For QE31/3/2015, SSteel's LBT declined 43% q-o-q from RM68 million to RM39 million due to improved margins from higher selling prices. Its revenue rose 7% q-o-q to RM675 million. Despite incurring substantial losses for the past 3 quarters, the company is sounding optimistic. It expects that its "operating results to improve in the fourth quarter of the financial year ending 30 June 2015".
Table: SSteel's last 8 quarterly results
Chart 1: SSteel's last 36 quarterly results
Valuation
SSteel (closed at RM0.97 yesterday) is now trading at a Price to Book of 0.45 times (based on its NTA of RM2.16 as at 31/3/2015). We are unable to compute SSteel's PE multiple since it has incurred a net loss of RM103 million or LPS of 24.6 sen. Based on PB of 0.45 times, I believe the downside for SSteel is limited.
Technical Outlook
SSteel is in a downward channel, RR-SS since 2010. The lower line, acting as support, could hold up the stock at around RM0.90.
Chart 2: SSteel's monthly chart as at May 7, 2015 (Source: ShareInvestor.com)
Looking at the 20-year monthly chart, we can see that SSteel has been trading in a range between RM1.00 & RM2.00 for the past 15 years (except for a brief breakout in 2008) . In a worst case scenario, it may go as low as RM0.80 (recorded in 2001) before recovering.
Chart 3: SSteel's monthly chart as at May 6, 2015 (Source: ShareInvestor.com)
Conclusion
Based on technical support & asset-backing, SSteel could be a good long-term investment at the current price of around RM0.90-1.00. Its financial performance could take a while to recover due to dumping activities by Chinese steel producers.
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, SSteel.
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