Bluescope Steel (BSL) - one to watch

I wrote a while back about Bluescope Steel (BSL), Australia's largest steel producer, and why I thought it was posed to rise further amid a strong export environment and rising domestic prices. It was trading around $9.80 at that time and despite recent turmoil in the share markets it is trading at $11.40. One of the few stocks to actually go up. I still think that steel prices will continue to rise, driven by demand from China/India and from the run up in coal prices (the key ingredient for making steel) which are being passed on to end consumers.

Bluescope (BSL) is expected to deliver an interim profit of up to $328 million on Monday. The consensus among analysts is that Bluescope will deliver a first half profit of about $300 million. "Bluescope should benefit from its exposure to sharply rising export prices, while domestic sheet prices have also gained," UBS analyst Chris Drew said in a February 15 client note.

While there are some adverse factors affecting profits (higher currency costs, Asian operation write-offs), overall the year ahead should be good for BSL. US and European steel companies have been reporting strong profits and seen significant share price appreciation. This also puts BSL, a relatively small global steel producer, in play as a takeover target.

If you are willing to take some risk, believe in the ongoing commodities/steel growth trends then BSL is a good buy. A strong result is priced into the share price so any unexpected surprises could cause a big drop in the share price - which could potentially present a good buying opportunity. If the company significantly beats expectations it price will get close to $12.

Either way I am holding on to this stock as it is one of the few growth stories out there.

Photo courtesy robotbrainz