Stock Name: MASTEEL
Company Name: MALAYSIA STEEL WORKS (KL)BHD
Research House: OSK



OSK Research has reiterated its neutral call on Malaysia Steel Works (KL) Bhd due to weaker steel prices and "not so rosy" outlook as the steel producer and seller may have been caught with some high cost scrap metal when prices surged to US$500 a tonne in May.

In contrast, the company's average scrap metal cost is likely to be US$400 a tonne, OSK said in a research note today.

OSK also revised Masteel's target price to 88 sen. Its shares are currently hovering at 86 sen on Bursa Malaysia.

The research house sees limited room for steel prices to pick up further despite the recovery at end-July caused possibly by the build-up for high inventory by steel mills, suggesting possible dumping on any price escalation.

As a result, the buyers are likely to hold back on procurement.

"The weakening steel price plus the lack of a demand-push factor prompt us to cut our financial year 2010 projection by 16.3 per cent although we retain our financial year 2011 figures." it said, adding that it remains cautious on the second half outlook. -- Bernama