- We maintain HOLD on Press Metal Bhd with an unchanged fair value of RM2.90/share - pegged to 14x FY15F PE.

- Press Metal announced on Bursa Malaysia yesterday that it had resumed production at its Samalaju plant on 8 June.

- This is positive as it had earlier indicated that it would close the plant for a month before it resumed production.

- Recall that the Samalaju plant was shut down for cleanup and repair works following a fire incident that occurred on 17 May.

- The fire had damaged a few pots and management then noted that the plant would be shut down for a month. At this juncture, the cause of the fire is still unclear but management has indicated an adequate insurance coverage.

- We had earlier cut our earnings estimate by 10% for FY15F to reflect a one-month closure of the plant. Management had indicated earlier that the plant is expected to resume full production by Aug.

- Press Metal also announced that it has signed an amended and restated power purchase agreement (PPA) with Syarikat Sesco Sdn Bhd to take full delivery of 500MW of power by 4Q15.

- Recall that under the original PPA, Press Metal was supposed to draw power in two stages:- (i) 330MW by 4Q15; and (ii) 170MW by 1Q18.

- Press Metal said that barring unforeseen circumstances, the entire Phase 3 (capacity: 320,000MT) is now expected to begin operation by 4Q15. Earlier, the group had indicated that stage 2 of Phase 3 would only commence operations in 1Q18.

- When completed, Press Metal will have a maximum capacity of 760,000MT (Mukah plant: 120,000MT; Samalaju: 320,000MT; Phase 3: 320,000MT).

- Nevertheless, we maintain our numbers, pending clarity. Also, we only expect contributions from Phase 3 to only flow through strongly from FY16 onwards.

- We maintain HOLD. Our call is also premised on the muted global outlook amid structural changes in the aluminium market. Aluminium spot prices have fallen to a 15-month low of USD1,666/MT, with an average YTD price of USD1,795/MT YTD. Global premiums have also fallen to USD101-USD138/MT from the USD400/MT levels seen earlier.

Source: AmeSecurities Research - 17 Jun 2015