Summary

• Earnings came in below expectations. In 2HFY23, OMH’s core LATMI registered at –USD1.0m, bringing the full year core PATMI to USD18.1m. The core PATMI came in below expectations, making up only 44.6% of our earnings estimates of USD40.5m. Key variances include (i) lower average selling prices of FeSi and Mn ore.

• YoY. Revenue declined 31% to USD589.2m due to softer ASP despite improved sales volume of ores by 5% in FY23 to 936.9k tonnes in FY23, while sales volumes of Alloys declined marginally by -1% to 405.1k in FY23. The core PATMI plunged 73.3% to USD18.1m as compared to USD67.8m in FY22 due to overall weak ASP in FY2023 amid supressed demand from steel mills and the weakening global steel market. Platts reported FeSi fell approx. 21% from USD1630/tonne CIF Japan at end-2022 to USD1285/tonne CIF Japan at end-2023.

• HoH. Revenue for 2HFY23 fell 31% to USD269.5m on the back of softer ASP. Hence, for the period, it has registered a core LATMI of USD1.0m for the period from USD19.1m in 1HFY23.

• Outlook. Total operational FeSi furnaces will be 6-8 in 2204 with 130-140ktpa, while Mn Alloys will be having 280-308ktpa capacity with 8 operating furnaces. Besides, MetSi will be having 0-2 furnaces in 2024 with 26-29ktpa, totaling up to 430- 470ktpa. Meanwhile, overall capacity is guided to be 450-490ktpa after 2024.

Valuation & Recommendation

• Earnings forecasts. Given the core PATMI came in below expectations, we slash the core PATMI by 10-11% to USD31.5m and USD37.9m for FY24-25f. We expect OMH to pay out US 0.6-0.7 cents as dividend for FY24-25f.

• Valuations. We downgrade OMH to HOLD (from BUY) with a lower target price of RM1.34 (revised downwards by 30% from RM1.90). The target price is derived by assigning a P/E multiple of 7.0x to FY24f 19.1 sen.

• Risks to our recommendation and target price include weaker-than-expected production and ferroalloy prices. OMH is also exposed to currency risk, whereby a weaker USD against the ringgit would be a drawback and vice versa.

Source: Mplus Research - 5 Mar 2024