Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD
Research House: OSK

KUALA LUMPUR: OSK Research remains cautious on CSC Steel in view of a potentially weaker 2H,'' although its 1H numbers were way above the research house and consensus estimates when annualised.

OSK Research said on Tuesday, Aug 10 that as its higher dividend payout ratio assumption also translates into lower net cash, this marginally reduces its target price, which is derived from 6x EPS plus net cash per share on FY10 projections.

The research house said CSC Steel has been paying attractive dividend in the past, having committed to paying not less than a 50% gross payout from the respective years' net profit.

OSK Research said with the net cash position continuing to grow and the net payout ratio exceeding 60% in FY09, CSC management had verbally confirmed that CSC Steel will raise its dividend payout to at least 50% at the net level. These changes are also in line with the shift among Malaysian corporates to pay single tier dividends.

'As such, we have revised upwards our payout ratio to match the changes from our previous assumption of 37.5%. The changes in payout ratio also translate into a marginal drop in our net cash forecast. Thus our fair value, which is derived from 6x EPS plus net cash per share on FY10, is lowered to RM1.95.

'Together with the potentially weaker 2H, we are maintaining our NEUTRAL recommendation on CSC Steel despite seeing limited downside from the present level and potential buying interest on the fairly good 2Q results,' it said.