KUALA LUMPUR (April 15): Press Metal Aluminium Holdings Bhd emerged as the top gainer in the morning session today after rising as much as 60 sen or 6% to RM10.62 today, as the rise in aluminium prices is seen to boost the group's earnings.

At noon break, the counter pared some gains to RM10.60, still up 58 sen or 5.79%. The counter saw 3.71 million shares traded.

UOB Kay Hian analyst Desmond Chong said in a note today that the London Metal Exchange's (LME) aluminium prices continue to gain traction on the back of supply shortages and structural demand for aluminium.

"Should aluminium prices continue to rise, based on our sensitivity analysis, every US$100/tonne increase to our current spot aluminium price assumption of US$2,250/tonne in 2022 would increase Press Metal's earnings by 20% annually," he said.

According to him, LME aluminium prices continue to rise steadily to hover at about US$2,250 to US$2,300/tonne (year-to-date average: US$2,120/tonne).

While Chong makes no changes to Press Metal's 2021 net profit forecast, he increases its 2022 net profit estimate by 9% to account for a higher spot aluminium price of US$2,250/tonne.

"We believe Press Metal is in a sweet spot to reap the positive spillover of stronger aluminium prices as we believe the group has only hedged 40% at the average price of more than US$2,000/tonne," he said.

He maintains a "buy" call on the stock and revises up its target price to RM12.50 from RM10.10.