CSCSTEL: Earnings Recovered

Results Update

For QE31/12/2017, CSCStel's net profit rose 5.6% q-o-q or 139% y-o-y to RM15 million on the back of higher revenue -which rose 13% q-o-q or 288% y-o-y to RM267 million. Group’s revenue rose q-o-q due to substantial increase in total sale volume and higher selling prices for all its steel products. As a result, the Group's profit before tax rose to RM19 million this quarter compared with RM16 million achieved in the previous quarter. (Note that effective tax rate on consolidated profit before tax for the current period was lower than the statutory income tax rate of 24% due mainly to tax effect of income not taxable in determining taxable profit; and tax effect of utilizing re-investment allowance.)


Table: CSCStel's last 8 quarterly results


Graph: CSCStel's P&L for last 41 quarterly results

Valuation

CSCStel (closed at RM1.51 yesterday) has a PER of 9.3 times (based the last 4 quarters' EPS of 16.19  sen). At this PER multiple, CSCStel is deemed fairly attractive.

Technical Outlook

CSCStel has broken below its intermediate uptrend line, SS at RM1.70 in late November last year. Shortly thereafter, it also broke to the downside of its descending triangle, ABC at RM1.63. This means CSCStel may continue to slide.


Chart 1: CSCStel's daily chart as at Feb 13, 2017 (Source: MalaysiaStock.Biz)

If you look at the monthly chart, CSCtel has been rising in an upward channel since 2006. It is now slightly below the middle line. If the share price weakens further, it is likely to go to the lower line. Thus it is important that CSCtel must recover above the middle line at RM1.55.


Chart 2: CSCStel's weekly chart as at Feb 13, 2017 (Source: MalaysiaStock.Biz)

Conclusion

Based on satisfactory financial performance and fairly attractive valuation, CSCStel is a good stock for long-term investment. However we have to track this stock closely as its technical outlook has turned negative.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.