KUALA LUMPUR (May 19): Hong Leong Investment Bank (HLIB) Research has maintained its “buy” rating on Press Metal Aluminium Holdings Bhd (PMetal) at RM5.28 with a lower target price of RM7.59 (from RM7.71) and said it expects PMetal’s 1Q22 results to come in at yet another record high with a net profit of between RM420 million-470 million (+47-64% q-o-q, +104-128% y-o-y).

“If met, we would deem the results to be within our expectations as we believe that PMetal is on track to more than double its profits y-o-y in FY22 due to: (i) elevated aluminium prices; (ii) full commissioning of its Phase 3 Samalaju expansion; and (iii) further contribution from its 25%-owned PT Bintan alumina refinery,” it said in a note on Thursday (May 19).

HLIB said taking cue from China’s easing domestic new Covid-19 cases and potential relaxation of its SOP and reopening of its major economies, the aluminium prices will stage a turnaround in anticipation of an increase in aluminium consumption from China.

“Hence, current PMetal’s 40% correction from YTD high of RM7.40 provides a good opportunity for investors to accumulate, as its share price is highly correlated to aluminium prices (+95% correlation based on 3Y historical data).

“After some housekeeping measures: (i) diluting the group’s share base post-private placement; and (ii) updating the group’s audited numbers from its recently released FY21 annual report, we maintain 'buy' with a slightly lower TP of RM7.59 (20x P/E on FY23F EPS),” it said.