PETALING JAYA: Malaysia Smelting Corp
Bhd’s (MSC) shares have had a strong start to the year on optimism that the company’s earnings will improve in tandem with the increase in tin prices.
While its share price had eased from the recent high closing price of RM2.27 to close at RM1.97 last Friday, the counter had registered a gain of about 29% year-to-date.
According to UOB Kay Hian Research (UOBKH), MSC’s mining division would likely register stronger earnings in the upcoming results for the fourth quarter (4Q) of its financial year ending Dec 31, 2022 (FY22), supported by higher production and better tin prices.
“We are positive on the company’s outlook as its earnings are expected to improve, driven by stronger tin prices and higher production output,” it said.
“MSC is well-positioned for meaningful growth in FY23, backed by improved production output and better margins from the full utilisation of its new eco-friendly plant,” it added.
Tin prices have rebounded in the last three months to currently trade around US$28,000 (RM121,245) per tonne, representing an increase of about 58% from its bottom last year.
The recovery in tin prices was attributable to the ongoing structural supply constraints, coupled with rising demand amid the gradual reopening of China, which consumes more than 50% of global tin, UOBKH observed.
Its correlation analysis showed that every US$2,000 (RM8,660) per tonne increase in its tin price assumptions would boost MSC’s earnings by about 10% a year, and vice versa.
Meanwhile, UOBKH pointed out that MSC managed to increase its average daily mining output by close to 11 tonnes per day in 4Q22.
Although daily output fell to 9.5 tonnes in the first half of FY22 due to Covid-19-related disruptions, a rebound was noted in the second half of FY22.
UOBKH expects MSC’s daily production to increase to 12 tonnes in 2023 with the utilisation of new technology and exploration of new deposits.
“With the new mining area from Asas Baiduri Sdn Bhd (ABSB) in Perak, MSC is expected to enhance its mining output to over 15 tonnes per day (thus boosting earnings by around 20%) in the next two to three years,” it said.
