We are impressed that Malaysia Steel Works (KL) (Masteel)’s 2QFY11 results bounced back after a satisfactory 1Q on higher export sales. At its recent briefing, management was upbeat on the medium term outlook for long steel requirement in the local market given the flurry of “mega” projects scheduled for implementation that will spur capacity expansion at its meltshop and rolling mill. The proposed rail project is well in progress although we believe obtaining government approval may be lengthy. Being prudent in our valuation given the uncertain global economy, we are keeping our valuation at 0.46x FY11 BV, or -1 std deviation of the stock’s historical trading range. We maintain our Trading BUY recommendation as our fair value of RM1.18 still offers a decent price upside.
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