performance. ( There is a clear turnaround in earnings! ) (Again yes the turnaround the earnings is there. On average, this is a fantastic set of earnings, however I am sure the disappointment is there. Let's be honest, I for one, was expecting much more.)

2. The company dabbles in the share market!....

• Is this a concern?
• Is this getting out of hand?
• Why so poor results in such a hot market?
• Does the fund manger know what he/she is doing?
• Does this bug you??

As reported in last night earnings:

The status of the Group’s investment in marketable securities as at the end of the reporting quarter is as follows:-

(i) at cost: RM46.240 million;
(ii) at carrying value: RM46.563 million; and
(iii) at market value: RM46.563 million .

The company purchased more shares!

How?

Is this a worry?

The better points.

1. Although Ornasteel earnings performance was disappointing for fy 2005 and fy 2006, it held up strongly during times when demand and prices were poor. So the assumption is when the good times come, surely Ornasteel would perform much better. ( Performance is decent!) (Yes, performance is indeed decent!)

2. How the company transformed itself from a net debt to a net cash company is most impressive. (this now not a better point as OrnaSteel turned into a net debt company of 5.999 million! (Company is now in a nett cash of 79.903 million)

3. Dividends. Last year, Ornasteel paid a 5% less tax ( First and Final Dividend ). This year, a 10% less tax had already being proposed. ( RECOMMENDATION OF A FIRST AND FINAL DIVIDEND OF 10% OR 10 SEN PER SHARE LESS 27% ) ( Still waiting! ) (Dividend has been paid)

4. The market. Market till today is around 1350 points. Surely AmIncome Fund would have performed some little bitsy bit of wonder for Ornasteel's investment, right? ( Do they know what they are doing! ) ( Where is the results?)

~ ~ ~ ~ ~ ~ ~ ~ ~
Overall, the earnings is decent. However as mentioned, perhaps I had expected a much better set of earnings from Ornasteel, hence I am disappointed because if compared to previous quarter, earnings is really flat. And the issue that bugs me is the company's dabbling in the market. I have always preferred companies to return their excess cash back to its shareholders.

The following are some notes from the company earnings notes:

Review of performance

The Group achieved revenue of RM373.0 million and pretax profit of RM29.5 million for the quarter under review. This represents an increase of RM124.0 million or 49.8% higher in revenue than that of its corresponding quarter. Profit before tax improves by RM3.8 million or 15.0% to RM29.5 million from RM25.6 million in the corresponding quarter.

The improved performance is primarily attributable to higher selling prices and higher sale volume of our steel products in the quarter under review compare with the corresponding quarter as a result of higher demand for our products. However, pre-tax profit does not increase proportionately due to higher increase in the cost of raw materials for the quarter under review.

Current year prospects

The result for the first half of 2007 has been quite satisfactory. The demand for our products for the second half of 2007 is expected to be slightly weak in Malaysia although the demand for steel worldwide is still increasing. Domestically, the release of infrastructure projects from the Ninth Malaysia Plan may help to mitigate the expected drop in steel demand. However due to the oversupply of steel from China and some cheap imports from neighbouring countries, the price of steel is under pressure. Barring any unforeseen circumstances, we expect this price pressure to be temporary and would not significantly affect the profitability of the Group for the rest of the year


Old postings: Review on OrnaSteel Again and Review on OrnaSteel and Ornasteel

Read more...

Review on OrnaSteel Again

My Dearest Ngok Yee,

Many thanks for your comments.

• A respectable Q result.
  However, there are something which is not so spectacular.
  
  1)Rise receivable and short term investment...
  
  Other than this, really nothing much to prick upon.Now, the only problem is its current price still atractive to go in? That's a million dollar Question which i need you to answer :) ?

Here is my review of OrnaSteel. And the best way I think is to review my last review mentioned previously. ( See OrnaSteel )

I will add in new comments in purple italic fonts.

First the minus point.

1. As you know, OrnaSteel belongs in the highly cyclical steel industry. And as seen above, the past 2 years were rather disappointing in terms of earnings performance. ( There is a clear turnaround in earnings! )

2. The company dabbles in the share market! Yuckos dude! Currently the company holds some 30.389 worth of marketable securities. According to their quarterly earnings reported on 16/8/2006. Quarterly rpt on consolidated results for the financial period ended 30/6/2006

• During the quarter under review the Group has invested RM20.240 million in AmIncome Fund and the status of this investment as at the end of the reporting quarter is as below:-

And in their last reported earnings on Feb 2007, Quarterly rpt on consolidated results for the financial period ended 31/12/2006

• The status of the Group’s investment in marketable securities as at the end of the reporting quarter is as follows:-
  (i) at cost: RM30.240 million;
  (ii) at carrying value: RM30.388 million; and
  (iii) at market value: RM30.388 million .

Ok, that quarterly earnings was up to 31st Jan 2007. AmIncome Fund manages company marketable securities. And up to Dec 2006, that Fund did not look like it performed...

And the current quarter, OrnaSteel reported the following!

OrnaSteel purchased another 10 million of securities. Some questions.

1. Is this a concern?
2. Is this getting out of hand?
3. Why so poor results in such a hot market?
4. Does the fund manger know what he/she is doing?
5. Does this bug you??

The better points.

1. Although Ornasteel earnings performance was disappointing for fy 2005 and fy 2006, it held up strongly during times when demand and prices were poor. So the assumption is when the good times come, surely Ornasteel would perform much better. ( Performance is decent!)

2. How the company transformed itself from a net debt to a net cash company is most impressive. (this now not a better point as OrnaSteel turned into a net debt company of 5.999 million!

Took some screen shot of the cash flow...

See where the cash went?

3. Dividends. Last year, Ornasteel paid a 5% less tax ( First and Final Dividend ). This year, a 10% less tax had already being proposed. ( RECOMMENDATION OF A FIRST AND FINAL DIVIDEND OF 10% OR 10 SEN PER SHARE LESS 27% ) ( Still waiting! )

4. 4. The market. Market till today is around 1350 points. Surely AmIncome Fund would have performed some little bitsy bit of wonder for Ornasteel's investment, right? ( Do they know what they are doing! )

How?

What say you my dearest Ngok Yee?

rgds

Read more...

Review on OrnaSteel

My Dearest Ngok Yee,

OrnaSteel releases its earnings tonight, Quarterly rpt on consolidated results for the financial period ended 31/3/2007.


I have updated the tables for you.

How?

Can I have your opinions instead?

:D

Read more...

Ornasteel

My Dearest Ngok Yee,

As per requested the following is Ornasteel track record.



The fy 2005 numbers are slightly distorted because Ornasteel made a change in their financial year end. Hence the Fy 2005 numbers shown above are represented by 13 months of earnings.



And the following table shows the quarterly earnings performance from OrnaSteel. The very first column, 05 Q1 earnings is muddled, it represented 4 months earnings as explained earlier.

Some views.

First the minus point.

1. As you know, OrnaSteel belongs in the highly cyclical steel industry. And as seen above, the past 2 years were rather disappointing in terms of earnings performance.

2. The company dabbles in the share market! Yuckos dude! Currently the company holds some 30.389 worth of marketable securities. According to their quarterly earnings reported on 16/8/2006. Quarterly rpt on consolidated results for the financial period ended 30/6/2006

• During the quarter under review the Group has invested RM20.240 million in AmIncome Fund and the status of this investment as at the end of the reporting quarter is as below:-

And in their last reported earnings on Feb 2007, Quarterly rpt on consolidated results for the financial period ended 31/12/2006

• The status of the Group’s investment in marketable securities as at the end of the reporting quarter is as follows:-
  (i) at cost: RM30.240 million;
  (ii) at carrying value: RM30.388 million; and
  (iii) at market value: RM30.388 million .

Ok, that quarterly earnings was up to 31st Jan 2007. AmIncome Fund manages company marketable securities. And up to Dec 2006, that Fund did not look like it performed...

The better points.

1. Although Ornasteel earnings performance was disappointing for fy 2005 and fy 2006, it held up strongly during times when demand and prices were poor. So the assumption is when the good times come, surely Ornasteel would perform much better.

2. How the company transformed itself from a net debt to a net cash company is most impressive.

3. Dividends. Last year, Ornasteel paid a 5% less tax ( First and Final Dividend ). This year, a 10% less tax had already being proposed. ( RECOMMENDATION OF A FIRST AND FINAL DIVIDEND OF 10% OR 10 SEN PER SHARE LESS 27% )

4. The market. Market till today is around 1350 points. Surely AmIncome Fund would have performed some little bitsy bit of wonder for Ornasteel's investment, right?

How?

What say you my dearest Ngok Yee?

Read more...