Affin Hwang: Press Metal likely to acquire brownfield upstream assets


This proposed acquisition via its 80%-owned subsidiary, Press Metal Bintulu Sdn Bhd will enable PMetal to access 5% of the annual production of WAP, which amounts to 230,000 tonnes of alumina p.a which is 15% of PMetal

PETALING JAYA: Press Metal Aluminium Holdings Bhd will likely acquire brownfield upstream assets to better manage the cost and supply of carbon anode and alumina, said Affin Hwang Capital.

This comes as the group aims to expand vertically in the supply chain to weather volatility in its key raw materials.

Carbon anode and alumina contribute close to 50% of Press Metal’s total production costs.

In a coverage initiation report, Affin Hwang Capital said Press Metal’s earnings growth will likely come from better product mix.

“In our view, capacity expansion is limited in the near future given limited energy availability.

“Press Metal is targeting to raise value-added aluminium products capacity to 60% of total capacity in 2019.

“This should contribute positively to the bottom line as value-added aluminium products enjoy better margins compared to standard P1020 ingots,” the research house said.

To date, the group has formed a joint venture with Sunstone and acquired 50% of Japan Alumina Associates, securing 50% of carbon anode and 15% of alumina for its current requirements.

The JAA acquisition was priced at RM739mil, which will be fully funded through borrowings.

Through the acquisition, Press Metal is able to secure 230,000 tonnes of alumina, which is equivalent to 15% of its annual alumina requirement.

The group has to buy alumina at market price, but it will gain 50% share of profit from JAA.

Meanwhile, the joint venture with Sunstone in China is for the manufacturing of pre-baked carbon anodes with an expected capital expenditure of RM280mil.

Through the joint venture, Press Metal has secured 50% of its carbon anode requirement of 300,000 tonnes per annum.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
   

Did you find this article insightful?

Yes
No

Next In Business News

YTL Power posts higher Q1 net profit
Higher volume and better products mix lift JCY earnings�
Market jumps after Budget passed in parliament
Evergrande Property's Hong Kong IPO meets with lukewarm reception, raises US$1.8bil
Southeast Asia IPO proceeds buck downtrend to hit US$6.4bil as of mid-Nov
Japan shares end at over 29.5-year high as Nasdaq gains cheer tech stocks
HeiTech Padu explores partnership with Regal Orion
Sime Darby's motor division recovery propels 1Q net profit to RM281mil
TNB posts 3Q net profit of RM1.01bil
Westports records stronger 3Q results as container throughput improves

Stories You'll Enjoy