KUALA LUMPUR: Kenanga Research has maintained its Outperform rating on Press Metal
with a target price of RM5.41, based on unchanged ascribed PER of 15.0x on FY16E FD core EPS of 36.1 sen.
In a note on Thursday, the research house said its valuation benchmark is justified by Press Metal's strong earnings growth prospects at 21.2%-20.7% in FY15-16E, way higher than that of FBM70’s earnings growth of 11.4%-4.4%, respectively.
"Press Metal 1Q15 Core Net Profit (CNP) of RM140.2mil makes up 41.9% and 43.3% of our and consensus’ full-year estimates, respectively. We derived the CNP after excluding an one-off item namely unrealised forex losses of RM97mil.
"However, we only consider the result as “broadly in line with our expectation” instead of ahead of expectations," it said.
Kenanga expects a bright outlook in the near-medium term as it expects earnings growth from the new capacity to start kicking-in from January 2016 onwards.
"We also reaffirm our aluminium price assumption at US$1,900/MT, as we expect aluminium prices to stabilise in later part of 2H15 when demand is expected to recover, driven by growing usage of aluminium in the auto sector," it noted.
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