SOUTHEAST Asia’s largest aluminium extrusion outfit Press Metal Aluminium Holdings Bhd is on the verge of breaching a RM1 bil net profit for its FY2021.
Tentatively scheduled to release its results on Feb 25, Hong Leong Investment Bank (HLIB) Research expect core earnings for Press Metal’s 4Q FY2021 to come in at a record high of between RM330 mil (+16% quarter-on-quarter [qoq]; +100% year-on-year [yoy]) and RM370 mil (+31% qoq; +125% yoy) barring any unforeseen swings in cost structure.
This will be driven by:
- Higher LME aluminium spot prices, averaging at US$2,760/tonne in 4Q 2021 (vs the average of US$1,931/tonne in 4Q 2020 and US$2,652/tonne in 3Q 2021);
- Full commissioning of Phase 3 of its Samalaju project which resulted in increased sales tonnage in 4Q 2021; and
- Earnings boost from its 25%-owned Phase 1 PT Bintan project.
“Our 4Q FY2021 core earnings estimate indicates that FY2021’s cumulative profits would range from RM1.07 bil to RM1.11 bil, signalling a 124-132% yoy growth from FY2020’s profits of RM479 mil,” projected analyst Jeremie Yap in a company update.
“This would make up about 97-101% of our FY21F full-year forecast and 98-102% of full-year consensus estimates.”
Moving forward, HLIB Research anticipates monumental growth prospects with Press Metal’s core PATMI (profit after tax and minority interests) to grow massively by 130% and 111% to RM1.1 bil and RM2.3 bil for FY2021-2022F respectively.
“This would represent a CAGR (compound annual growth rate) of 121% which we reckon is a pretty scarce phenomenon for a large-cap company,” opined the research house.
While it is currently retaining Press Metal’s “buy” rating with an unchanged target price of RM7.25, HLIB Research said it may increase its ascribed P/E (price-to-earnings ratio) multiple for Press Metal as the group deserves a premium in its valuations to reflect:
- Its favourable cost structure as bulk of its energy costs are locked in via 15-25 year power purchase agreement (PPA) with Sarawak Energy Bhd;
- The scarcity premium of a growing large-cap, investible aluminium proxy in Malaysia; and
- Its low carbon footprint as its smelters are hydro powered, making its ESG (envrionemtal, social and governance) profile more favourable to investors.
At 11.06am, Press Metal was up 10 sen or 1.64% to RM6.20 with 1.98 million shares traded, thus valuing the company at RM50.07 bil. – Feb 4, 2022
