Kuala Lumpur (May 11): Steel products manufacturer CSC Steel Holdings Bhd rose as much as 9.5 sen or 9.55% to RM1.09 today after the company reported its return to profitability in its first quarter ended March 31 (1QFY15).
 
As at 2.37pm, CSC (fundamental: 1,2; valuation: 1.8) had eased to RM1.03, still in the positive with 3.5 sen or 3.52% gain, after some 212,300 shares changed hands. The current price gives it a market value of RM382.37 million.
 
CSC reported a net profit of RM5.4 million in its 1QFY15 results, released last Friday (May 8), after a year of net loss, on higher sales volume and selling prices.
 
However, despite the improvement in its earnings, Hong Leong Investment Bank (HLIB) remains cautious on the stock as the outlook for steel in financial year 2015 remains bleak on stiff competition - which it noted will likely worsen - and the weaker ringgit, which it sees will further weaken CSC's profitability.
 
Hence, it has maintained its "hold" call for CSC in a note to clients today, but lowered its sums-of-parts-derived target price on the stock by 9.5% to 95 sen a share.
 
The research house also trimmed its FY15-16 net profit forecasts for CSC by 12.1%-13.5%, largely to account for lower finance income assumptions.
                                                                                                      
"Looking ahead, management remains cautious on its near term outlook, given stiff competition arising from the influx of imported steel products from China, which will likely worsen; and weaker ringgit which will further weaken CSC's profitability," HLIB said.
 
(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.)