UOBKH Research said that MSC’s Pulau Indah plant will help spur its margins this year.
KUALA LUMPUR: Malaysia Smelting Corp
Bhd (MSC) is expected to continue experiencing growth from its operations locally while profit margins could see an improvement from one of its plants.
This will be aided by new technologies as it aims to increase its mining output with recent new jobs.
According to UOB Kay Hian (UOBKH) Research, MSC’s average daily mining output rose to around 10.5 tonnes per day from 9.5 tonnes per day last year and this is anticipated to grow further.
“The company will continue to boost output to 12 tonnes per day in 2023 with the utilisation of new technology and exploration of new deposits.
“With recent new mining areas, MSC is expected to enhance its mining output to over 15 tonnes per day, which will boost earnings by around 20% in the next two to three years,” it said.
MSC also plans to undertake geological studies of the land and will construct additional tailing ponds once the studies are completed, it said.
Commenting on its smelting division, UOBKH Research said this had become a major contributor to its earnings, having recorded a profit of RM24.9mil in the second quarter despite it being a 33% drop quarter-on-quarter (q-o-q).
The q-o-q weakness was due to lower sales quantity of refined tin in the second quarter as a result of the planned two-month annual shutdown and maintenance of the top submerged lance (TSL) furnace at Pulau Indah that commenced at the beginning of June 2023, it noted.
UOBKH Research said that since the furnace has resumed operations this month, MSC can then allocate higher capacity and achieve a good balance between smelting of third-party ore and intermediates to improve margins.
Meanwhile, it noted that MSC’s Pulau Indah plant will help spur its margins this year.
“With a full commission, MSC expects higher operational efficiency to boost margins this year. As at end-June 2023, the Pulau Indah plant has reached 90% capacity and it targets to hit 100% in 2023,” UOBKH Research said.
The plant has a 50% higher capacity, which yields an additional 20,000 tonnes per year, it noted.
“The plant boasts production costs that are at least 20% lower than the old ones in Penang, as it has better efficiency.
“Higher average tin prices will help to partially offset the elevated production costs for energy, fuel and labour amid the ongoing inflation,” the research house said.
Despite a fall seen in MSC’s recent quarterly results, UOBKH Research said this was mainly due to lower sales quantity of refined tin on the planned two-month annual shutdown and maintenance of the TSL furnace at Pulau Indah that commenced at the beginning of June 23.
“However, we still expect MSC to perform better year-on-year as a ramp-up in production volume can help to further support earnings this year,” it said, maintaining its “buy” call with an unchanged price target of RM2.69 on the counter.
