- Press Metal Bhd announced on Bursa Malaysia yesterday that a fire incident had occurred at its smelting plant in Samalaju, Bintulu on 17 May (Sunday).

- The company told the exchange that it is unable to ascertain the cause of the fire or estimate the full impact and consequences of the incident.

- Nevertheless, the company said that preliminary findings suggest that the impact on the group’s earnings is not expected to be substantial. It will also be mitigated as the smelter is adequately insured.

- No persons were harmed in the incident nor were there any uncontrollable emissions at the Samalaju plant with a capacity of 220,000 metric tonnes per annum.

- Nevertheless, management assured that its Mukah plant (120,000 metric tonnes) remains in full operation, while construction for its RM2bil Phase 3 expansion (next to the current Samalaju smelter; full capacity of 320,000 metric tonnes) is ongoing.

- This is the second unscheduled shutdown in two years. Recall that its Mukah plant was shut down following a state-wide power outage in June 2013. As a result, the group had to set aside RM40.5mil in provision for assets written off in FY13. Nevertheless, the plant was able to resume full capacity production by April 2014.

- Given the management’s fortitude and the group’s strong cash flow, we believe that Press Metal will be able to overcome the latest hurdle.

- Nevertheless, pending further clarity on the impact of the incident, we maintain our numbers for now.

- Our HOLD call is premised on the subdued aluminium prices and mixed global economic outlook.

Source: AmeSecurities Research - 20 May 2015