KUALA LUMPUR (May 15): Steel products manufacturer Choo Bee Metal Industries Bhd saw its net profit rise 32.54% on-year to RM3.91 million or 3.59 sen per share in the first quarter of ended March 31, 2015 (1QFY15), from RM2.95 million or 2.71 sen per share, on stronger demand and better prices.

In a filing with Bursa Malaysia, Choo Bee (fundamental: 1.5; valuation: 2) said the improvement was due to dealers stocking up ahead of the implementation of the goods and services tax (GST), stronger demand of steel from the construction industry, and improved average selling prices.

Revenue was up 24.89% on-year to RM144.89 million in 1QFY15, from RM116.01 million previously.

Choo Bee noted however that earnings increase in 1QFY15, contributed by both its manufacturing and trading operations, was partially offset by higher sales and marketing expenses, as well as foreign exchange losses due to the weaker ringgit.

On prospects, Choo Bee said it expects the local steel industry to remain challenging in the medium term, due to the absence of anti-dumping actions by the government.

“This is the case where, despite a decline in raw material prices that could boost margins, the local steel consumption is growing in tandem with the increase in imports from China, where prices are more attractive than local steel products,” it said.

“This would impact local steel players in terms of production volume on falling demand and cause further depression in selling prices,” it noted.

Choo Bee shares closed 2 sen or 1.2% lower at RM1.64, with a market capitalisation of RM178.67 million.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)