New move into the market

After tired of waiting for correction, I made some move this few days.

Last thursday I bought in 30 lots of Cscstel for 1.29 in anticipating for 2nd quarter result but it seems to be quite dissapointing as it turned out EPS only 2cents making EPS up till 2 quarters only around 6 cents. In quarter report, Cscstel is anticipating a much weaker outlook for next half year since steel is still abundance from China. However, I observed Cscstel started a new round of share buyback again. With 70 cents per share, I think Cscstel can use those money to buy back share in the open market to improve EPS since they seldom distribute special dividend this few years. The following is the newest price target by Hong Leong together with their report:

Hong Leong Trading Buy for Cscstel aiming RM1.50

Highlights
On a qoq basis, 2Q13 net profit weakened to RM7.5m (from RM17.5m in the previous quarter) mainly on the back of:
 (1) Lower sales volume;
 (2) Lower selling prices; and
(3) RM9.4m inventory writedown.

1H13 net profit rose by 54.3% to RM25.1m mainly on the back of the strong performance due to sharp recovery in sales volume (whereby earnings registered in 1Q13 itself was already more than the earnings registered in 1H12), but partly mitigated by RM9.4m inventory writedown incurred in 2Q13.

While international steel prices seem to have stabilized, we are holding our cautious view on the company’s mediumterm outlook as overcapacity in the region (in particularly, China, Indian, and Korean steel mills) will continue to weigh on the sector’s profitability including CSC Steel. Despite our less bullish view on the company’s earnings outlook, we believe share price downside is limited by its RM265.8m net cash (translates to 70 sen/share or 54% of share price) in its balance sheet.

Risks

Downside risks-
(1) Overcapacity in China remains over the longer term; (2) Volatile input prices; and (3) Influx of steel products at cheap prices.

Forecasts

We are maintaining our 2013 earnings forecast, but cut 2014 earnings forecast by 19% to RM43.5m largely to account for lower sales volume assumption.

Rating

Trading BUY
Positives – Strong balance sheet
Negatives – Inability to pass on higher cost of raw materials to end-users

Valuation

SOP-derived TP cut by 6.8% to RM1.50 to reflect the downward adjustment in our 2014 earnings forecast, which more than offset a slightly higher net cash balance. Maintain T.BUY call on the stock.
Source: Hong Leong Investment Bank Research - 5 Aug 2013
http://klse.i3investor.com/servlets/ptres/17341.jsp


Besides that, I also topped up another 15 lots of Supermax at RM2.25 today to add up total of 50lots. Malaysia Ringgit depreciating toward Us dollar together with softening of rubber price and increasing of Mers cases lead me to accumulate more Supermax. Supermax at PE 12.39 still way behind its opponent's PE namely Topglov 17.6, Harta 21.15 and Kossan 16.52. Still waiting for Supermax latest quarter result to see what is the next move. I hope this will come before Fed next meeting on 16 and 17 September as I will clear of some stocks again to wait for another round of stock discount. Tomorrow will only be half day trading since Raya is coming. Selamat Hari Raya for those who are celebrating.