Kenanga Research said it has cut Press Metal’s FY24 and FY25 earnings forecasts by 18% and 21%.
PETALING JAYA: The recent fire incident at Press Metal
Aluminium Holdings Bhd’s smelter in Samalaju, Sarawak is expected to impact about 3% of the group’s total smelting capacity for the financial year 2024 (FY24), says Kenanga Research.
The affected plant would require four months to restore its operation, the research house said, adding that the damaged assets and loss of revenue are expected to be covered by insurance.
With aluminium prices remaining volatile, Kenanga Research has trimmed its assumptions.
“As such, we cut Press Metal’s FY24 and FY25 earnings forecasts by 18% and 21%, and the target price by 9% to RM5.80, though our ‘outperform’ rating on the stock is maintained,” the research house added.
It noted the spot price of aluminium on the London Metal Exchange (LME) had been see-sawing in the past two months, rising from below US$2,200 per tonne in end-July to peak above US$2,500 per tonne in mid-August before retracing to US$2,300 per tonne level currently.
This is despite aluminium prices expected to stay firm on the back of the demand recovery in China.
Year-to-date, LME aluminium spot price has averaged at US$2,360 per tonne against the research house’s assumption of US$2,550 per tonne.
Press Metal has guided that it hedged 40% of its FY24 selling price at US$2,600 per tonne and 35% for FY25 at US$2,650 per tonne, said Kenanga Research.
“We continue to like Press Metal for its structural cost advantage over international peers given its access to low-cost hydro-power secured under four long-term power purchase agreement contracts ending between 2034 and 2040.”
The group has also strongly secured alumina supply with stakes in two alumina miners, such as Japan Alumina Associate (40%) and PT Bintan (25%) which supply 80% of its requirements and has green investment appeal as a clean energy source producer.
