Summary

• To recap. OMH’S core LATMI came in below expectation during 2HFY23, where the key deviations were due to lower average selling prices of FeSi and Mn Ore.

• Updates. FeSi prices remain range bound between USD1200-1300. SiMN rebounded from USD850 in 4Q2023 to USD1223 end-May 2024.

• Announced new dividend policy. OMH to distribute 30% (up from 10%), subject to a cap of 50% of Free Cash Flow and other considerations.

• Furnaces status. Total operational FeSi furnaces will be 6-8 in 2024 with a capacity of 130-140 ktpa, while Mn Alloys will have a capacity of 280-308 ktpa with 8 operating furnaces. Besides, fabrication works for the MetSi furnaces will be completed in 1Q24, and the hot commissioning phase is expected to start in 3Q24 with a capacity of 26-29 ktpa. The total Sarawak plant output will be 430-470 ktpa, with an expected utilization rate of more than 85%. Overall capacity in the long run will be around 450-490 ktpa, with the addition of one MetSI 33MVA furnace.

Outlook & Recommendation

• Outlook. OMH’s operating furnaces have stabilized, and SiMn’s selling price has improved, but we think overall earnings may see limited improvement due to a subdued market environment in early 2024. Recent stabilized FeSi and improved SiMn prices may only translate to earnings by end-FY24, reflected in earnings releases during 1Q25.

• Ceasing coverage. In view of the lacklustre earnings and due to reallocation of internal resources, we are ceasing coverage on OMH. Our last recommendation on OMH was HOLD with a target price of RM1.34, derived by assigning a P/E multiple of 7.0x to FY24f 19.1 sen.

Source: Mplus Research - 29 Jul 2024