Posted on 03 Jan 2008
Strong buying interest, fanned by expectation of growing demand and higher selling prices, drove up steel-related stocks yesterday.
Steel is one of the favourite sectors recommended by investment analysts due to the rolling out of mega infrastructure projects, such as the double-tracking rail and second
Furthermore, Malaysia Hardware, Machinery and Building Materials Dealers Association executive adviser Tan Sri Pheng Yin Huah was quoted by Nanyang Siang Pau as saying that the Government had decided to revise steel product prices upwards.
It was possible for another hike this year in tandem with the escalating international prices, Pheng commented.
Construction companies, which had based their bids on lower steel prices and had been awarded the projects, would be the losers, he added.
The authorities had last raised the ceiling prices of steel bars and billets in April last year.
Long steel bars and billets, which are mainly used for construction, are price-controlled items.
Given the higher prices overseas and that there is no restriction on exports, it is more profitable for manufacturers to export such products than to sell them locally.
Consequently, that gave rise to the domestic shortage.
The last price hike had already lifted the steel-related companies' earnings.
Ann Joo Resources Bhd posted over 70% rise in pre-tax profit to RM62.1mil for its third quarter ended Sept 30 on nearly 31% higher revenue of RM490.6mil.
Southern Steel Bhd's third-quarter pre-tax profit also rose more than 70% to RM54.8mil compared with RM31.6mil in the previous corresponding period, while revenue improved by nearly 40% to RM885.1mil.
Kinsteel Bhd's turnover surged 151% to RM582.4mil in the third quarter from RM231.4mil before.
Its pre-tax profit, however, dropped almost 82% to RM70.5mil due to a negative goodwill arising from the acquisition of subsidiaries in the preceding year.
Investment analysts expect the stellar financial performance in the industry to continue this year.
"We hold a positive view on the steel sector. We believe the demand for steel products will be higher locally and abroad this year," said OSK Equity Research analyst Ng Sem Guan.
The export duties that were slammed on steel billets in
Yesterday on
Southern Steel was the biggest gainer with its share price jumping nearly 23%, or 41 sen, to RM2.21. Ann Joo rose 27 sen to RM2.94, while Kinsteel added 24 sen to RM1.58.
