- We maintain HOLD on Press Metal Bhd with an unchanged fair value of RM6.00/share – pegged to 15x PE FY14F core FD EPS. Our ex-bonus fair value is RM3.00/share.

- Press Metal reported a core net profit of RM82.6mil for 3QFY14 (+38% QoQ, +65% YoY), bringing the 9M core net earnings to RM170.7mil (+26.4% YoY).

- This makes up 61% and 68% of our and consensus full-year FY14F estimates, respectively. We maintain our numbers as we expect contributions to come in stronger in the last quarter.

- For the 9M period, its revenue grew by 26% to RM2.9bil due mainly to higher metal selling prices and aluminium premium. In addition, the period also saw full contributions from its two plants in Mukah and Bintulu that are running at full capacity (440,000 metric tonnes). Recall that the Mukah plant was shut down in July last year due to a power outage.

- The average spot price quoted on the LME for the quarter was USD1,987/MT, vs. USD1,782/MT for the same period last year. The LME spot price last closed at USD2,037/MT. Meanwhile, global premiums are being quoted at USD312-USD494/MT range.

- We maintain our all-in aluminium price of USD2,150/MT for FY14F. The YTD average LME spot price is RM1,845/MT.

- Press Metal declared an interim dividend of 6 sen/share, bringing the total payout to 16 sen/share for FY14F to-date (yield of 2.3%). This is within expectations, as the management noted earlier that is it looking at a dividend payout of 30%-50%.

- Note the proposed 1-for-1 bonus issue of up to 584.9mil new shares has been approved. The ex-date and entitlement date for the bonus issue are 6 Nov and 10 Nov, respectively.

- Also on Wednesday, Press Metal announced to Bursa Malaysia that major shareholder Alpha Milestone Sdn Bhd and persons acting-in-concert (PAC) are looking to convert all of their outstanding RM210.5mil 8-year 6% Redeemable Convertible Secured Loan Stocks (RCSLS).

- Based on the maximum scenario, Press Metal’s share base will also increase from 549mil shares (as at 29 Sept) to 1.289bil (post 1-for-1 bonus issue). We estimate the advance conversion of 95.7mil RCSLS (65.7% of total issued) will result in interest savings of RM12.6mil.

- We maintain our HOLD call on Press Metal for now as we review our FY15F numbers and the outlook on global aluminium demand for next year.

Source: AmeSecurities