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Table of Contents

Table of Contents.................................................................................................................1 Abstract................................................................................................................................2 Vision and Mission Statements............................................................................................3 Analysis of Vision & Mission Statements...........................................................................3 What are the strategic factors facing the CSC.....................................................................5 CSCs competitive market position within Steel Industry...................................................7 Michael Porters Five Force Analysis for CSC Steel Holdings.........................................10 SWOT Analysis of CSC Steel Holdings............................................................................18 CSC leaders philosophy and its impact upon corporate culture and daily company activities.............................................................................................................................20 Analysis of the performance of stock of the company......................................................23 Conclusion.........................................................................................................................26 References..........................................................................................................................27

Abstract
CSC Steel Holdings Berhad Fomerly known as Ornasteel Holdings Berhad is a subsidiary of China Steel Corporation was incorporated in Malaysia on 20 January 2004. CSC is among the leaders of the Steel Industry of Malaysia. It is an ISO 14001:2004 certified and is registered within BM TRADA Certificate Scheme with annual turnover of 1,372,850,318 RM (Audited Accounts 2008). CSC has a product portfolio of hot rolled pickled & oiled steel, cold rolled steel, hot-dipped galvanized steel and pre-painted galvanized steel. CSC is the Malaysias largest cold rolled producer by production size. The productions capacity is 500,000 tpy of cold rolled steel, 240,000 tpy of hot-dipped galvanized steel, and 120,000 tpy of pre-painted galvanized steel (according to South East Asia Iron and Steel Institute SEAISI). CSC Steel is a registered member of Malaysian Iron and Steel Industry Federation (MISIF). With 180 employees (Source: MISIF website) it is exporting products to more than fifteen countries some of them are USA, Canada, Italy, West Germany, England, Brazil, Mexico, Saudi Arabia, UAE, Kuwait, China, Australia, new Zealand, Bangladesh, Taiwan, Thailand, Vietnam, Philippines, Indonesia etc. Along with heavy production and being market leader in cut throat competition CSC is also actively involved in CSR activities. They understand their social responsibility and continuously come up with various initiatives and investments in CSR activities. In this research paper I will try to cover the business or market strategy of the CSC Steel Malaysia. It will also consist of financial statement analysis, its growth strategies, opportunities and threats faced by the company in the Malaysian steel industry why would one buy CSC steel shares etc.

Vision and Mission Statements


Vision:
To be a trustworthy and one of the best flat steel manufacturers in South East Asia

Mission:
In order to achieve this vision, the Group strives to achieve the following mission objectives: To continuously improve quality and productivity To constantly develop high value-added products and environmental-friendly products To continually pursue excellence in quality and service exceeding customers expectation To fulfill commitments to corporate social responsibility

Analysis of Vision & Mission Statements


Vision and Mission statements are declared to fulfill two distinct purposes as discussed below. A mission is designed to define the companys purpose and primary objective. It is for internal employees of company for measures of company success and other audience is customers and stakeholders. A vision statement depicts companys core values which motivate employees to achieve their and companys goals. If a company attains its mission statements it must assure that they result in achieving vision statement. Although the mission and vision statements are very inspiring for the internal employees of the company but there are few improvement area in it.

CSC mission statements are covering following Quality Productivity

CSC Missio n

CSR

Environment Protection

Maintaining Quality will ensure the loyalty of the customers and definitely along with increasing productivity it emphasizes that marketing and sales team have to work hard and actively to look continuously for new markets to explore. Every company has a inherent responsibility to protect environment. It is a saying that you should take only that much from nature as you need and return it back too. CSC follows this and continuously encourages and makes aware their employees to protect environment. CSC has always helps underprivileged. They are active in corporate social responsibilities. What ever they are earning from people some part of it is returned back for societies welfare. These four are the core principles of the CSC Steel, which not only helps them to rapidly grow in the steel industry but also gain customer and peoples favor. Now after understanding the mission statements of CSC if we look at the Vision of the company which is clearly divided into two parts Trustworthiness One of the best flat steel manufacturers in South East Asia

By fulfilling their missions of maintaining and improving quality, productivity and constantly supporting environment and society definitely CSC will achieve in trustworthiness of the customers and society. For stakeholders vision of the CSC indicates that their money is invested in a company which is continuously involved in gaining customer trustworthiness and always working in increasing productivity to become steel sector industry leader in South East Asia. This vision statement always reminds and motivates its employees for actively involve and perform their task to attain company objectives. One more addition that I think should be added in the vision statement is something for their employees as a company is also responsible for supporting its employees for its growth. Try and align company and employee goals which are a motivating factor for employees. Vision and mission statements are not only for its customers and stake holders but it is also a motivating factor for its existing employees and also for employees which are intended to join the organization so these statements must contain clause for symbiotic growth of both company and employee. Now let us look at the strategic factors adopted by CSC to compete with other competitors.

What are the strategic factors facing the CSC


CSC Steel Holdings is a group company of CSC china. To become Malaysias own company and In order to simplify the marketing activities, effective from 1 January 2009, CSC Steel Sdn. Bhd. merged and acquired Group Steel Corporation, and actively promote the Groups core products, which are pickled & oiled steel coils (PNO), cold rolled steel coils (CRC), galvanized steel coils (GI) and pre-painted galvanized steel coils (PPGI). To promote them self they started and first step was taken by them by unveling their new logo as cited in Business Times Published: 2008/09/11.

Corporate facelift for CSC Steel CSC Steel, a unit of China Steel Corp and listed on Bursa Malaysia main board since 2004, has unveiled a new logo to refresh its brand CSC Steel Holdings Bhd, formerly known as Ornasteel Holdings Bhd, has unveiled its new corporate identity to refresh its image and brand name. "Our new logo is a combination of a "smiling M" in the centre of the CSC Group logo. This means, China Steel Corp is always keeping Malaysia in mind, and Malaysia responds with sincere smile, that brings harmony and happiness to all parties," said CSC Steel group managing director Su Wei-Jin in Petaling Jaya on Tuesday. CSC Steel, which was listed on the main board of Bursa Malaysia in 2004, is a 51 per cent subsidiary of China Steel Corp. The launch was officiated at by International Trade and Industry Deputy Minister Datuk Jacob Dungau Sagan. During the launch, the deputy minister said the government is reviewing the current policy on iron and steel industry, so that it can support the country's commitments towards free trade area agreements. He said the government is also considering proposals from the industry. This includes imposing Mandatory Malaysian Standards so that the quality of imported billets and steel bars are up to par. "Steel products which have no Malaysian Mandatory Standards will now have to consider adopting international standards to be made mandatory by the government," Jacob said. The production of iron and steel products increased seven per cent to 11.3 million tones. Export of iron and steel products rose 12.4 per cent to RM10.5 billion.

These are the citing of CSC in The Edge on Saturday, 06 February 2010 KUALA LUMPUR: Investors are expected to stay cautious in the new week starting Feb 8 after the sharp fall over the week, spurred by worries about fiscal problems in Europe and the continued move by China to curb liquidity in the market. On Wall Street, US stocks ended slightly higher on Friday on some mild bargain hunting after a volatile week. The Dow Jones industrial average closed up 0.10% at 10,012.23, the Standard & Poor's 500 Index ended up 0.29% at 1,066.19 and the Nasdaq Composite Index gained 0.74% to close at 2,141.12. At Bursa Malaysia, stocks to watch this week include Scomi Marine Bhd, Latexx Partners Bhd, Proton Holdings Bhd, CSC Steel Bhd and Gula Perak Bhd. CSC Steel posted 4Q net profit of RM37.11 million versus net loss of RM 42.08 million a year ago. RHB Research Institute, which had issued a report ahead of CSC's earnings, had earlier upgraded its earnings forecasts while its indicative fair value was raised by 23.1% from RM1.64 to RM2.02 based on 9.0 times revised FY12/10 EPS of 22.4 sen. CSC Steel is in production of rolled steel sheets of hot rolled pickled & oiled steel , cold rolled steel, hot-dipped galvanized steel and pre-painted galvanized steel. They supply these to other production factories.

CSCs competitive market position within Steel Industry


Below are the few companies which are competitors of CSC Steel in Malaysian Steel industry All figures RM000 of 2008 Company CSC Steel Amalgamated Industrial Steel bhd Revenue 1167,768 168,637 PAT 100,855 9,915 Total Assets 786,558 179,149 Share Holders Equity 692,933 99,610

Leader Steel Holdings 231,610 bhd Malaysia Steel Works 881,224 (KL) bhd Mycron Steel bhd Southern Steel bhd WZ Steel bhd 406,100 3222,000 93,239

58,400 79,301 30,300 105,000 8,272

139,587 735,030 526,500 1877,000 54,612

8 8,953 430,820 179,000 759,000 50,000

The revenue wise share of CSC steel among the other above competitors is as shown below

Revenue

CSC Steel Amalgamated Industrial Steel bhd Leader Steel Holdings bhd Malaysia Steel Works (KL) bhd Mycron Steel bhd Southern Steel bhd WZ Steel bhd

The Total Asset wise share of CSC steel among the other above competitors is as shown below

Total Assets

1% 45%

18% 4% 3%

CSC Steel Amalgamated Industrial Steel bhd Leader Steel Holdings bhd Malaysia Steel Works (KL) bhd Mycron Steel bhd 17% Southern Steel bhd WZ Steel bhd

12%

The Share Holders Equity wise share of CSC steel among the other above competitors is as shown below
Share Holders Equity

CSC Steel Amalgamated Industrial Steel bhd Leader Steel Holdings bhd Malaysia Steel Works (KL) bhd Mycron Steel bhd Southern Steel bhd WZ Steel bhd

The above three pie-charts depict that within the mentioned companies in the steel industry of the Malaysia CSC Steel Holdings is among the leaders. Although the competition is becoming intense, government rules and regulations are becoming intense but because of their own corporate strategies, environment friendly operations and continuous efforts in branding and marketing strategies by the company have always helped them achieve more market share and continuous growth. They also have advantage of China Steel Corporation (CSC) group as the brand name caries and also the logo changing and other competitor acquisition have helped CSC Steel Holding to increase their market share.

Michael Porters Five Force Analysis for CSC Steel Holdings


The below given figure shows the five force model given by Michael Porter. This model helps companies to understand where their power lies what are their strong points and what are their threats.

Supplier Power: Any company requires five Ms Man, Material, Money, Machine and Method. All of these five or some of them could be supplied by others. Suppliers price can affect the very our own companys prices and costs incurred in productions. Suppliers have a significant power in their hands of even affecting your market share. So the suppliers have bargaining power, following are the reasons which gives the supplier a bargaining power.

The required inputs or raw material required are supplied by very few suppliers. This definitely gives the supplier bargaining power over the company. They can easily demand for higher prices which could force the company to raise their prices and could easily affect their market share.

The inputs required are unique and which gives the supplier a power to bargain for higher power. The company could not shift to other supplier because of the uniqueness of the raw materials supplied by their supplier.

Companys purchases from the supplier are not making a significant amount of the supplier business. It means supplier is not at all dependent on their customers which mean they are not much concerned with the smaller revenue dependency on the company. So they could bargain for higher price or they will transfer to others.

Some times supplier have access to companys own customers and they could target the end customers by themselves. This will not only be affecting the companys customer base but also impact on their prices as the supplier is no more there for supplying raw material.

If it is difficult for the company to switch to another supplier like if the company has recently invested a huge sum on inventory management system and then it will not be possible for the company to switch to another supplier.

Company does not have full understanding of the supplier business so when negotiations are required the company could not properly negotiate with the suppliers.

When we look at the specific CSC Steel Holdings they do not have exploration business so are dependent on their suppliers for iron ore. But because of other factors like they could switch to other suppliers if the need arises as the raw material supplied by supplier are also facing similar competition. Below are some news paper citing where we can see that how CSC is extending their business and are also looking for backward integration and also for forward integration which will expand their business by leaps and bounds and give a strong holding in the market.

Below is the article cited at HKTDC on 18 Dec 2009 titled as China Steel Corp to invest in Brazilian iron ore project where CSC is looking for investing in Brazilian iron ore company for their backward bending strategy. China Steel Corp, the biggest steel producer in Taiwan, announced that it will acquire a 1% stake in an iron ore project in Brazil for NT$3 billion, sources said. Chung Lo-min, executive vice president of CSC, said that the firm will purchase the stake in Namisa S.A. from Japan's Sumitomo Metal Industries Ltd and Itochu Corp. Reportedly, the iron ore project is estimated to have a proven reserve of 1.4 billion metric tons. Brazil's Companhia Siderurgica Nacional owns a 60% of Namisa, and other stakeholders include Nippon Steel Corp, JFE Steel Corp, Kobe Steel Ltd, Nisshin Steel Corp from Japan and Korea's POSCO. CSC needs about 160 million metric tons of iron ores per year. With the operation of a blast furnace at its wholly owned subsidiary Dragon Steel Corp in Taichung, it will need another 3 million tons, said Chung. Another citing at http://paguntaka.org dated February 13th, 2009 titled as China Steel Company Leadership To Prepare Talks Contract Iron Ore Prices where CSC is negotiating for iron ore prices with there suppliers. China steel company leadership prepared to have a meeting with the mining companys largest iron ore supplier to determine the contract price of iron ore in 2010. Discussion planned in April 2010. However, from both sides producers of iron ore and steel companies have delivered their desire for change in contract iron ore prices. Iron ore mining company wants iron ore prices rose 40%, while Chinas steel companies do not want an increase in excess of 30%. China steel company wants iron ore price increases ranged from 20% to 30%.

Trade analysts mining of raw materials said, each party has the power to defend their desires. Chinas steel producers see an increase in demand for iron ore by steel plant in China will open opportunities for other iron ore producers to supply iron ore in China. Events in 2009, China canceled the contract of iron ore with Rio Tinto to pay compensation $ 9 billion. China has conducted a search of preparation of iron ore supplier to China. But BHP Billiton has a different belief, that this mining company will maintain sales prices of iron ore iron ore prices in the spot market, because the development of iron ore spot prices higher than the contract price of iron ore. The below graph from depicts how the prices for raw material for the steel industry has been in the past. In the graph we can see how the iron ore prices has picked up in 2007 to 2008 but because of the sudden crash in the demand caused by crash in the market the prices have drastically fallen from 2008 to 2009. The sudden fall is because the world was facing a recession originated from USA which spread across the world and no country was untouched by this recession of our times. Again now some of the growing countries are coming out of recession countries like China, India and Malaysia etc are gradually coming out of recession phase and becoming demand centers of the world which is again driving the global steel demand and intern raising the prices in iron ore industry also. To counter or reduce the buyer influence on a company the company should focus on following things Reduce inventory cost, try to implement just in time facilities. Automating the whole procurement process may be by implementing ERP solution a company could achieve this. Speed up the adoption of new technology, invest in R&D and always focus also in backward as well as forward integration.

Buyer Power: This is a power where every industry is dependent on it. It is the degree to which buyers of your product could influence the prices and ultimately the profit margins of the company. If the numbers of buyer are too small in size then definitely they have negotiating and influencing power. But if the numbers of buyers are too large in size then even if a group of buyers are capable of influencing the prices but still there the company will not be dependent on that small size. In case of CSC Steel holdings they are into business to business model in Malaysia and their customers are not the end user but the other steel goods producing companies. So they are very few in numbers which gives them barraging and negotiating power. Factors which affect this porters force are as under Your company have few but large customer and there are many supplier of the similar products that you are supplying this will give buyers a significant amount of bargaining power which the company will not be able to negotiate and finally they might will have to reduce prices and affect their profit margins. The products supplied by your company reflect relatively very large expense for your customers and this is true in CSC Steel holdings case. The steel supplier by them to their customers will be a huge expense for their customers and this might force customers to negotiate for prices or switch to other providers. Customers are very much aware of the market condition and are always equipped with the best deals that they could have from various other vendors. Which is very much likely in CSC Steel holdings as their customers are other companies which are very much agile and nimble always updated with the market and other supplier options. So to counter this CSC must be aware of their other competitors and they also must invest in branding and try to deliver best possible values to their customers and customer also must be made to perceive that they are getting the best possible deal for their raw materials. Product supplied by the company is not unique and could be very easily supplied by any other competitor. This is again where CSC have to make the perceived value of their product to best available in the market.

Customers could make your product by them self give customers always an option to switch to this option. It means your business is vulnerable and entry for new entrants is easy. CSC Steel holding does not face this problem as the entry into making the products supplied by them is not easy and requires government approvals, huge investments and the break even is also not close enough to be digested by small investors.

Customer could easily switch to other substitutes like say aluminum. We can see in the market that there are many products which were initially made up of steel are now switching to aluminum. So CSC Steel Holdings do have this problem.

If we look at the revenue trend of CSC Steel Holdings and the demand trend of steel industry of Malaysia we can say that till now CSC Steel Holdings is going perfectly fine. If the trend of the company matches with the trend of the industry demand then its doing well.

Revenue of CSC Steel Holdings


1400 1200 1000 800 600 400 200 0 2005 2006 2007 2008 2009

Competitive Rivalry: Although the competition is the foundation for free enterprise system and good healthy business environment. But for individual companies it is a problem which they have to constantly be aware of and agile enough to counter competitors strategies. Rivalry among competitors is often the strongest of the five competitive forces, but can vary widely among industries. If the competitive force is weak, companies may be able to raise prices, provide fewer products for the price, and earn more profits. If competition is intense, it may be necessary to enhance product offerings to keep customers, and prices may fall below break-even levels. Factor which makes companies profits vulnerable because of competitive rivalry are as below When economies of scale for production is very much effective for the company in that case the competitors and company may itself be tempted to produce large quantities and make profits from economies of scale this will intense the competition more and competitive rivalry will increase then it will demand for higher investments in marketing and branding for the company. This is holding true for CSC Steel Holdings where competition is intense and companies earn profits by economies of scale operations only. Products are perishable and there is a pressure of selling them even at lower prices which will push the companies to go for too lower prices which adds to

competitive rivalry. CSC does not face this problem as the products are not perishable. Customer loyalty for companys products is very important for competitive market as the customer may switch to other providers any time they want. CSC Steel Holdings invest huge amounts in marketing and for customer loyalty. Threat of Substitution: Steel industry particularly has been facing this problem of substitute which is aluminum for steel in many sectors especially in construction industry. If there are easily available low priced substitutes of a companys product then that company is naturally facing a big problem of loosing market share. The factors which affect the treat of substitute are as under Product of your company does not have any differential advantage over the other substitute products or the products provided by other competitors then it becomes a threat for the company to loose market share. This could be overcome by branding your products, by increasing customer loyalty; perceived value delivered by your product must be higher than compared to others. CSC Steel Holding after entering in Malaysia they have invested significant amount for their branding as Malaysian company which has given them loyal customers. Customers loyalty and switching nature are again the two more reasons for this threat. To reduce the threat of Substitution Company must add differential advantage to their products and focus on branding. CSC does a unique technique to target end user of steel products and they are investing the end user branding also. Threat of New Entry: This is the measure of degree how easy it for business to enter into your market. Steel market of a country is some what protected market from the governments as it is one of the core industries for Malaysia after tourism. But new entry in the market is not easy for an investor. Secondly it requires very big investor for this industry as the initial investment is very high and break even point is too long some time even more than five years. So the investors have to be patient and invest huge amount in marketing and branding to capture market. Already existing companies have first mover

advantage too. To reduce the treat of new entrants a company should protect their man, method, machine and technology.

SWOT Analysis of CSC Steel Holdings


Strengths Low cost and efficient labor force availability in the Malaysia is one of the strengths of the steel industry for global competition. Although the company is comparatively new in Malaysia but they have created a sizable market base and reputation in steel industry by investing huge amounts in corporate social responsibility activities and branding activities. Strong managerial capability of CSC Steel Holdings is also an strength of the company in an intense competitive market of steel industry of Malaysia. The production of steel companies in Malaysia a large portion of it is exported. In case of CSC they have strong point of being associated with China Steel Corporation group one of the leaders in the manufacturing capacity. The group directors visionary thoughts is taking the company into leaps and bounds of growth. Strongly globalized industry and emerging global competitiveness in the Malaysian steel industry sector is also strength for the company as it gives them access to new technologies and competition always helps companies to improve their own capabilities. Modern new plants & modernized old plants of CSC Steel Holdings is always an strength for the company. Backward integration policy strategy of the company is also and strength for the company. Weakness High cost of energy consumption is a weakness for steel companies. CSC need to invest huge funds in R&D to improve their production technology and reduce energy consumption at production. Higher duties and taxes is something which every company is facing.

To utilize the profits of economies of scale operations the company needs to invest on infrastructure expansion of the production and inventory management. Dependency on various suppliers for their raw material requirements is making their profit margins vulnerable to supplier bargain powers. CSC Steel Holdings is investing heavily on backward integration. As we have seen in the above couple of news articles that CSC is facing supplier bargaining power problems and are also thinking of investing iron ore mining companies.

Dependence on imports for steel manufacturing equipments & technology is also one of the weaknesses of the company.

Opportunities Some of the opportunities for all the steel companies in Malaysia are as under Huge Infrastructure demand in the country is a big boost and a great opportunity for the steel companies. Rapid urbanization of one of the most developing nations in the southern Asia is also a big opportunity for steel industry. According to the reports of international steel communities developing nations are the biggest demand centers of steel. Increasing demand for consumer durables in Malaysia as shown in above figures by MISIF is proof of the rising demand of steel products in consumer durables is an opportunity which the CSC Steel Holding should look to tap. Untapped rural demand is one area which many company are reluctant to go into. CSC steel holding should try to take hold of that market. Increasing interest of foreign steel producers in Malaysia is in one perspective a threat but if the company access it properly it will be an opportunity for the company as it shows the rising demand in the country and CSC having first mover advantage can tap this opportunity. Threats Slow growth in infrastructure development become hindrance and threat for the steel industry

Global economic slow down initiated from USA has impacted every corner of the world and every sector was adversely impacted by this recession. Environmental concerns by social communities and governments have always been a threat for any steel company and it is for CSC Steel Holdings too. This could be divided into three parts as below Climate Change: Climate change caused because of carbon dioxide emissions is a big problem for steel industry. Management of the total life cycle of steel Threat of loosing environmental reputation

CSC Steel Holdings has always been cautious for their corporate social responsibilities and environmental responsibilities. Their target to plant ten million trees in coming ten years is one example of their environmental concern.

CSC leaders philosophy and its impact upon corporate culture and daily company activities
CSC leadership strongly believes in creating a culture which is for the benefit of its worker. CSC initiated a number of programs like Environment, Safety and Health Competition (ESH) in order to provide safety to its employee. Environment, Safety and Health Competition is organized every half-yearly, with the objective to promote a safe and healthy working environment among employees of CSC. This competition will be focusing on 5S management, facilities and equipments safety, recycle practices and other environment, safety and health selected matters. A group of judge will be invited to perform evaluation on participated departments/sections, and determine the 3 best winners. As an encouragement and recognition, cash reward will be allocated to winners. It is believed that such promotion program will not just improving working environment, but at the same time, enhancing awareness, alertness and working effectiveness among employees, hence contributing positive impact to business and reputation of CSCM. Another such program which was initiated by CSC were Energy saving and Environment policy which includes continues improve the operational techniques and environmental

management system, managing operational equipment and industrial wastes effectively, ensure complying with all applicable laws and regulations and most important promoting the involvement of the employee. Strategies of CSC steel For CSC steel supply and demand is quite healthy. The market is much better than a year ago, when it was at its worst. As the steel prices will probably climb higher because mills need to cover costs, therefore CSC would raise prices for domestic customers by 2.9% price in April 2010. But CSC steel hasn't reached agreements with suppliers. The miners are still trying to boost prices. The market analyst expected CSC's February shipping quantity will was about 600,000 to 700,000 tonnes, which is about 20% less than in January 2010. CSC expected its shipment to reach 2.5 million tonnes in the first quarter. Recently CSC raised the wholesale prices for its steel products to be shipped in April and May by 2.9% or TWD 612 per tonne. The company will see an addition of TWD 900 million in sales in both April and May 2010. CSC noted domestic demand for steel products has recovered, reflecting the projection made by the Cabinet level Directorate General of Budget, Accounting and Statistics that Taiwan's economic growth will reach 4.72% this year. In addition, the International Monetary Fund has recently raised worldwide economic growth projections to 3.9%, indicating the speed of the economic recovery is stronger than market expectations. Such emerging nations as those of the Association of Southeast Asian Nations will restore a 4.7% annual growth in overall economy this year. According to statistics compiled by the market analyst Worldsteel, the worldwide consumption of steel products will increase by 9.2% to reach 1.206 billion tonnes, almost hitting the highest record in history. Furthermore, the price hike in such materials as coal and iron will help push up the prices for steel products. An institutional investor believed CSC will see its monthly earnings reach between TWD 4 billion and TWD 4.5 billion in the first half of this year. As a result, the company is expected to cash in a total of TWD 25 billion in the first half of this year.

CSC has recently started operating its Dragon Steel Corporation unit on February 26th 2010, increasing capacity by 25% to meet rising domestic demand. The first products from the furnace, which is expected to have an annual 2.5 million tonne capacity, were February 28th 2010. An economic ministry report showed on January 25th 2010 that Production from Taiwan's basic metal industry surged 57% in December 2009 from a year earlier as public works projects and expansion by technology companies bolstered demand for steel. Since the market is improving, the Dragon Steel plant in western Taiwan will make up the shortfall caused by the stoppage of China Steel's No 1 furnace, shut last month for regular repairs. This No 1 furnace, which has an annual capacity of 1.9 million tonnes, will be restarted in July 2010. Supply and demand in Taiwan will become balanced as the Dragon Steel furnace starts production. With Dragon Steel, CSC will have 5 furnaces with a combined capacity of 12.5 million tonnes a year. Dragon Steel is building a second furnace, slated to start production in 2013. That furnace will also have an annual capacity of 2.5 million tonnes. Earlier CSC steel was planning to buy stake in Salzgitter AG Germanys second largest steelmaker, but later company had take its decision back , because of high labor and other costs in the European country. How the company sustaining its growth strategies Every company is after sustainability, of course, because every company wants to achieve profitable growth over the long term. Recent research from Economist Intelligence Unit found, for example, that about two-thirds of the senior executives surveyed expect growth initiatives to take a more prominent place on their companys strategic agenda. But until now, the desire to perform at high levels into the future has not been accompanied by strategies and operating models that enable those companies to accurately determine how much of their market value is represented by investors confidence in their long-term outlook. Many companies are constrained by an inability to

achieve long-term growth through innovation. Their competitive advantage, if they have one, cannot readily be sustained because it is built only on their current enterprise, with insufficient attention paid to the innovations necessary to drive future growth and create future value. CSC steel is already executing a million tonne expansion which would, in a year-and-ahalf. Currently CSC is focusing on the back of improved product mix, improved volumes and better price realization. As part of its growth strategy for the current year, the steel major also has projections to substantially increase its share of the cold rolled products market (direct sales to automobile original equipment manufacturers). CSC steel leadership believe in employee safety and security as a key factor for the success of the company. In pursuing continual improvement on safety and health management, the Group through its Safety and Health committee which is chaired by the Vice President of production division has set target, implemented and maintained a sound management system for providing a safe and comfortable working environment to its employees. It is supported by a set of clear safety standards and a performance monitoring system that aims to reduce accident levels year-on-year. Besides, the Group is regularly working with its employees, government agencies, suppliers and sub-contractors in promoting the safety and health awareness and, the Group believes, a truly safe working environment could only be achieved through everyone's will and in return, everyone could jointly enjoy the Group's advancement.

Analysis of the performance of stock of the company


CSC steel has shown promising improvement in its stock performance in the last few years. We have seen in the recent time how CSC steel is coping with the economic crisis. The impacts of the crisis on the stock value of CSC steel are reflected in the weakening domestic demand for steel especially high value added steel products for the automotive, ship building, machinery, container and home appliance industries as well as the significant declines in steel exports. Here we done the analysis of the stock performance of CSC steel which is supported by the reports generated by InsiderAsia, RHB Research Institute, OSK Research Firm.

CSC steel stock prices have shown consistent performance in the second quarter of 2009. This trend remains the same in the third quarter with stronger prices and volume demand. The earning per share of CSC steel has dipped from 15.7 in 2008 to 10.6 in 2009. Although the price earning ratio has increased from 6.5 in 2008 to 9.6 in 2 Key stock
Statistics

2008 2009E EPS (sen) 15.7 10.6 P/E (x) 6.5 9.6 Net DPS (sen) 8.5 5.3 NTA/share (RM) 1.86 1.92 Issued capital (mil) 373.2 52-week price range (RM) 0.70-1.40

Share Price performance chart from Jan 2008 to Aug 2009

CSC Steels earnings results for 2QFYDec2009 were in line with our expectations. Positively, volume sales showed encouraging pick up, which helped offset the price decline. We believe demand was boosted, at least in part, by restocking activities after user-companies had run down on inventory for the better part of 4Q08-1Q09.

Hence, I can say CSC has shown stronger revenue and profits in 3Q09, compared to 2Q09, on the back of higher volume sales and selling prices. The price for cold-rolled coils has risen above US$600 per tonne in Aug 2009, compared to below US$500 per tonne in April 2009. In the first half of year 2009 the net profit of CSC came according to the expectation of the stockholder. On year on year comparison in the first half financial year the profit declined by 79.4% to RM15.1m due to a sharp drop in both demand and average selling prices of flat steel products since Aug 08. In quarter on quarter comparison despite a 6.7% drop in revenue, second quarter of financial year net profit rose by 65.2% to RM9.4m mainly due to two main factors. Firstly, the margin expansion on the back of lower raw material cost and better economies of scale (arising from higher utilization rate) and secondly, the recovery of doubtful debts of RM2.4m. Most importantly when I analyze the future prospects of the company I believe that
CSC Steels

performance is likely to remain strong over the next few quarters, underpinned by favorable flat steel products near-term price outlook. Several key steel producers, including Baosteel and Wuhan Iron and Steel (WISCO), announced hikes in steel prices for 2009 delivery. The favorable near-term price outlook will in turn boost inventory replenishing activities, as stockiest tend to replenish more aggressively when prices are expected to trend up.
Indicative fair value is RM1.14

based on 7x FY12/10 EPS of 16.3 sen, at 30% discount to our 1-year forward target PER of the long steel product players of 10x to reflect the comparatively less robust prospects of the domestic flat steel product sector. This is mainly because the competitiveness of Malaysian flat steel producers in the international market is weaker; moreover the Chinese steel producers on the back of export rebates given by the Chinese government.

Steel prices too have recovered from the lows registered this year, in April 2009. Sharp production cutbacks by the big steel millers have kept a tight rein on global stockpiles, which has helped support higher prices. Prices are also being supported by pricier raw materials. The cost of raw materials has been creeping higher with growing evidence that the global economic recession is abating.

If I review the stock performance of CSC during third quarter I can see that CSC steel has made a comeback in this quarter. Considering that the companys strong balance sheet is not captured in PER valuation, adding our projected net cash position for FY10 to our 6x FY10 EPS valuation, which translates into a higher 12-month target price of RM1.68. Nevertheless, the bumpy

recovery and uncertain 4Q prompt us to only upgrade CSC Steel to a Trading BUY. While stockholders are excited over the firmer price trend of the flat steel products (domestic), the sharp pullback in Chinas local steel prices since August 2009 had to certain extent shaken market sentiment. Although the official HRC price for November 2009 delivery by Megasteel SB remains flattish m-o-m at RM2, 650 per tone, our market sources suggest that larger discounts are being offered by suppliers. Meanwhile, while December prices remain unknown, I believe this will depend on the pace of recovery in steel prices in Malaysia. We have witnessed a rebound in Steel industry but are uncertain over its sustainability. Hence we are conservatively projecting a q-o-q profit contraction entering into second quarter of 2010. Keeping all the above mentioned points and the potential of the CSC steel, I strongly recommend buying the stocks of this company.

Conclusion
From the above research I would like to conclude that CSC Steel Holding BHD has gained a strategic good position in the steel industry of Malaysia. The companys growth for the past couple of years and recovery after the recession phase in the last four quarters of 2009 company has shown great promises of growth. As per the SWOT analysis of the company it does have dependency on suppliers and also on their customers. They need to invest huge amounts in branding and marketing activities to retain and acquire loyal customers. For tackling the threats and weakness of the CSC Steel holdings I would suggest to increase investment in branding activities and corporate social responsibilities especially environmental responsibilities and they should focus on backward integration for their raw material requirements.

Environmental responsibilities are a big concern and a heated topic of discussion for every company and government across the globe. Company need to focus in this and make investments like they have made for tree plantation. Regarding the stock buying option of the company according to the analysis presented above of multiple equity analysis companies and the analysis of the financial statements of the company and their potential which was proved in all the four quarter of 2009 I would suggest to buy the shares of the company for a long duration and in and around the price of RM 1.5. In long run this company is going to grow and fetch good rewards and income,

References
Overview of the business situation operation report 2006 at Asian Steel Company Ltd website referred http://www.asiansteel.com.sg CSC Steel Holdings BHD, for three quarter results of 2009 and yearly financial consolidated result of 2008, website referred http://www.cscmalaysia.com/index.asp World economy of steel reports, Report of Malaysian Economy and World Economy reports, website referred http://www.economywatch.com/world-industries/steel-industry/ Malaysian Iron & Steel Industry Federation (MISIF) official website

http://www.misif.org.my/index.php?navi_id=29 CSC 2010. Steel Holdings company profile report at website

http://goliath.ecnext.com/coms2/product-compint-0000941769-page.html dated 19th Jan

Report of Company Profile For CSC Steel Holdings Berhad dated 12th March 2010 at news site http://in.reuters.com/money/quotes/companyProfile?symbol=CSTH.KL News Article at http://paguntaka.org dated February 13th, 2009 titled as China Steel Company Leadership To Prepare Talks Contract Iron Ore Prices News Article at HKTDC on 18 Dec 2009 titled as China Steel Corp to invest in Brazilian iron ore project Marketing Management Book Chapter two, Developing Marketing Strategies and Plans, by Philip Kotler, Kevin Lane Keller, Abraham Koshy and Mithileshwar Jha; thirteenth edition. Michael Porters Five Force model at article Industry Analysis: The Five Forces by Cole Ehmke, Joan Fulton, and Jay Akridge; Kathleen Erickson; Sally Linton Published by Purdue University Extension EC-722 AICC report. Malaysia's Steel Industry Report at Icapital education website:

http://www.icapitaleducation.biz/index.php?section=5&sub=3 Sectoral Performance, Economic Performance and Prospects and Private Sector Performance Reports at website http://www.treasury.gov.my Equity Research reports in Insider Asia by Asia Analytica published 18 August, 2009; 16 Nov, 2009; 8 Feb, 2010. Corporate Highlights Report by RHB Research, Institute Sdn Bhd, A member of the RHB Banking Group dated 18 August, 2009. South East Asian Iron and Steel Institute (SEAISI) newsletter, dated march, 2009.

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