YKGI Holdings Berhad (YKGI - 7020) is one of Malaysia top 3 flat steel producer. Formerly known as Yung Kong Galvanising Industries Berhad, the group operates in Peninsula Malaysia as well as East Malaysia. YKGI also had trading hub in Thailand and Indonesia to distribute their coated steel products.

Albeit the increasing consumption of steel which is fueled by large infrastructural development in Malaysia, Malaysia steel industries outlook had been very challenging for the past 4 years with cheap steel imports largely from China and Vietnam, increasing cost from higher electric tariffs, implementation of GST as well as increasing labor cost.

However, the recent effort in the Malaysian Government in introducing anti dumping duties on steel import had gave the industries a new lease of life again. On the 22nd January 2016, MITI had imposed a flat rate 52.1% duties for import from China, while Vietnam producer/exported saw anti dumping duties as high as 34.85%, with exception for Nam Kim Steel Joint Stock Company. The duties are imposed on pre-painted, painted or color coated steel coils (PPCCSC) for a period of 5 years.

How would this be a turn around opportunity for YKGI ?


Steel Manufacturer on Pump Up Production

The huge vacant in the supply chain had definitely left the local steel manufacturer rushing to pump up their production in order to meet the continuous demand of steel. Malaysia being a developing country had been consuming much steel locally, primarily contributed by the huge infrastructural development project such as LRT extension, MRT as well as highways.

As for YKGI, the group is currently pumping out additional 80,000 tonnes or 53% in order to meet the rising demand following the imposition of the provisional anti dumping duties for PPCCSC products imported from China and Vietnam.

The government commitment towards the infrastructural development of the country will continue to be the main fuel for the demand in steel industry. YKGI is expected to see it's order demand in Sarawak to rise by 50% in 2016 to 2018 due to the rapid development in the state.

Last year, East Malaysia contributed 20% of revenue to the group.

Infrastructure projects such as LRT, MRT, Pan Borneo Highway and construction development continue to underpin the demand of steel industry.

YKGI produce similar steel like CSCSTEL, ANNJOO and MYCRON. But CSCSTEL, ANNJOO and MYCRON share price keep breaking new high. It is time for YKGI share price to play catch up. YKGI target price is previous high 40sen.