$LYSAGHT / 9199 (LYSAGHT GALVANIZED STEEL BERHAD): Profit and Cash achieving New High

Background:

For those unfamiliar with LYSAGHT, it is a leading manufacturer of galvanized steel poles and masts in Malaysia. Their products serve a wide range of applications, including lighting columns for streets and highways, infrastructure for transport terminals and traffic interchanges, illumination solutions for airports, ports, sports complexes, and stadiums, supporting structures for golf courses and other recreational facilities, and antenna masts for 5G technology. Additionally, they offer tubular steel structures designed for supporting overhead power transmission lines, power substation structures, and mounting high-voltage equipment.

Q1FY24 Updates:

📌 Revenue: Achieved RM22.48 million, marking a 32.34% increase YoY but a 3.51% decrease QoQ. The YoY increase is primarily due to higher sales of galvanized steel products and installation income. Sales of galvanized steel products contribute 99.7% of total revenue.
📌 Sales Breakdown: Poles and masts sales amounted to RM17.56 million and RM3.80 million, respectively.
📌 Geographical Revenue: Revenue from other ASEAN countries (excluding Malaysia) constitutes about 48% of total revenue, followed by Malaysia at 42%.
📌 PBT: Increased by 43.37% YoY and 14.55% QoQ to RM4.69 million. The YoY increase is due to higher revenue, while the QoQ increase is due to a roughly 3% decrease in steel prices this quarter.
📌 PAT: Recorded at RM3.59 million for the quarter.
📌 Balance Sheet: Remains strong with a cash position of RM98.38 million and zero borrowings. This equates to RM2.37 per share in cash, meaning 87% of the current share price of RM2.71 is actually cash.
📌 Free Cash Flow: Remains positive for the quarter.
📌 Management Outlook: The management remains cautious about upcoming quarters due to concerns over foreign exchange volatility, a slowing global economy, geopolitical tensions, inflationary cost pressures, and increased competition from lower-quality products.
📌 Additional Factors: Volatility in commodities and crude oil prices, which affect supplier pricing for raw materials sourced from overseas, and fluctuations in steel prices, which impact the company's profit margins.