KUALA LUMPUR (Jan 21): Aluminium smelting and extrusion facility, Press Metal Aluminium Holdings Bhd’s (KL:PMETAL) fourth quarterly earnings are expected to come in a range of RM375 million to RM400 million, according to Hong Leong Investment Bank (HLIB).
The research house said better earnings will be driven by another record-high contribution from its associate PT Bintan, driven by higher realised alumina prices.
HLIB said while the company faces some margin compression in its midstream operations, the impact will be partially mitigated by the yet another record-high contribution from PT Bintan.
“Although aluminium prices had risen 8% q-o-q in the quarter, smelting margins would likely shrink in 4QFY2024, as alumina-aluminium price ratio rose to 27%, coupled with the 9% capacity loss due to the phase 3 smelter fire incident. However, we believe the earnings downside will be partially cushioned by yet another record high associate contribution from PT Bintan, due to higher realised alumina price,” it said.
HLIB said the 4Q earnings would bring Press Metal’s total FY2024 earnings to RM1.72 billion-RM1.74 billion.
HLIB maintained its “buy” recommendation on Press Metal, with a target price of RM6.21.
HLIB noted that PT Bintan’s contribution to Press Metal’s earnings has been increasingly pivotal, and the strong alumina prices are expected to support the firm’s bottomline going into FY2025.
While the research house foresees a moderation in alumina prices next year, they remain confident in PT Bintan’s ability to sustain its positive trajectory, contributing to the group’s overall growth.
Looking ahead, HLIB maintains a positive medium-term outlook for Press Metal. The research house expects earnings to continue growing through FY2025 and FY2026.
The research house highlighted several positive factors that make Press Metal an attractive investment case, noting that the company’s cost structure is viewed as highly favourable, largely due to its long-term power purchase agreements that lock in energy prices for up to 25 years, offering stability in its energy costs.
Moreover, Press Metal’s operations are supported by a robust environmental, social, and governance (ESG) profile. The company’s smelters are powered by hydroelectric energy, a key consideration for investors focusing on sustainability and ESG factors in their portfolios.
PT Bintan’s current alumina production capacity of two metric tonnes per annum (mtpa) is slated to grow by one mtpa in mid-2025, and another one mtpa in the second half of 2026, tentatively. This implies a doubling of PT Bintan’s production capacity by the end of 2026.
Press Metal is a Malaysia-based aluminum company and is principally engaged in the manufacturing and trading of both midstream and downstream aluminum products.
The company’s segments include smelting and extrusion, as well as trading, refinery, and investment holding.
According to Bloomberg, 10 analysts including HLIB recommend “buy”, and two analysts have “hold” ratings on the stock.
At the time of writing on Tuesday, Press Metal shares were unchanged at RM4.98, valuing the company at RM40.95 billion.