Better aluminium prices, alumina price to drive Press Metal in FY20E

Better aluminium prices and normalising alumina price are set to drive Press Metal Aluminium Holdings Bhd’s (Press Metal) financial year 2020 (FY20E) earnings

Better aluminium prices and normalising alumina price are set to drive Press Metal Aluminium Holdings Bhd’s (Press Metal) financial year 2020 (FY20E) earnings.

Affin Hwang Investment Bank Bhd (AffinHwang Capital) recapped that year-to-date, London Metal Exchange (LME) aluminium prices averaged at US$1,785 per metric tonne (MT), while the main Japanese ports (MJP) premium hovers around US$80 to US$86 per MT.

“The coronavirus outbreak since January 2020 has caused a temporary disruption to global economic activity and put downward pressure on aluminium prices,” AffinHwang Capital said.

“However, we expect prices to recover once the situation improves.”

Having said that, AffinHwang Capital cut its 2020E aluminium price assumption to US$1,850 per MT, while the research firm maintained its 2021E aluminium average selling prices (ASPs) at US$1,900 per MT.

For Press Metal, the research firm also factored in lower associates’ contribution given a more cautious outlook for global economic growth.

As such, AffinHwang Capital cut its 2020-21E earnings by three-six per cent. Net profit estimates for Press Metal were now at RM612.3 million and RM881.4 million, respectively.

Meanwhile, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) highlighted that while alumina prices have normalised to 16 per cent to 17 per cent of aluminium LME price which is now at circa US$280 per MT from average US$292 per MT in the fourth quarter of FY19 (4QFY19), “the recovery in aluminium prices should lead FY20E earnings growth higher”.

Kenanga Research has thus kept its FY20 and FY21 estimates, for now, with core net profit at RM623 million and RM902 million, respectively.

“Nonetheless, focus should be directed to FY21 given the 42 per cent smelting capacity expansion in Samalaju Plant 3 which is set to be commissioned end of 3Q of current year 2020 (3QCY20) and lower logistic cost after it acquired a 25 per cent stake in alumina producer PT Bintan for nearer supply in Indonesia as compared to its current alumina source in Australia.

“In addition, it looks to increase sales composition of high-value products such as billet and wire rod.”

Source: The Borneo Post 

Posted on : 26 February 2020
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Last Updated : Thursday 2nd April 2020