PETALING JAYA: Press Metal
Aluminium Holdings Bhd is well-positioned for robust earnings growth this year, underpinned by higher aluminium prices on the London Metal Exchange (LME) and a favourable aluminium-to-alumina cost ratio, according to RHB Research.
“We believe aluminium prices will remain supported in the near term amid a weaker US dollar, high copper prices, and tight supply,” the research house said.
It noted that a structurally weaker US dollar this year would be driven by expected rate cuts, ongoing de-dollarisation, and the liquidity surge into the US market.
“Aluminium prices are closely correlated with copper, as both metals are key beneficiaries of electrification and energy-transition themes, including investment in power grids, data centres, and electric-vehicle (EV) infrastructure.
“Supply is expected to remain tight this year following disruptions in Indonesia, which accounts for about 4% of global copper output, and operational setbacks in Chile, while structural demand from infrastructure related to artificial intelligence (AI) remains intact, providing a supportive backdrop for aluminium prices,” the research house said.
Alumina prices have fallen 54% year-on-year (y-o-y) to US$310 per tonne, now making up 10% to 11% of aluminium prices.
“This year, we expect alumina prices to remain favourable, thanks to new capacity coming onstream in Bintan. Meanwhile, bauxite prices, which make up about 50% of alumina costs, also eased by 13% y-o-y last year and are down 2% year-to-date this year.
“We revise our aluminium LME assumptions to US$2,950 per tonne for this year and US$2,850 per tonne for next year, from US$2,700 per tonne. While spot prices of US$3,000 to US$3,100 per tonne may persist in the near term given the current momentum, we prefer to adopt a more conservative stance,” the research house said.
It has lifted its forecasts for Press Metal by about 5%, 17% and 18% for 2025 to 2027, respectively, to account for the latest price assumptions and in-house US dollar to ringgit forecasts.
“We believe the company’s share price has further upside despite the strong run-up last year. The stock currently trades at 22 times this year’s forecast price-earnings ratio, within its three-year average, and we view this as attractive given the elevated aluminium price, which should translate to a favourable aluminium-to-alumina cost ratio,” it said.
Key risks which could affect the integrated aluminium manufacturer include faster-than-expected supply growth, plunge in aluminium prices, and lower-than-expected demand from renewable energy.
