Hong Leong Investment Bank Bhd (HLIB) has shown confidence about Press Metal Aluminium Bhd’s earnings prospects in the next 12-18 months. The bank anticipates that the Malaysia aluminium extrusion manufacturer and traders’ earnings to be buoyed by the bullish LME aluminium benchmark price trend over the next one year or more. Also, the general recovery of the aluminium market post-pandemic across most countries is expected to contribute to Press Metal’s earnings.
According to Hong Leong, the world at large is likely to enter into an aluminium deficit during FY2022-23, resulting in demand outstripping supply globally. This may ultimately lead to a drop in inventory in the LME, lifting aluminium spot prices.
Press Metal’s Phase 3 Samalaju expansion project is also expected to be a vital catalyst for the company’s earnings growth in FY2022-2023. The project is scheduled to come into operation by October 2021, ramping up the company’s smelting capacity by 42 per cent to 1.08 million tonnes.
HLIB expects Press Metal’s earnings to be also driven by the company’s 25 per cent-owned PT Bintan alumina refinery (Phase 2), targeted to fully commission in the first half of FY22.
"From a long-term business sustainability perspective, Press Metal will be able to hedge against the volatility in alumina prices from its strategic stake in PT Bintan and Worsley,” noted HLIB
"We maintained 'buy' on Press Metal with a target price of RM7.42," it added.
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