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[NST] MARC affirms AAAIS (fg) rating on Masteel’s sukuk

Monday, October 3rd, 2022

By Azanis  Shahila Aman

KUALA LUMPUR: MARC Ratings has affirmed its AAAIS(fg) rating on Malaysia Steel Works (KL) Bhd’s (Masteel) RM130.0 million Danajamin Nasional Bhd-guaranteed Sukuk Ijarah Programme with a stable outlook.

The rating agency said the rating and outlook are based on MARC Ratings’ assessment of the credit strength of Danajamin (AAA/Stable).

“This has provided unconditional and irrevocable financial guarantee insurance on the programme,” it said.

Upon completing the amalgamation exercise of Danajamin and Bank Pembangunan Malaysia Bhd (BPMB), BPMB will honour Danajamin’s obligations under the guarantees.

Accordingly, Masteel’s guaranteed sukuk will carry BPMB’s AAA/Stable rating.

Masteel’s credit profile incorporates its longstanding track record in the domestic production of steel billets and steel bars, its moderate domestic market position and the improving operational efficiency from continued investment in production technology.

The company is exposed to the volatility of steel prices and raw material costs.

The company’s financial performance improved, attributable to the higher steel bar price, for the first half of 2022 (1H22).

Meanwhile, its revenue grew by 12.8 per cent year on year (YoY) to RM894.5 million as the average selling price of domestic steel bars rose to RM3,020 per metric tonne (MT) from RM2,600 per MT in 1H21.

The normalisation of economic activities contributed to this after easing pandemic-induced restrictions.

According to MARC Rating, the outstanding under the Sukuk Ijarah Programme stood at RM90.0 million as of end-June 2022, with the subsequent repayment of RM40.0 million due on November 30, 2022.

“The company has a cash balance of RM62.1 million as of end-June 2022.

“The company’s borrowings rose to RM452.5 million as of end-June 2022 (end-2021: RM380.9 million), mainly to fund the working capital for steel production.

“The gross debt-to-equity ratio stood at 0.53 times,” it added.

[The Star] Masteel net profit surges 57% to RM13.2mil in 1Q

Friday, May 27th, 2022

KUALA LUMPUR: Malaysia Steel Works (KL) Bhd’s (Masteel) net profit jumped 57.4% to RM13.2mil in the first quarter ended March 31, against RM8.39mil a year prior, buoyed by higher selling prices of its steel products.

Revenue rose 4% to RM457.4mil versus RM439.7mil previously, due to the higher selling price of steel products in line with the rising of global steel prices and recovery of the Malaysian economy.

Managing director Datuk Seri Tai Hean Leng said its first quarter’s operations continued to benefit from the accelerated construction activities since the recommencement of projects in late last year after stop-work orders to curb Covid-19 were lifted.

“Coupled with the increased utilisation of our production facilities, the higher selling prices have also contributed to our improved profitability during the quarter, and bode well for the upcoming quarters as well.

“With the positive start, we are looking forward to a favourable year ahead as Malaysia transitions to an endemic phase alongside a normalised economic situation for the nation,” he said in a statement.

As the construction sector for the nation picks up and with the gradual normalisation of the international supply chain, demand for building materials is expected to be on an improving trend which would support the prices of steel in the near term.

“While optimistic of delivering a resilient FY2022 performance, we remain cautious of the trickling effects from high interest rate and inflationary pressure which could impact the global economic recovery,” Tai said.

[The Star] Masteel 1Q results soar on higher prices

Friday, May 27th, 2022

Revenue rose 4% to RM457.4mil versus RM439.7mil previously. Managing director Datuk Seri Tai Hean Leng said. (File pic shows Masteel factory)

PETALING JAYA: Malaysia Steel Works (KL) Bhd’s (Masteel) net profit jumped 57.4% to RM13.2mil in the first quarter ended March 31, against RM8.39mil a year prior, buoyed by higher selling prices of its steel products.

Revenue rose 4% to RM457.4mil versus RM439.7mil previously. Managing director Datuk Seri Tai Hean Leng said operations continued to benefit from the accelerated construction activities since the recommencement of projects last year after stop-work orders were lifted

[The Star] Lower margin risk amid another profitable year for steelmakers

Saturday, April 9th, 2022

By Ganeshwaran Kana

AFTER a strong 2021, thanks to higher selling prices, many steel producers could be looking at compressed margins and a normalisation in selling prices this year.

Amid the expected recovery in demand, steel players are already facing a rise in raw material prices such as iron ore, coupled with higher energy and freight costs.

Nevertheless, an analyst says steel producers could still expect to be profitable in 2022, leveraging on the pick up in construction and industrial activities following the reopening of the economy.

“Global supply chain disruption, stemming from China’s zero-Covid policy and the Russia-Ukraine war, could also keep steel selling prices elevated,” the analyst adds.

The lower margin and selling prices are expected to affect even the country’s largest listed steel maker, Ann Joo Resources Bhd.

In a sector report published on April 4, Kenanga Research said that Ann Joo’s peak profitability has passed, and earnings could turn weaker in the subsequent quarters.

This is premised on the expectation that weakening steel price would compress margins as raw material costs play catch-up.

Iron ore, which is the primary raw material in blast furnace steel production, has seen a rise in price of almost 40% year-to-date.

Price of metallurgical coal, which constitutes about 40% of the blast furnace cost of production, has also remained at a high level in 2022.

Amid the challenges, an analyst says that Asian steelmakers, including Malaysia, would benefit from China’s move to curb its domestic steel production as the country seeks to be more environment-friendly.

“China will have to import steel from elsewhere to meet local needs for steel, so producers in other countries such as Malaysia would benefit from this.

“Other countries that could no longer purchase the same volume of steel from China would also turn to Malaysia, for example.

“This is positive for the top line of local steel makers this year,” the analyst says.

The expectations of another positive year for steel players, despite the impact on margin and selling prices, have boosted local steel stocks in the past one month.

Ann Joo and Hiap Teck Venture Bhd are up by over 10% and 7% respectively, while Lion Industries Corp Bhd’s share price has increased by almost 13%.

A smallish steel player, Malaysia Steel Works (KL) Bhd (Masteel), is also up by 11.3% in the period.

Despite the increase, it is worth noting that these stocks remain well below the highs seen in 2021.

It seems that the market still awaits the steel players to deliver positive earnings in the recently concluded first quarter of 2022.

Masteel, which is involved in the manufacturing of high tensile steel bars, mild steel bars and prime steel billets, remains positive of the industry’s outlook.

In its results filing released on Feb 22, Masteel said the commencement of spring civil construction period in North Asia and the ending of restrictions of steel mill activities in China for the Beijing winter Olympics are causing steel prices to recover internationally and domestically.

The group, whose more than 91% of its revenue is contributed domestically, expects prices of local steel bars are expected to continue to trend higher.

This is due to rising international steel prices and the gradual recovery of the Malaysian economy from the Covid-19 pandemic.

The group also exports its steel products to China, Australia, New Zealand, Indonesia, Singapore and Vietnam, among others.

“The company continues to maximise its new steel making facilities and is expected to perform satisfactorily amid some short term volatilities due to the Omicron wave and shortage of labour issues in the country,” Masteel said.

Masteel staged a turnaround in the financial year ended Dec 31, 2021 (FY21), after two consecutive years of losses.

The rebound was possible on the back of higher selling prices, resulting from the recovery of the international and local steel prices, and enhanced production cost efficiency.

The steelmaker recorded a net profit of RM32.5mil in FY21 as compared to a net loss of RM14.73mil in the previous corresponding year.

Masteel’s revenue, on the other hand, improved by 14.18% year-on-year to RM1.58bil from RM1.38bil in the previous year.

This was achieved despite recording lower sales volume in FY21.

The group’s net profit margin in FY21 was recorded at 2.1%

While Masteel declined to respond to StarBizWeek’s queries, including on the plans to enlarge its capacity, the group has previously said that it has substantial capacity to meet the anticipated uplift in industry demand.

Masteel plans to capitalise on its upgraded steel manufacturing facilities to meet the increased demand.

In an earlier press statement, Masteel managing director and CEO Datuk Seri Tai Hean Leng remained upbeat on the group’s prospects.

This is considering that the stronger demand for steel from the accelerated pace of economic activities globally were expected to overshadow the impact of uptrending raw material prices.

Moreover, the ongoing conflict in Eastern Europe is not expected to have any impact on the group’s earnings, according to Tai.

“With our large capacity and reliable delivery network, we are confident of capturing this demand wave,” he said.

Masteel’s ability to further expand its production capacity may be restricted, considering that the group already has high debts on its books.

As of end-2021, the steelmaker had total borrowings of RM380.82mil against cash and cash equivalents of RM56.96mil.

In terms of valuations, Masteel has a price-to-earnings (PE) ratio of 7.1 times, compared to AnnJoo’s 4.32 times and Hiap Teck’s 3.44 times.

Choo Bee Metal Industries has a PE ratio of 2.46 times and Leon Fuat Bhd is valued at a PE ratio of 2.03 times.

[NST] Masteel turns around in 2021 with RM32.5mil net profit

Friday, February 25th, 2022

By Farah Adilla

Masteel managing director and chief executive officer Datuk Sri Tai Hean Leng remained upbeat on the company’s prospects, particularly as the stronger demand for steel from the accelerated pace of economic activities globally was expected to overshadow the impact of uptrending raw material prices. 

KUALA LUMPUR: Malaysia Steel Works (KL) Bhd (Masteel) saw a firm turnaround in the financial year ended December 31, 2021 (FY21), with a net profit of RM32.5 million from a net loss of RM14.73 million in FY20.

The integrated steel manufacturer said this was buoyed by the recovery in selling prices of steel products in local and international markets. 

Masteel said prices of iron ore, a primary raw material for blast furnace-based steel making which is a bellwether for steel demand, rose from a low of US$85 per tonne in November 2021 to more than US$150 per tonne on February 11, 2022, before settling at US$143 per tonne in the fourth week of February.

At the same time, price of metallurgical coal, which constitutes 40 per cent of blast furnace cost of production, remained high year to date.

Masteel’s revenue during the period increased 14.2 per cent to RM1.58 billion from RM1.38 billion.

Masteel said the growth in revenue was bolstered by the Malaysian market where sales rose 15.8 per cent to RM1.4 billion from RM1.3 billion previously on stronger demand from the construction sector. 

Export sales remained stable at RM136.1 million in FY21, versus RM137.3 million a year ago. 

Masteel managing director and chief executive officer Datuk Sri Tai Hean Leng remained upbeat on the company’s prospects, particularly as the stronger demand for steel from the accelerated pace of economic activities globally was expected to overshadow the impact of uptrending raw material prices. 

He said the ongoing conflict in Eastern Europe was not expected to have any impact on the company’s earnings.

“This strong turnaround, is made even more significant against the backdrop of the disruptive Movement Control Orders in FY21, and showcases our resilience. 

“We are also reaping the benefits of the timely upgrading of our steel making facilities. 

“Although prices of raw materials are increasing, the greater force of external demand is widely expected to eclipse the high-cost environment,” he said.

Tai added that North Asia’s commencement of the civil construction period in the spring, together with the lifting of restrictions of steel mill activities in China, was prompting a strong rebound in domestic and international steel prices. 

“With our large capacity and reliable delivery network, we are confident of capturing this demand wave,” he said.

For the fourth quarter, Masteel’s net profit improved 46.6 per cent to RM12.04 million from RM8.21 million, while revenue increased 24.4 per cent to RM463.87 million from RM372.76 million.

Tai said the company intended to maximise its new steel making facilities, which has substantial capacity to meet the anticipated uplift in industry demand. 

“Overall, despite short-term volatilities such as the Omicron wave and labour shortage, Masteel is expected to continue delivering satisfactory performance in FY22,” he added.

[The Edge] Masteel 4Q net profit climbs 47% y-o-y to RM12m, boosted by RM5m tax credit

Friday, February 25th, 2022

By Izzul Ikram

KUALA LUMPUR (Feb 25): Malaysia Steel Works (KL) Bhd (Masteel) reported a 47% rise in net profit for the fourth quarter ended Dec 31, 2021 (4QFY21) to RM12.04 million from RM8.21 million a year earlier, boosted by a tax credit amounting RM5.06 million.

However, in a filing on Friday (Feb 25), the group said its profit before tax (PBT) slipped 42% to RM6.97 million from RM12.07 million in 4QFY20, mainly due to higher operating expenses arising from a rights issue with warrants exercise, and a foreign exchange loss.

Its quarterly revenue rose 24% to RM463.87 million from RM372.76 million a year ago, due to higher steel bar selling prices, in line with the increase in global and domestic steel prices.

For FY21, Masteel swung to a full-year net profit of RM32.5 million compared to a net loss of RM14.73 million in FY20, mainly due to higher steel bar selling prices and enhanced production cost efficiency during the year under review.

Similarly, annual revenue rose 14% to RM1.58 billion from RM1.38 billion in FY20 on the back of higher steel bar selling prices, despite recording lower sales volume.

“This strong turnaround is made even more significant against the backdrop of the disruptive Movement Control Orders in FY2021, and showcases our resilience. We are also reaping the benefits of the timely upgrading of our steel making facilities,” said Masteel managing director and CEO Datuk Seri Tai Hean Leng in a statement.

In terms of prospects, Masteel said prices of local steel bars are expected to continue to trend higher due to rising international steel prices and the gradual recovery of the Malaysian economy from the pandemic.

“Although prices of raw materials are increasing, the greater force of external demand is widely expected to eclipse the high-cost environment.

“North Asia’s commencement of the civil construction period in the spring, together with the lifting of restrictions of steel mill activities in China, are already prompting a strong rebound in domestic and international steel prices,” Tai said, adding that the group is confident of capturing the expected increase in demand.

Masteel shares closed one sen or 3.23% higher at 32 sen, giving the group a market capitalisation of RM214.12 million.

Edited by Ahmad Naqib Idris

[The Star] More project rollouts likely

Wednesday, January 12th, 2022

KUALA LUMPUR: A gradual improvement in contract flows in the construction sector is likely this year as the country moves towards the endemic phase from the Covid-19 pandemic stage.

Hong Leong Investment Bank Research (HLIB) said a recovery in private sector opportunities and ongoing rollouts of existing projects like the East Coast Rail Link, Pan Borneo Highway Sabah and Sarawak, Johor Baru-Singapore Rapid Transit System and Central Spine Road project will support job flows in 2022.

Additionally, there is also the potential rollout of the Sarawak Metro which costs about RM6bil.

Note that domestic contracts to listed contractors amounted to RM6.3bil in the fourth quarter (Q4) of last year, boosted by RM1.6bil worth of awards from water and solar projects, notably the Rasau Water Scheme (RM896mil) and the fourth cycle of Large Scale Solar projects (RM571mil).

Notable contract wins in Q4 of 2021 included package two and three of Rasau to Taliworks Corp Bhdl, the Sabah Sarawak Link Road package to Kimlun Corp Bhd (RM780mil) and the aerotrain project in the Kuala Lumpur International Airport to Pestech International Bhd (RM743mil).

Meanwhile, there was only one foreign contract awarded during the quarter which involved the upgrading of various substations in the Philippines to Pestech International Bhd for a contract sum of RM157mil.

“The Home Ownership Campaign (HOC) and low interest rates which lifted property sales in 2021, could see a ramp up in private sector contract awards considering the repeated award delays in 2021,” HLIB pointed out.

However, the downside to this is the dampening of sentiment from the expiry of the HOC, interest rate hikes and rollout delays due to high materials price.

On a year-to-date basis, contracts awarded in 2021 were higher by 63% largely due to the low base effect as 2020 saw lockdowns imposed in the country.

In 2021, HLIB noted that stronger water, affordable housing, solar and road projects such as public sector funded jobs were seen while private sector contracts remained flattish due to the continued restrictions which dented rollout optimism.

The research house has maintained its “neutral” call on the construction sector given the fluidity of the looming general election, which could weigh on sector sentiment with investors adopting a wait-and-see approach.

“Sector valuations are on the lower end at 12.9 times price-to-earnings ratio on the next 12 months earnings per share (five-year average) and 0.65 times price-to-book value (minus one standard deviation five-year range).

“Recent reports on critical projects, including the Mass Rail Transit line three, are encouraging but we remain cautious on the timeline and overall sector earnings execution amid the ongoing virus spread,” it added.

[TheEdge] Masteel swings to profit in 2Q on higher sales volume, steel bar prices

Tuesday, September 28th, 2021

By Justin Lim

KUALA LUMPUR (Sept 28): Malaysia Steel Works (KL) Bhd (Masteel) has swung to a second-quarter profit on the back of higher sales volume and selling prices of steel bars.

It reported a net profit of RM9.39 million or earnings per share of 2.07 sen for the quarter ended June 30, 2021 (2QFY21), compared with a net loss of RM22.53 million or loss per share of 5.11 sen in the same period last year.

Quarterly revenue jumped 80.52% year-on-year to RM353.14 million from RM195.63 million.

For the six months to June, Masteel posted a net profit of RM17.78 million, compared with a net loss of RM26.7 million in the same period last year. Six-month revenue rose 33.65% to RM792.87 million from RM593.27 million.

“We could have reported an even stronger 2Q if not for the implementation of Full Movement Control Order (FMCO) in June. The improved performance was supported by the efficiency of our operations in adapting to the Covid-19 pandemic situation in Malaysia,” said Masteel managing director and chief executive officer Datuk Tai Hean Leng.

“Additionally, our strategic location in the Klang Valley near to key construction activities, along with our large capacity and reliable delivery, places us favourably in capturing the uptake in steel bar demand,” he added.

Tai said the group is heartened that lockdown restrictions have eased since this month under the National Recovery Plan, allowing the group to resume optimal production rate.

He said with the FMCO lifted, the group is now seeing steel bar orders from the construction sector resume.

“We expect steel bar demand to pose a gradual recovery to pre-FMCO levels from the second half of 2021 (2H21), supported by fulfilment of ongoing construction jobs, as well as major infrastructure projects to be rolled out.

“We will also continue to export our steel products to the regional markets where demand remains firm. Against this backdrop, we are confident of delivering resilient 2H21 performance,” he added.

Masteel’s share price closed 1.5 sen or 3.49% lower at 41.5 sen, for a market capitalisation of RM282 million.

Edited by S Kanagaraju

[The Edge] M&A Securities underwrites Masteel’s rights issue raising RM89.4 million

Thursday, September 2nd, 2021

By Sulhi Khalid

KUALA LUMPUR (Sept 2): Malaysia Steel Works (KL) Bhd (Masteel) has signed an underwriting agreement with M&A Securities Sdn Bhd for the former’s rights issue with warrants exercise to raise RM89.41 million.

In a statement today, the steel maker said the other co-underwriters are BIMB Securities Sdn Bhd, Malacca Securities Sdn Bhd and Inter-Pacific Securities Sdn Bhd.

On Feb 8, Masteel obtained its shareholders’ approval for the rights issue of up to 226 million new ordinary shares on the basis of one rights share for every two existing Masteel shares held. The cash is sweetened with free detachable warrants on the basis of one warrant for every one rights share subscribed.

The cash call is fixed at 39.5 sen, representing a 28% discount to the last traded price per share of 55 sen on Sept 1 and a 16% discount to the theoretical ex-all price per share of 47 sen.

“TYY Resources Sdn Bhd, which is the company’s largest shareholder, has undertaken to subscribe for its full entitlement to the rights issue with warrants. Coupled with commitment from the underwriters, this effectively means that the Rights Issue with Warrants is fully underwritten,” said the steel maker.

Of the funds raised, the group highlighted RM10 million will be used for the repayment of existing bank borrowings, RM76.81 million to fund the company’s working capital requirements, and the balance RM2.6 million to defray expenses of the rights issue.

Masteel Managing Director and CEO Datuk Sri Tai Hean Leng said the issuance of rights shares along with the free warrants would increase the number of Masteel shares in circulation, as well as enhance the liquidity and marketability of our shares.

This corporate exercise provides shareholders with the option to increase their participation within the company and benefit from its future growth, he said.

Shares in Masteel ended 1.5 sen or 2.73% lower at 54 sen, giving it a market capitalisation of RM240.01 million. It has a share issuance of 452.74 million.

Year to date, the stock has fallen by 12.3%.

Edited by Kathy Fong

[The Edge] Masteel revises rights issue price downwards to 39.5 sen apiece

Thursday, August 19th, 2021

By Adam Aziz

KUALA LUMPUR (Aug 19): Malaysia Steel Works (KL) Bhd (Masteel) has revised its rights issue price downwards by 19.1 sen or 32.59% to 39.5 sen per rights share, from 58.6 sen.

Similarly, Masteel revised downwards the exercise price of the accompanying free warrants to 39.5 sen, from 58.6 sen, its filing showed.

MasteeSl said the decision took into account, among others, the decline in its share price since the right issue’s price-fixing date of May 6, 2021, when Masteel’s counter closed at 86.5 sen.

The revised issue price of the rights shares and the revised exercise price of the warrants represent a discount of 24.3% to the 5-day volume-weighted average market price (VWAMP) of Masteel shares up to and including Aug 18, 2021 of 52.15 sen.

It also represents a discount of 13.8% to the theoretical ex-all price of Masteel shares of 45.83 sen, based on the 5-day VWAMP calculation respectively, it said.

“Premised on the above, the board is of the view that the revised issue price of the rights shares and the revised exercise price of the warrants are fair,” it added.

Masteel had proposed the one-for-two rights issue of up to 226.37 million rights shares in December 2020, together with one free warrant for every rights share subscribed.

The latest pricing now implies Masteel would raise up to RM89.42 million from the rights issue, of which around 85% would be used for working capital whereas another RM10 million will be used for debt repayment.

Shares of Masteel closed down 1.5 sen or 2.8% to 52 sen apiece, valuing the steelmaker at RM235.42 million.


Edited by Tan Choe Choe

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