PETALING JAYA: Press Metal
Aluminium Holdings Bhd is expected to put in a decent performance for its financial year ending Dec 31, 2024 (FY24) despite headwinds faced by the company due to high alumina prices caused by global supply disruptions in the second-half of this year.
Affin Hwang Investment Bank (Affin Hwang Research), which lowered the company’s earnings forecast for FY24 to FY26 by 7% to 14%, said the manufacturer of aluminium products would still show decent earnings growth of 24% year-on-year, with its third quarter ended Sept 30, 2024 (3Q24) earnings forecast to come in around the RM325mil to RM375mil range.
The company posted core earnings of RM951.5mil in the first-half of the year, a 46% rise compared with the same period of 2023 after 2Q24 core earnings rose 68% year-on-year. The core earnings of the first-half formed 47% of the research house’s full-year estimate.
It said despite the high alumina prices, Press Metal should be partially shielded from the hedged portion of its alumina input costs against aluminium prices while associate PT Bintan would be expected to benefit from the high alumina prices.
The research house maintained a “buy” call on the stock but lowered the target price to RM5.30 from RM5.80 on the earnings revision based on unchanged past five-year mean price-earnings multiple of 24 times applied to FY25 earnings-per-share.
“We remain optimistic about the company’s prospects, as alumina prices are likely to ease as the global supply increases.
“Separately, we believe the next sustainable re-rating catalyst for the stock could take place later in 2028 when it could potentially secure a new hydropower electricity source for its primary aluminium production capacity,” it said.
Noting that the global aluminium market surplus would be turning into a deficit in 2025 due to improving demand from the United States and China, which comprise 60% and 8% demand, respectively, it expects aluminium prices traded on the London Metal Exchange (LME) to average US$2,550 per tonne next year as global demand for the metal registers 3.3% growth.
Affin Hwang Research’s LME aluminium price assumption, although lower than the consensus average of over US$2,600, would now be inline with Bloomberg’s estimate of US$2,537.
It has also revised alumina prices to US$455 from US$473 per tonne, carbon anode costs to 3,600 yuan from 3,750 yuan and a US dollar-ringgit assumption of 4.10 from 4.50 on various changes in market conditions.
