• PMB Technology (PMBT) is an investment holding company that engages in the manufacturing and distribution of metallic silicon products, access equipment, aluminium related products, and related building materials.

• Metallic silicon is an essential raw material widely used in many industries including aluminium alloys and hence, the steady prospect of the company.

• We like PMBT as the group is set to benefit from (i) the current rally in global commodity (i.e.,silicon), (ii) steady demand for raw material of photovoltaic cells and semiconductors industries, iii) silicon segment expansion plant and therefore, an increase in capacity and iv) uptick in demand from construction sector post pandemic.

• We initiate our coverage on PMBT with a HOLD recommendation and TP of RM4.11. Our TP is based on PER of 17x, an average 5- year historical forward PER, that is pegged to FY23F EPS of 24.2 sen.

Steering further growth in metallic silicon business

We anticipate the Group’s announcement in securing the additional 25MW power for its Phase 3 expansion with Syarikat Sesco Berhad, a wholly owned subsidiary of Sarawak Energy Berhad, to propel more room for profit generation. The Phase 3 expansion in Samalaju Industrial Park in Bintulu will bring total power to 129MW and additional capacity of 36,000MT, which will push the group to achieve greater economies of scale by 2023. This is expected to contribute c.76.0% upside to silicon segment revenue by FY23.

Sturdy earnings spread across all segment

We project PMBT core profit to grow at a 3-year CAGR of 26.4% (FY21- FY24F) on the back of strong demand from the renewable energy sector such as solar energy, electric vehicle, and semiconductor industry. This will be added by the expected turnaround in construction sector post pandemic. Earnings are also likely supported by supply tightness from China due to a slash in power consumption. We forecast PMBT’s earnings to expand further or to c.RM163mn-308mn over FY22F-24F.

Initiate with HOLD and TP of RM4.11

We initiate coverage on PMBT with a HOLD recommendation and TP of RM4.11. Our TP is based on PER of 17x, an average 5-year historical forward PE, that is pegged to FY23F EPS of 24.2 sen. This is fair given attractive long-term outlook on renewable energy and construction sector. However, we remain mindful on factors such as global economic slowdown and inflationary pressure where these may dampen investors interest on the broader market and hence, the stock.

Source: BIMB Securities Research - 20 Oct 2022