PETALING JAYA: The recovery in steel prices is expected to help Hiap Teck Venture Bhd record better financial results for the second half of its financial year ending July 31, 2023 (2H23).
The steel producer returned to the black with a core net profit of RM15.6mil for the second quarter (2Q23) versus a net loss of RM23.5mil in 1Q23, which took its core net loss for the six months ended Jan 31, 2023, (1H23) to RM7.9mil.
The improved 2Q23 numbers were primarily due to a strong recovery at Hiap Teck’s 27.3%-owned associate Eastern Steel Sdn Bhd (ESSB), according to Hong Leong Investment Bank (HLIB) Research, adding that the results could have been even better if not for the seasonal weaker sales volume and average selling prices.
“We consider Hiap Teck’s results within our expectations, as we anticipate performance recovery to pick up momentum in 2H23 on the back of the recent recovery in steel prices,” it said in a report yesterday.
The research house noted Hiap Teck’s core net loss of RM7.9mil for 1H23 was arrived at after adjusting for a RM14.8mil reversal of inventory write-down, RM1.3mil in unrealised foreign-exchange losses and a RM3.3mil gain on disposal.
The research house is optimistic about Hiap Teck’s prospects on the back of a recovery in steel prices and an anticipated improvement in steel demand.
It added that despite challenges and heightened volatility in steel prices and financial markets, Hiap Teck’s management remains cautiously optimistic for the coming quarter.
Pending updates from the company’s management, HLIB Research has maintained its “buy” call on Hiap Teck with an unchanged target price of 38 sen a share.
The valuation is based on an unchanged seven times calendar year 2023 core earnings per share of 5.4 sen.
“We continue to like Hiap Teck for its healthy balance sheet and multi-year growth potential in ESSB’s earnings, supported by its continuous efforts in enhancing cost efficiencies and major capacity expansion,” HLIB Research explained further.
Meanwhile, in a statement following its latest financial results, Hiap Teck said it will remain vigilant of the challenges and heightened volatility in steel prices and financial markets.
The group said it will continue to adopt prudent procurement strategies and inventory management to optimise financial performance and preserve balance sheet strength.
“With the recent recovery in steel prices and expected improvement in demand, management is cautiously optimistic on the group’s performance in the coming quarter,” it said.