Press Metal shares hit 1-year high amid rising cost

by M JAY SHEILA

PRESS Metal Aluminium Holdings Bhd shares rose 11 sen or 1.9% to RM5.29 in intraday trading today, hitting one-year high.

Last Friday, the stock hit RM5.29, with more than 27.3 million shares exchanging hands, after rising from RM4.60 on March 25.

The integrated aluminium producer was among the top gainers for today’s midday trading, with more than 16.8 million shares traded. It hit an intraday high of RM5.36 at 9.08am.

In a report released today, Hong Leong Investment Bank Bhd (HLIB Research) has maintained a ‘Hold’ call for Press Metal’s counter, with a higher 52-week target price (TP) of RM4.65 based on a price earnings (PE) multiple of 22.5 times on rolled-over financial year 2025 (FY25f) profits — pegged to -1 standard deviation (SD) of its five-year historical mean price-to-earnings ratio (P/E).

The counter has six ‘Buy’, five ‘Hold’ and one ‘Sell’ calls with a 12-month consensus TP of RM5.13.

HLIB Research expected Press Metal’s first quarter 2024 (1Q24) core earnings to come in at the range of RM330 million to RM350 million, representing 21%-22% of FY24 forecasts, barring unforeseen swings in cost structure.

“Alumina price rose 8% quarter-on-quarter (QoQ) to Chinese yuan 3,241/metric tonne (MT) in 1Q24 after supply disruptions in Guinea (major oil depot explosion) and Australia (Alcoa’s closure of 2.2 million tonne Kwinana alumina refinery). This may drag Press Metal’s smelting margins but it could be mitigated by slightly better contribution from its associate PT Bintan via higher alumina average selling prices (ASP),” HLIB Research said.

The research house said Main Japanese Port (MJP) premium has likely caught up with the hike in freight costs from 2Q24 onwards as S&P Global Inc reported that the MJP premium for the first shipment of 2Q24 has jumped 60% QoQ to US$145 (RM685.85)/MT, higher than the whole of 2023.

“Bloomberg Intelligence forecasts that aluminium market surplus would narrow in 2024 due to China’s gradual demand recovery and slower output growth as orders from the rest of the world may recover as inflation eases,” HLIB Research said.

HLIB Research likes Press Metal due to its favourable cost structure as bulk of its energy costs are locked in via 15-25 years power purchase agreement (PPA) with Sarawak Energy Bhd, solid track record as an investable aluminium proxy in Malaysia and favourable environmental, social and governance (ESG) profile as its smelters are hydro-powered.

Its top shareholders are Alpha Milestone Sdn Bhd with a 33.81% stake, executive vice chairman Koon Poh Ming (6.22%) and ED Koon Poh Weng (5.71%). It has a market capitalisation of RM43.6 billion.