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Tuesday, May 17, 2016

CSCSTEL: Earnings Plunged

Results Update

CSCStel's net profit dropped by 70% q-o-q to RM8.9 million on the back of a 8.9%-decline in revenue to RM221 million. When compared to the corresponding quarter last year, net profit rose 65% despite a 25%-drop in revenue.. Revenue dropped q-o-q due to substantial decreases in both the sales volume and selling prices of our steel products. Despite the substantial decreases in selling prices of our steel products, production cost has registered a marginal increase. This led to lower operating profit, which coupled with the absence of  the write back of RM16.9 million of doubtful debt in the preceding quarter, led to a sharp drop on profits.


Table: CSCStel's last 8 quarterly results


Chart 1: CSCStel's P&L for last 34 quarterly results

Valuation

CSCStel (closed at RM1.40 as at 12.30pm) has a PER of 9.0 times (based the last 4 quarters' EPS of 15.49 sen). Its dividend yield  is quite decent at 5.7%.

Technical Outlook

CSCStel rallied from a low of RM0.90 in September last year to a high of RM1.45 in the past 3 months. This morning, the share price retreated dropped to its 50-day EMA line support at RM1.38. Below that, it may find support at the horizontal line at RM1.35 & then RM1.25.


Chart 2: CSCStel's monthly chart as at Feb 22, 2016 (Source: ShareInvestor.cm)

Conclusion

Despite the weaker financial performance, CSCStel is rated a HOLD based on reasonable valuation.

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, CSCSTEL.

4 comments:

Jessie Ma said...

Mr Alex what is your advise on Gamuda?

Tq

Alex Lu said...

Hi Jessie Ma

Gamuda's current decline is a bit of a surprise. After all, it is the numero uno of the construction sector and that sector is the most happening sector in this dull market.

Notwithstanding the poor sentiment of the market and the weakness of Gamuda's share price, I believe the stock could well stay above the RM4.60 level. That's the medium-term uptrend line. Failure to stay above this level could send the stock a bit lower to RM4.40-4.50. That's a very important long-term uptrend line support. If you have not bought this stock, that's a good level to aim to get in. If you are having the stock, then let's hope it stay above RM4.40.

Good luck!

Jessie Ma said...

Mr Alex, yes it surprise all of us.

Is Construction sector still the main theme for 2016? How about rest of sector?

Alex Lu said...

Hi Jessie Ma

On Construction sector, please check out The Edge article entitled "It's not too late to buy construction stocks, say analysts". Go to the link below.


http://www.theedgemarkets.com/my/article/it%E2%80%99s-not-too-late-buy-construction-stocks-say-analysts