Press Metal’s Q4 earnings will revolve around fire, price and coalition: HLIB

Press Metal Aluminium Holdings Bhd’s (KL: PMETAL), a leading aluminium smelting and extrusion facility based in Malaysia, has its fourth quarterly earnings expected to come in a range of RM 375 million (USD 83.25 million) to RM 400 million (USD 88.8 million), according to Hong Leong Investment Bank (HLIB).

Image Source: https://www.pressmetal.com/

The research house has mentioned that heightened earnings are potentially going to be driven by yet another record-high contribution from its partner PT Bintan, which is driven by higher realised alumina prices. HLIB has also shared that while Press Metal is going through some margin compression in its midstream operations, the impact will be partially mitigated by its associate’s assistance.

“Although aluminium prices had risen 8 per cent Q-o-Q, smelting margins would likely shrink in 4QFY2024, as the alumina-aluminium price ratio rose to 27 per cent, coupled with the 9 per cent capacity loss due to the phase 3 smelter fire incident. However, we believe the earnings downside will be partially cushioned by yet another record high associate contribution from PT Bintan, due to higher realised alumina price,” it said.

HLIB reports that the fourth quarter revenues would bring Press Metal’s cumulative FY2025 earnings to RM 1.72 billion-RM 1.74 billion (USD 381.84 million USD to 386.28 million).

HLIB retained its ‘buy’ recommendation on Press Metal, with a sought price of RM 6.21 (USD 1.38). HLIB has observed that PT Bintan’s contribution to Press Metal’s earnings has become increasingly significant. The high alumina prices are expected to support the firm’s profitability going into FY2025.

While the research house anticipates a moderation in alumina prices next year, they remain confident in PT Bintan’s ability to maintain its positive growth trajectory, contributing to the overall development of the group. Looking ahead, HLIB maintains a positive medium-term outlook for Press Metal, expecting earnings to continue to grow through FY2025 and FY2026. This positive outlook should instill optimism in the audience about the future of Press Metal.

HLIB has emphasised a number of positive elements that make Press Metal a lucrative investment subject. The organisation’s cost structure is reflected as favourably promising, heavily due to its long-term power purchase agreements that lock in energy prices for up to 25 years, offering stability in its energy costs. This reassures potential investors about the stability and profitability of their investment in Press Metal.

Moreover, a robust environmental, social, and governance (ESG) profile supports Press Metal’s operations. The company’s smelters are powered by hydroelectric energy, a key consideration for investors focusing on sustainability and ESG factors in their portfolios. 

PT Bintan, with its current alumina production capacity of two tonnes per annum, is set to grow tentatively by one tonne per annum in mid-2025 and another one tonne per annum in the second half of 2026. This implies a doubling of PT Bintan’s production capacity by the end of 2026, a promising sign for the future growth of Press Metal. 

Press Metal is a Malaysia-based aluminium company and is principally engaged in the manufacturing and trading of both midstream and downstream aluminium products.

PT Bintan’s current alumina production capacity of two tonnes per annum is slated to grow by one tonne per annum in mid-2025 and another one tonne per annum in the second half of 2026, tentatively. This implies a doubling of PT Bintan’s production capacity by the end of 2026. 

Press Metal is a Malaysia-based aluminium company and is principally engaged in the manufacturing and trading of both midstream and downstream aluminium products.

The company’s segments include smelting and extrusion, as well as trading, refinery, and investment holding. 

According to Bloomberg, 10 analysts, including HLIB, recommend “buy”, and two analysts have “hold” ratings on the stock. At the time of writing on Tuesday, Press Metal shares stood static at RM4.98, valuing the company at RM40.95 billion.