The joint venture could contribute at least RM200mil to RM300mil in profit.
PETALING JAYA: Press Metal
Aluminium Holdings Bhd’s new joint venture (JV) to establish its second alumina refinery in Indonesia could contribute at least RM200mil to RM300mil in profit.
This is assuming a normalised alumina price of US$350 to US$380 per tonne versus the current price of US$530 per tonne, said UOB Kay Hian (UOBKH) Research in a report.
Press Metal on Wednesday said it had entered into a strategic JV with PT Alakasa Alumina Refineri, PT Dinamika Sejahtera Mandiri and PT Kalimantan Alumina Nusantara (KAN).
Under the agreement, KAN will establish an integrated alumina refinery in Sanggau, West Kalimantan, Indonesia.
The refinery, which will have an initial annual capacity of up to 1.2 million tonnes is projected to cost around RM3.24bil.
Press Metal will acquire an 80% equity stake in KAN and this will be funded internally.
“While detailed financial guidance is yet to be provided by management at this stage due to the preliminary nature of the project and the incomplete understanding of KAN’s alumina refinery cost structure, our initial estimates suggest that the JV could contribute at least RM200mil-RM300mil in profit to Press Metal through its 80% stake,” said UOBKH Research.
This, the research house said, is based on the assumption of a normalised alumina price of US$350-US$380 per tonne and similar cost structure with PT Bintan Alumina Indonesia (PTBAI),” said UOBKH Research.
In June, Press Metal Aluminium said it was planning to sell its entire 25% stake in aluminium oxide producer PTBAI in exchange for a 25.59% stake in Hong Kong firm Nanshan Aluminium International Holdings Ltd in a deal worth about RM1.55bil.
Press Metal had bought the 25% stake in PTBAI in 2020 to secure a stable supply of alumina, which is one of the main raw materials the company uses for its smelting operations,
UOBKH Research is maintaining a “buy” call on Press Metal with an unchanged target price of RM6.30, based on 28 times 2025 price earnings.
“Should aluminium prices swing from our conservative forecast, based on our sensitivity analysis, every US$100 per tonne rise to our current spot aluminium price assumption of US$2,500 per tonne in 2025 would increase its earnings by 14% annually, assuming alumina cost of US$375 per tonne (around a 15.5% cost ratio) and carbon anode prices of 5,500 yuan per tonne.”
