CSCSTEL - More Hurdles Ahead? (OSK)

CSC Steel Holdings (CSC) faces more challenges ahead including, among others, a prolonged inconsistent supply of local raw materials, a slowing global economy and intensifying local competition which can shrink its margins, especially for cold-rolled coils (CRC). We have warned investors earlier that CSC’s 2HFY11 does not look promising and hence, we were not surprised by a lacklustre 3QFY11. Nonetheless, we maintain our Trading Buy recommendation with a fair value of RM1.78 on the back of its solid balance sheet, decent dividend yield and the possibility of CSC becoming a privatization candidate.