Press Metal's perfect timing?

​Press Metal Aluminium Holdings Bhd is poised to benefit from the timing of commissioning of the Phase 3 expansion in Samalaju, Sarawak which should coincide with a global aluminium demand recovery

Press Metal Aluminium Holdings Bhd is poised to benefit from the timing of commissioning of the Phase 3 expansion in Samalaju, Sarawak which should coincide with a global aluminium demand recovery.

Affin Hwang Capital said the expansion, which was scheduled for commission by January 2021, should coincide with an aluminium demand revival.

The expansion will increase Press Metal's smelting capacity by 320,000 tonnes to 1.08 million tonnes from 760,000 tonnes currently.

The firm said based on Press Metal's historical track record, the group had been able to achieve more than 95 per cent take-up of its aluminium production either in the form of ingots or value added products (VAP) due to a constant deficit in the world-ex China.

Besides that, Affin Hwang said the commissioning of the PT Bintan Alumina (PT BAI) alumina plant should translate into better margins as Press Metal would benefit from logistics cost savings due to Indonesia's closer proximity to Malaysia than Australia.

Both Samalaju Phase 3 and PT BAI plants are set to be commissioned in January 2021, versus previous estimate of October 2020.

Affin Hwang said consequent to global demand recovery, aluminium price had trended upwards.

In April, the London Metal Exchange's (LME) aluminium price bottomed at US$1,422 per tonne amidst global aluminium demand disruption, as government imposed movement restrictions and limited business or production activities in an effort to contain the spread of the virus.

Since then, the LME aluminium price has bounced back and is trading at US$1,600- US$1,780 per tonne level (inching closer to end-2019 price of US$1,800 per tonne).

"Moving into 2021, we expect global economies to recover from the 2020 lows and consumption to normalise as the public adapts to the new normal, translating to a global aluminium demand recovery and hence the LME aluminium price," it said.

As such, Affin Hwang has raised its financial year 2021 aluminium price assumption to US$1,820 from US$1,780 previously.

The firm also upgraded Press Metal to "buy" from "hold" previously, with a higher target price of RM5.92 from RM5.42.

Source: NST 

Posted on : 28 September 2020
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Last Updated : Friday 30th October 2020