KUALA LUMPUR (Feb 21): Malaysia Smelting Corp Bhd's (MSC) share price rose to a record high of RM4.56 on Monday (Feb 21) after the group announced its results for the year ended Dec 31, 2021 (FY21) — the best ever posted.

MSC, the top gainer, jumped 11.76% or 48 sen to a high of RM4.56 on Monday (Feb 21) morning. It then slipped to RM4.40 for a gain of 32 sen at the closing bell, which translates to a market capitalisation of RM1.85 billion.

With 5.48 million shares traded, the stock surpassed its 200-day average of 1.12 million shares. The counter is up 39.24% year-to-date from RM3.16 and 68.58% over the past year from RM2.61.

Last Friday (Feb 18), the mining and metals producer said net profit for the full FY21 increased almost eight-fold to an all-time high of RM118.06 million compared to RM15.16 million last year due to favourable average tin prices. Revenue for the full year rose 32% to RM1.08 billion from RM813.36 million last year.

For the fourth quarter ended Dec 31 (4QFY21), net profit amounted to RM64.07 million from RM14.92 million a year ago, as revenue rose to RM255.06 million from RM232.57 million.

The group has proposed a first and final single-tier dividend of seven sen per share, representing a payout of 25% of FY21 net profit. This dividend is subject to shareholder approval at the group's upcoming annual general meeting.

UOB Kay Hian Research said the group's latest result came in above its estimate and amounted to 134% of its forecast, mainly on the back of record high tin prices, which remain high as global demand outstrips supply.

In a note Monday, UOB analyst Noor Hazmy Noor Hazin said MSC posted explosive results despite a 26% year-on-year decline in smelting production to 16,400 metric tonnes (mt).

With the lifting of force majeure, recovery of production and higher tin prices in 2022, Noor Hazmy expects better results for MSC, going forward.

“We raise our 2022-23 net profit forecasts by 21% and 15% to reflect better margins and we increase our tin price assumptions from US$34,000 and US$30,000 to US$36,000 and US$32,000 per mt respectively, reflecting the prolonged rally in tin prices.

“We also introduced our 2024 forecast with [a] price assumption of US$30,000 per mt. Based on our sensitivity analysis, every US$2,000 per mt rise in our tin price assumptions would boost earnings by about 12% a year,” he explained.

The stock was downgraded to "hold" from "buy" despite a higher target price (TP) of RM4.45 (from RM3.83), Noor Hazmy said.

“Our TP implies 10x 2022F PE (five-year mean PE). If tin prices remain at the current high of US$44,000 per mt in 2022, it could result in a 10% upside to our TP at RM4.89 (8x 2022F PE). Our blue-sky earnings suggest a potentially higher TP of RM5.37 (8x 2022F PE), -1SD to its five-year PE mean.

“We have the ‘hold’ call mainly because the share price [of MSC] has reached our range of TP. We still continue to like the company. If tin prices remain at this level in the coming months, we may rerate our call to ‘buy’ again. Because now we have a conservative tin price assumption of US$36,000 per mt for 2022 vs current tin price of US$44,000 per mt,” the analyst added.