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Mark Lin
Mark Lin
Articles (212) 

Choo Bee Metal - Malaysia-Listed Net-Net Steel Trader

November 13, 2012 | About:

Choo Bee Metal Industries (CBEE.MK) is principally engaged in the manufacture of flat-based steel products, including pipes and tubes, hollow sections and stainless steel products and the trading in a range of flat and long-based steel products such as structural steel and building materials. The trading division generates 60% of revenue, while the manufacturing division contributes the other 40%.

Valuation

Choo Bee is a net-net trading at 0.54x P/NCAV and 0.37x P/NTA. Its current P/NTA valuation represents a 21% discount to its five-year average P/NTA of 0.47.

Financial Risks

Choo Bee has a strong financial position with a gross debt-to-equity ratio of 5.3%. In addition, Choo Bee has a current ratio of 7.4x and an interest coverage of 17.5x.

Business Quality and Capital Allocation

Volatility in international steel prices have limited or no impact on Choo Bee, as it operates in a protected market where importation is prohibited. Choo Bee sources its main raw material, hot rolled coil from a sole domestic supplier Megasteel.

Choo Bee has a 37% dividend payout ratio and a dividend yield of 4.4%. It has paid out a dividend every year since 2003, with a minimum of RM$0.05 dividend per share.

Management

The executive chairman of Choo Bee, Soon Lian Huat, is the founder of Choo Bee Metal Industries Berhad and has over 50 years experience in the iron and steel business. He has a deemed interest of 57.85% in the company's stock.

Conclusion

Debt-free with a consistent dividend policy, Choo Bee is attractively valued at 0.54x P/NCAV and 0.37x P/NTA.

Disclosure

The author does not have a position in any of the stocks mentioned.

About the author:

Mark Lin

Rating: 2.6/5 (5 votes)

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