After I posted my article named “Steel stocks comparison and outlook” yesterday, many of my friends asked me which are the better stocks to buy among the 10 steel stocks as shown on my tabulation as below. 

I have invested about the same value in each of these 3 steel stocks namely AYS, Leon Fuat and Prestar. They are the cheapest in terms of PE ratio. These are my reasons for buying each of the 3 stocks:

Why I bought AYS?

Share Placement: I like to buy AYS because Institutional Investors have bought the 38 million placement shares at 76 sen after discount in October last year. The big buyer must know that AYS has very good profit growth prospect.

How is the share placement price fixed?

According to Security Commission rule, the placement price should not be less than the average price in the last 5 trading days with a maximum discount of not more than 10%.

I also like to buy AYS because the average daily traded volume is about 10 million shares. I can make some money on short term trading.

Why I bought Leon Fuat?    

Leon Fuat reported 11.34 sen EPS in the latest quarter ending Sept. and 9.76 sen in its previous quarter. Leon Fuat and Tashin are the only 2 steel companies reported better profit in their latest quarter than their previous quarter despite MCO lockdown.

For the quarter ending December, I expect Leon Fuat to report better EPS than 11.34 sen before the end of February because during this period there was no MCO lockdown.  

Why I bought Prestar?

Prestar business collaboration with a Japanese company, Murata Machinery, Ltd (“MURATA”) to supply automated storage solutions worldwide During FYE 2020, Prestar Storage System Sdn. Bhd. (“PSSSB”), a wholly-owned subsidiary of the Company had entered into a Manufacturing Partnership Agreement with MURATA for the purpose of designing, manufacturing and supplying of Automated Storage and Retrieval System (“ASRS”) Racking System for the latter’s worldwide market.

MURATA is one (1) of the largest designers and manufacturers of material handling systems in Japan with leading edge in the manufacturing of Automation Integrator serving a global market in a wide range of industries. The said collaboration will provide PSSSB with a growth opportunity to participate in the supply of ASRS Racking System for MURATA’s global market including the United States of America, Japan, China and ASEAN countries as well as leveraging on its core strength to achieve greater success in factory automation sector. In addition, the collaboration is expected to give PSSSB the instant accessibility for supplying ASRS Racking System to e-commerce, pharmaceutical, Omni-channel distributions, retailing, distribution and logistics industries and high throughput industries such as fast-moving consumer goods particularly for export market. The collaboration will definitely augur well the long-term strategic business goal of PSSSB.

Prestar guardrail sale

Sarawak Pan Borneo Highway (“PBH”) contract Another wholly-owned subsidiary, Prestar Engineering Sdn. Bhd. (“PESB”) had on 1 July 2020 entered into the Supply Agreements (“Agreements”) with Pansar Company Sdn. Bhd. (a wholly-owned subsidiary of Pansar Berhad, a company listed on the Main Market of Bursa Malaysia Securities Berhad) and was also awarded the contracts (“Contracts”) from LTC West Gate Sdn. Bhd. and Kemakmuran 2000 Sdn. Bhd. for the purpose of supplying and delivering guardrails and accessories in respect of the development and upgrading of the proposed PBH in Sarawak, Malaysia. The total estimated amount of the Agreements and Contracts secured by PESB was approximately RM80.0 million.

Sarawak Pan Borneo Highway (“PBH”) contract (cont’d) Pursuant to the Agreements and Contracts awarded, PESB will supply and deliver guardrails and accessories to four (4) work packages in respect of the PBH project i.e., Pantu junction to Batang Skrang stretch, Sungai Kua bridge to Sungai Arip bridge, Semantan to Sungai Moyan bridge and Sungai Awik bridge to Bintagor junction. The Agreements and Contracts are expected to contribute positively towards the future earnings of the PESB for the financial year ending 31 December 2021, or until the expiry of the respective Agreements and the Contracts. PBH is a road network on Borneo Island connecting Sabah and Sarawak, with Brunei and Kalimantan regions in Indonesia. Prestar will continue to participate in bidding for the supplies of guardrails for future packages of PBH to Sabah in the near future.