Immediately after the announcement of the closure of Megasteel in early September 2016 all the share prices of steel manufacturers and traders invariably shot through the roof. Steel players are Masteel, Southern Steel, CSC Steel, Mycron, Annjoo; downstream players like Choo Bee, Leon Fuat, AYS, Leader Steel etc Investors simply bought them without knowing what the businesses of the companies and who are their customers. They bought the shares as if there was no tomorrow.
Now after two and half months of excitement, investors have come to their senses and think more rationally. They look at the companies’ latest quarterly profit announcements. Most investors have come to their senses and think more rationally and cut loss. Of course there will be still a few stubborn investors who refused to admit their mistake and cut loss. They are hoping for some miracle that can improve the price of their holdings.
Beside financial and technical analysis, investors must have some business sense to be really successful. All you need is common sense and you do not need a MBA to know what the companies are making and who their customers.
Let me try to explain to you what the major steel players are making and their customers so that you can understand their businesses to make your investment decision.
Southern Steel: manufactures reinforcement steel bars for building construction and black and galvanized steel pipes for other uses.
Malaysia Steel: manufactures reinforcement steel bars for the building construction.
Choo Bee: manufactures small diameter water pipes and hollow and angle section for building construction.
Mycron: Manufactures cold rolled steel coil (CRC) or sheets for motor and appliances, fridges, steel furniture etc.
CSC Steel: Manufactures cold rolled steel coil (CRC) or sheets for motor and appliances, fridges, steel furniture etc.
As everyone can see there is an oversupply of buildings in every town and city in Malaysia, investors should know how this situation will affect some of the steel manufacturers.