PETALING JAYA: Despite a severe downcycle in the global silicon metal industry, Press Metal
Aluminium Holdings Bhd is going ahead with its proposition to acquire a bigger stake in PMB Technology Bhd.
The integrated producer of aluminium products – which already has a 23% stake in PMB – plans to acquire an additional 36%, making it the largest shareholder at 59% and a subsidiary of Press Metal.
The rationale behind the acquisition is for Press Metal to secure PMB’s existing smelting infrastructure and 129-megawatt hydropower allocation.
The infrastructure will then be repurposed into an 80,000 tonnes per annum primary aluminium smelter, before progressively expanding into silicon-aluminium alloy production.
The repurposing will require approximately US$150mil in capital expenditure, compared to more than US$200mil for a new greenfield project.
Press Metal had previously said the acquisition will be funded through internally generated funds.
Kenanga Research said it remains “neutral” on the proposition.
According to the research house, silicon metal prices have fallen approximately 63% from a peak of US$3.47 per pound, to about US$1.27 per pound at the end of July 2026 amid persistent structural oversupply.
“Pricing pressure could intensify further, with close to one million tonnes of new Chinese-backed capacity in Indonesia expected to come online by the end of 2026.
“This includes Jiuwan at 250,000 tonnes, Taiqing at 180,000 tonnes and Shandong Nanshan at 500,000 tonnes, against current global demand of only approximately 3.6 million tonnes,” Kenanga Research said.
Furthermore, concrete contribution from the repurposed plant will only be expected after production ramps up in the second half of financial year 2027, with the research house suggesting limited immediate impact on its forecast earnings.
“We have yet to assume any meaningful earnings contribution from the repurposed aluminium operations, as we assume a longer gestation period for the plant conversion and for the business to turn profitable,” Kenanga Research said said.
“Taken together, we expect earnings accretion from the acquisition to remain limited over the foreseeable future.
“We have factored the consolidation of PMB into our forecasts, resulting in financial year 2026 (FY26) to FY27 earnings dilution of 0.2% to 0.3%, mainly due to the continued weakness in silicon metal prices and PMB’s loss-making operations.”
With that, Kenanga Research said it will maintain a “market outperform” recommendation on the stock with a target price of RM8.80.
Factors driving the positive call on the stock include Press Metal’s structural cost advantage over international peers, thanks to low-cost hydropower secured under four long-term power purchase agreements expiring between 2034 and 2040.
The company also benefits from a secure alumina supply via stakes in two smelters, alongside strong green investment appeal as a clean energy-sourced producer.
Risks include a global recession causing a sharp fall in aluminium demand that could hurt prices, escalating costs for key inputs like alumina and carbon anodes, and major plant disruptions or closures.
Meanwhile, BIMB Research noted that a potential impairment of silicon-related assets may be recognised before the completion of the acquisition, which could limit the post-acquisition earnings impact.
