CSC Steel up after Insider Asia says cash-rich firm undervalued

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KUALA LUMPUR (Nov 19): CSC Steel Bhd rose as much as one sen or 0.9% today, after Insider Asia said the firm was one of the most cash-rich steel companies listed on Bursa Malaysia.

CSC was at an intraday high RM1.12 before trading flat. At 3.10pm, the stock was traded
At 3.10pm, CSC was traded flat at RM1.11 with 60,300 shares done.

Insider Asia said CSC had cash of RM237.2 million with no borrowings as at end-June 2014.

This is unusual for players in the steel industry, according to Insider Asia.

“That is equivalent to RM0.64 per share or more than half of its current share price of RM1.12. This is a rarity for the steel industry, where companies typically have high borrowings to fund huge capital expenditure (capex),” Insider Asia said in a report.

The report is published in The Edge Financial Daily and today.

On valuations, Insider Asia said CSC was trading at a significant discount of 44% to its book value of RM1.99 as outlook was dim for the steel segment. The dim outlook was due to restrictions on material import and the global steel glut

CSC made a net loss of RM9.1 million in the first half ended June 30, 2014
versus a net profit of RM25.1 million a year earlier amid lower selling prices for its steel products.

Despite that, the Insider Asia expects CSC to maintain its dividend payments.

“Positively, the company is likely to maintain dividends, which totalled at least seven sen per share annually in the last five years, thanks to its strong balance sheet.

“That translates into higher than market average net yield of 6.3%. It has a dividend policy of distributing at least 50% of net profit,” said Insider Asia.