Quick take: Press Metal climbs to record, aluminium prices at two-year high


Press Metal, South-East Asia’s largest integrated aluminium producer, operates aluminium smelting plants in Bintulu and Mukah.

KUALA LUMPUR: Shares of Press Metal Aluminium Holdings Bhd rose to a record high of RM7.30 in late afternoon trade on Tuesday, underpinned by its strong earnings outlook and also the surge in aluminum prices.

At 3.17pm, it was up 26 sen to RM7.26. There were 2.80 million shares done at prices ranging from RM7.04 to RM7.30.

The FBM KLCI was up 39.05 points or 2.5% to 1,601.76. Turnover was 6.45 billion shares valued at RM3.47bil. Advancers beat deciners 680 to 449 and 461 counters were unchanged.

Aluminium price rose to a high of US$2,045 per tonne, the highest since October 2018.

AmInvestment Research said the robust recovery in the auto market in China as the single largest driver of aluminum prices. It has been instrumental in making China a net importer of aluminum in July and August this year, as well as driving down inventory at the London Metal Exchange (LME).

Recall, China is the largest producer and consumer of aluminium in the world with a global share in excess of 50%.

Aluminium inventory in the LME dropped by 17% from a peak of 1.67mil tonnes on 27 July 2020 to 1.38mil tonnes on Nov 27, while LME aluminium prices rose by 17% during the same time frame, from US$1,708 to US$1,999 a tonne

The research house had in a report on Monday increased its FY21–22F net profit forecasts by 27% and 11% respectively, and raised its fair value by 11% to RM5.53 a share (from RM4.97/share previously) based on 18 times revised FY22F EPS, on higher aluminium price assumptions.

While the 18 times multiple is in line with the KLCI’s 5-year historical average P/E, it is at a substantial premium to the 10 times average forward P/E of key global aluminium smelters.

This is to reflect Press Metal’s favourable cost structure with the bulk of its energy costs (from hydro power) locked in at very competitive rates over the long term.

StarBiz reported on Monday Press Metal is expected to ride on the strong recovery of aluminium prices when its new Phase 3 smelting plant in Samalaju Industrial Park, Bintulu, commence commercial production in two months.

The new smelter will raise the group’s production capacity by 42% to 1.08 million tonnes from 760,000 tonnes per annum.

Press Metal, South-East Asia’s largest integrated aluminium producer, operates aluminium smelting plants in Bintulu and Mukah.

“Our plan to commission the Phase 3 smelter in January 2021 is on track, increasing our capacity by 42% from 760,000 up to 1,080,000 tonnes per annum.

“This expansion is timely as aluminium price has strengthened by more than 40% over the last few months and we see that the world is looking at further economic recovery in 2021, ” said group chief executive officer Tan Sri Paul Koon in a statement as the company reported its latest quarterly results.

It recorded a slight increase in net profit to RM121.98 million for the third quarter ended Sept 30,2020, compared with RM121.51 million in the same period last year.

However, its revenue slipped to RM1.86 billion from RM2.12 billion previously mainly due to the impact of COVID-19 disruptions beginning in March 2020 which had significantly affected the aluminium selling price.

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Press Metal , aluminium , LME , earnings

   

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