Period 1QFY12/3MFY12
Actual vs. Expectations
Below ours and the consensus expectations.
The company reported a net loss of RM4.9m, which was
substantially below our estimated net profit of RM45.9m and that of the
consensus’ forecast of RM35.7m.
Dividends No dividend was declared.
Key Result Highlights
Although 1Q12 earnings were in the red, it has improved from
a net loss of RM13.3m in 4QFY11 due mainly to margins improvement caused by the
timing difference between the jagged drop in raw materials last quarter to the
higher selling price this quarter.
YoY, the bottom line fell by 179%, having recorded a net
loss of RM4.9m in 1Q12 vs. a profit of RM6.2m in 1Q11 as expensive inventories
may have eroded margins.
Outlook Negative.
We expect a slower 1H12 due to lacklustre demand in the
international market as the longdrawn European crisis caused customers to delay
their purchases. Furthermore, the oversupply of steel in China could have
exacerbated the situation.
That said, we reckon that there will be spillover demands
from potential projects such as KLIA 2, the conveyor belt and jetty portion of
the Vale site, the Manjung expansion as well as the Iskandar project in Johor
Bahru, which should benefit Masteel going into 2H12.
Change to Forecasts
We are reducing our earnings for FY12 by 31.2% as we tweaked
our scrap price assumptions.
Rating MAINTAIN MARKET PERFORM
Sector driven call.
Valuation We have reduced our target price from RM1.19
to RM1.08 as we rolled over our valuation to FY13E on an unchanged PER of
6.0x.
Risks Volatile scrap prices.
Source: Kenanga
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