KUALA LUMPUR: AmInvestment Research has cut its earnings forecasts for Press Metal
Aluminium Holdings Bhd on negative events impacting its supply of alumina, a raw material in the production of aluminium.
In a Thursday report, it maintained its hold call on the counter and trimmed its fair value by 7% to RM3 from RM3.23 previously, based on 13x revised FD FY19F EPS.
The research house said Rio Tinto, one of the largest producers of alumina, has invoked force majeure for certain contracts.In addition, Brazil-based Norsk Hydro Alunorte has havled its alumina production after being accused of contaminating water supply surrounding its site in Brazil.
This comes following US government sanctions on 17 Russian entities including Rusal PLC, causing aluminium prices to soar by 25% over the last two weeks.
"Press Metal is likely to be forced to reduce its annual production amid the global alumina supply shortage," said AmInvestment Research.
"We lower our sales volume assumption by 10% annually to 685K MT but increase our ASP forecast by 3%, 12% and 12% to US$2,000/MT, US$2,400/MT and US$2,500/MT respectively on the back of an uptrend of alumina prices.
"As such we revised up our alumina price in FY18-20F by 12%, 33% and 33% to US$380/MT, US$490/MT and US$520/MT respectively while other raw material, other operating costs and FX assumptions remained unchanged."
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