SSB’s MYR42.2m FY13 net profit was ahead of both consensus and our estimates,  thanks  to  a  satisfactory  4Q13.  Its  outlook  is  improving,  as more  ETP  projects  are set  to  take  off  in  the next  few  months, spurring demand for long steel products. This prompts us to lift our estimates a tad.  Accordingly,  our  book  based  FV  inches  up  1  sen  to  MYR2.14.  We maintain our TRADING BUY call.   

-  FY13  results  spot  on.  SSB’s  MYR42.2m  FY13  net  profit  is  four  times better  y-o-y  and  47.9%/19.6%  ahead  of  street/our  expectations.  While we  acknowledge  that  the  good  results  were  partly  due to  lower  positive tax  in  4Q13  (PBT  was  19.1%  lower  q-o-q), the company’s performance remains  commendable,  considering  that  local  steel  prices  have weakened some 5-10% since the Lunar New Year.

- Riding  on  infrastructure  spending.  Meanwhile,  we  are  heartened  by the number of projects currently in progress vs those nearing completion or recently handed over. Barisan Nasional (BN)’s renewed mandate in the  recently  concluded  General  Elections  (GE13)  may  accelerate  the implementation  of  more  construction  projects. BN’s pledge  to  continue with  the  Economic  Transformation  Programme  (ETP)  and  to  upgrade infrastructure  should  boost  market  confidence,  with  the  construction  of the  Mass  Rapid  Transit  (MRT)  Line  2  expected  to  proceed  as  planned. These,  plus  BN’s  commitment  to  build  more  affordable  homes,  all  point to accelerated demand for basic materials, including steel products.

- Reiterate  TRADING  BUY.  The  usage  of  the  materials  required  for  the construction  of  existing projects  will  be  spread  over  the  next  few  years, while  the  implementation  of  new  projects  will  also  take  a  while. Nonetheless,  a  more  stabilised  East  Asia  (ie  China)  steel  market  is expected  to  lift  earnings  of  local  steel  mills,  especially  on  improving demand.  We  value  SSB  at  0.98x,  or  a  mean  of  its  historical  five-year trading  range.  We  deem  this  justified,  as  any  small  upturn  in  the materials market may pique investor interest in the stock. That said, we raise our FY14/FY15 estimates by 4.3%/7.6% on the back of better than expected results, lifting our book based FV marginally to MYR2.14 (from MYR2.13). Maintain TRADING BUY.

Source: RHB