CSC Steel - Benjamin Graham Would Love This Stock

CSC Steel Holdings Berhad is one of the more prominent cold-rolled steel producers in Malaysia. The company is majority-owned by China Steel Corporation (CSC) of Taiwan, and several members of its senior management team are seconded from the parent company. Its principal raw material - hot-rolled steel coils - is primarily sourced from the parent group ensuring supply chain stability.

While the steel industry is inherently cyclical, CSC Steel has demonstrated resilience across market cycles, having remained profitable in nearly every year over the past two decades. The sole exception was in 2014, when the company incurred a loss due to a combination of global oversupply, aggressive low-cost imports, and a sharp decline in steel prices.

The most recent industry bottom occurred in 2020, following the peak in 2022. At present, the market appears to be in the downward leg of the cycle. Despite this, CSC Steel managed to remain profitable throughout the 2019–2024 period, although 2021 was an outlier year in which the company did not generate positive operating cash flow.

Over this five-year span, the company achieved a Return on Equity (ROE) ranging from 1.7% to 9.9%, with an average of approximately 5% -ma modest but consistent performance.

What stands out about CSC Steel is its valuation. The current share price of RM 1.18 trades significantly below its Graham Net-Net value of RM 2.00, a conservative estimate often used as a proxy for liquidation value. Given its clean balance sheet, consistent profitability, and strong backing from CSC Taiwan, CSC Steel does not exhibit any signs of financial distress.

This combination of subdued business performance and low investment risk places CSC Steel on the borderline between the “Goldmine” and “Turnaround” quadrants of the Fundamental Mapper - an apt reflection of its value-oriented appeal.