- Press Metal reported 2QFY12 net profit of RM19mil (1HFY12:
RM42mil). As expected, the group did not declare any interim dividend for the
quarter under review.
- While we had earlier flagged about a softer 1HFY12 (~42% of
our previous forecast), the sequential decline in 2Q profit was more than
expected.
- 2QFY12 profits dipped 15% QoQ on lower aluminium selling
prices. Benchmark aluminium prices fell 9% QoQ to US$1,978/tonne in 2Q12 as
buying sentiment turned cautious due to a weaker global economy.
- On a positive note, 1HFY12 revenue managed to hold around
the levels achieved last year, at ~RM1bil. We believe this was due to a higher
sales volume via the fullimpact of Mukah Smelter despite weaker aluminium pricing
trends. To be sure, EBIT margin was little changed YoY at 9.7% (2QFY12:
8.4%).
- We expect Press Metal’s prospects to improve in 2H.Phase 2
of its aluminium expansion programme at the Samalaju Industrial Park, Bintulu
is set to kick-off by endSeptember.
- Phase 2A alone would add 120,000 tonnes in new capacity –
followed by another 120,000 tonnes under Phase 2B by mid-2013.
- This is timely, given nascent signs of a return of buying interest
in Asia by Chinese traders with spot aluminium prices hovering near-trough
levels currently (~$1,823/tonne).
- We continue to like Press Metal for its transformational growth
prospects as one of only two aluminium smelters operating within a growing
ASEAN market. Phase 2 would help triple its smelting capacity to 360,000 tonnes
when it is fully commissioned next year.
- Prospects of M&A activities further back our strong conviction
on Press Metal. We reckon that the group is still open to foreign investors
when its new plant kicks off – including Japan’s Sumitomo which already has a
20% stake in Phase 1.
- Valuations remain alluring at FD12F-14F PEs of 5x-9x against
robust EPS CAGR of 22%.
Source: AmeSecurities
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