KSSC (5192) - K. Seng Seng Corporation Berhad - Of Steel and Water
K. Seng Seng Corporation Berhad (KSSC - 5192) a Selangor based steel manufacturer, focuses in stainless steel water pipes, steel sheets and other polishing consumables. The company supplies to various industry, such as marine industry, oil and gas, construction as well as automotive industry. Given the latest stint in the steel industry that had saw various steel manufacturer pushing up in a bullish manner, KSSC could be possibly be one of the last remainder in the bullish steel run.
While some are thinking when will this bullish steel sentiment is going to end, some analyst could predict that it will not end so soon, reason given is due to the impact from the implementation of anti dumping tax on CRC steel to protect the local steel industry from foreign player, the current cessation of HRC production from Megasteel and robust infrastructure demand and construction boom in the local arena. The sentiment could be lasting until at least the the 2nd half of 2017, where most company will start to report on the financial year end.
Based on the price chart of the above 4 steel manufacturer, it is notable that the steel sentiment continue to run strong, given the strong interest in those company. While most of the company had accelerated much in their capital appreciation, this could provide a great stage for KSSC which had just started it's journey.
Given the chart out look, KSSC had just broken up on primary resistant line of RM 0.45. This could be a convincing start for the company that had been lacking of share movement activity for almost 1 year.
With the booming steel sentiment not looking to back down anytime soon, there shouldn't be much of a problem for KSSC to trade at the range of RM 0.60.
KSSC to expand in house
It had been noted that KSSC had been holding back on reinvestment due to the uncertainty of the steel industry in the past few years. Albeit the tough environment, the company had been operating in a profit and pays an annual dividend without fail for the past 4 years.
Now, with the government implementing anti dumping tax to protect the local steel manufacturer, KSSC will expand it's operation with their existing land in Seri Kembangan, which is good for operation integration and synergy.
With demand chalking in from the vacuum left by China's import and cheaper HRC material import, the steel industry in Malaysia now can enjoy a better margin.
Fundamental Outlook
The Q2 FYE 2016 financial had saw an earning of 1.15 cents per share. However, the management is positive on seeing better revenue from demand in automotive and construction sector as well as water steel pipe replacement work in Selangor to address the issue of non revenue water.
The group also expect a better contribution from it's engineering work segment. While there are no profit forecast from the management, familiar sources that link with KSSC are estimating a better Q3 and Q4, which could chalk up a a total revenue of more than RM 70 million for the 2 remaining quarters, of which huge revenue are from the water pipe replacement exercise from Selangor.
Conclusion
KSSC is a potential rising star, given it's exposure to the water pipe replacement exercise in Selangor. With the current better steel margin, this will be a double joy for KSSC. Trading at 60% of the NTA value RM 0.77, and with a good record of dividend paying for the past few years, KSSC could be a good bet as the last rising steel player.
Bone's TP : RM 0.60
KSSC (5192) - K. Seng Seng Corporation Berhad - Of Steel and Water
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