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K. Seng Seng Corporation Bhd
KSSC’s latest earnings results saw strong y-o-y growth. Net profit totaled RM3.9 million for the first nine months of 2014, more than 2013’s full-year profit of RM2.2 million after stripping out one-off gain from land disposal of RM11 million, on the back of 22.7% y-o-y growth in sales. The company attributes this to its fast-growing engineering segment — which is expected to continue to underpin growth going forward. 

KSSC is a one-stop manufacturer/trader for a wide range of stainless steel industrial hardware including tubes, pipes, sheets, flat bar, fasteners and marine hardware (PP ropes, propellers). Its customer base is diverse, comprising of stainless steel fabricators, manufacturers, contractors, shipbuilders, industrial hardware wholesalers and retailers.

Its venture to provide engineering services to major glove makers in the country — machining and spare parts for rubber glove dipping lines — has borne fruit. In 2013, engineering revenue accounted for 23.5% of the total revenue or some RM22 million. This rose to RM27 million in 9M2014 or 33.9% of total revenue.

As the bulk of raw materials are imported, KSSC is exposed to fluctuating stainless steel prices and foreign exchange risks — although selling prices eventually adjust, after a lag. 

KSSC has decent underlying fundamentals. The Edge Research rates it 1.7 out of 3.0 on Fundamental score. Current gearing is modest at 11.4%.

At prevailing price of RM0.48, the stock is trading below its net asset value of RM0.76 and trailing 12-month PE of 9.4 times. This is pretty much in line with downstream steel players such as Tong Herr, Hiap Teck Venture Bhd and Chin Well Holdings Bhd whose stocks are trading at roughly 8-12 times P/E. 

KSSC is likely to maintain a 1 sen per share dividend for the current year, which translates to a yield of 2.%.  

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This article first appeared in The Edge Financial Daily, on December 24, 2014.

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