- We maintain BUY on Press Metal Bhd with an unchanged fair value of RM4.50/share, based on a 12x PE over FY14F core FD EPS of 37.5sen.

- Press Metal reported a core net profit of RM28mil for 1QFY14F (+11% YoY, +112% QoQ), making up 11% and 12% of our and consensus full-year estimates.

- Its top line grew by 24% to RM897mil compared to RM724mil a year earlier. Sequentially, it has improved by 11%.

- Press Metal declared a tax-exempt interim dividend of 5 sen, which exceeded both our and market expectations. No dividend was declared for the same period last year (FY13: 2 sen/share).

- The higher revenue was attributed to higher contributions from its Samalaju plant which achieved full operations at end-FY13.

- Its pre-tax profit saw a marginal 3% increase due to lower metal prices during the quarter (compared to a year ago) and an exceptional loss of RM2.2mil incurred by its Mukah plant.

- Press Metal’s results are commendable as it is still in the early stages of an earnings up-cycle. We maintain our forecasts as earnings will accelerate in the coming quarters.

- Its Mukah plant has resumed full production in 2Q while aluminium prices are rising from a 4-year trough level in 1Q.

- The aluminium spot price is currently at USD1,801/MT, compared to an average of RM1,710/MT during the 1Q. Note that global premiums had only begun to increase in 2Q (to USD150-USD500/MT vs. an average of USD150/MT last year).

- We remained upbeat on Press Metal’s investability, which is premised on:- (i) improved balance sheet, with net gearing to improve to 0.8x at end-FY15F (from 1.9x last year); (ii) higher aluminium prices and premiums; and (iii) capacity boost following the production ramp-up at its two plants.

- We raise our FY14F DPS to 5 sen/share, but maintain our FY15F-16F DPS pending guidance from management.

- Press Metal is currently trading at a core FD PE of 9.5x. Maintain BUY.

Source: AmeSecurities