Ssteel Q1FY18 EPS forecast
Assumption:
a.All Raw material were imported and in USD settlement
b.First In, First Out type of asset-management and valuation method.
c.All Raw Material and Scrap iron secured in Q4FY17 to be used in Q1FY18.
d.Imported scrap iron price, Rear Average Selling Price of Rebar are referred to Malaysia Government Official Website. Mean Value to be considered.
e.Number of Additional of Loan stock conversion (date: 6th September)
f.Tax issue
1.To find out Fixed Cost on top of Imported Scrap Iron Price (Based on Q3 QR)
Q3FY17 (Jan - March 2017) Average Scrap Iron Imported=RM1362/T
Q4FY17 (April- June 2017) Average Selling Price=RM1909/T
From Ssteel latest Q4FY17 financial report, company had delivered below expectation result of the LBT (Loss before Tax) of -8 million.
We can presume the cost of ssteel including operating expenses, admin costs, finance costs, tax and etc to be exactly at RM1909/T (Q4FY17 Average Selling Price)+ additional RM25/T of steel to compensate 8 million tax rebate.
As such, fixed cost per tonne of steel was RM1909+RM25-RM1362=RM572
2.To find out Q1FY18 Profit
Q4FY17 (April-June 2017) Average Scrap Iron Imported=RM1176/T
Q1FY18 (July- September 2017)Average Selling Price=RM2240/T, Assuming Rebar continue trading at the price of RM2500.
In fact,on 6th September 2017,price of certain rebar size is start from RM2600. Give RM100 discount to compensate in case any price drops in remaining September
Assume bring over fixed cost of RM572 to Q1FY18 + Increase price of graphite electrode of RM25/kg.
Profit for every tonne of Rebar during Q1FY18 =RM2240-RM1176-RM572-RM25=RM 467/T
Annual Ssteel Billet Capacity= 1.5 million Tonnes
Quarter Capacity to be at, 375000 Tonnes
Q1FY18 Profit to be at 375000 x RM 467= RM 175125000 or RM 175.1 million
EPS Q1FY2018=175125000/430934800=RM 0.406
Accumulating EPS=0.406+0.013+0.0754+0.0867=RM 0.58
Current Price Rm2.07, CU PE= 3.56
Ssteel is on the way marching to its 2008 glory day (Single Quarter earning of RM 0.48), History will Repeat itself.
http://www.bursamalaysia.com/market/listed-companies/company-announcements/4043085
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ReplyDeleteWell structured & great analysis, thank you for sharing
ReplyDeleteThanks for your analysis
ReplyDeleteHi, if not mistaken, SSTEEL is using Weighted Average method to value its COGS and Inventory.
ReplyDeleteSo your assumption above is using First In First Out, which may not be accurate.
But anyhow, your analysis is still a very good quality work.
Hi Alex Ng, ultimately i have used the average cost of each week to compute the average scrap iron price and average selling price.
ReplyDelete