• Press Metal Aluminium Berhad (Press Metal) has secured an  immediate deal with Daching Enterprises Ltd of Hong Kong to  export aluminium ingots worth RM110mn in 2023. Both parties  also agreed to seal the deal for the same product for RM670mn over the next five years.

• We are optimistic about these deals as it will boost the sales of  its value-added products (VAPs) and hence, the group’s  earnings.

• No change to our earnings estimates pending further  information about these deals.

• Reiterate our BUY call on Press Metal at TP of RM6.54. Our  valuation is based on PER of 30x that is pegged to FY23F EPS of  21.8sen.

Deals worth RM780mn

Press Metal and Hong Kong’s Daching Enterprises Ltd has secured  two exports deals worth RM780mn that will see the sale of  aluminium ingots worth RM110mn to Daching and a five-year export  deal of the same product for RM670mn. Daching Enterprises Ltd is  Hong Kong base company, one of the largest manufacturers of  premium thin gauge aluminium foil. The group have production  capacity up to 120,000 tonnes of foil and 220,000 tonnes of  aluminium sheets each year. Their customers come from all over the  world and the products will be used in various industries such  packaging of food and beverages, pharmaceutical products and as  cathode foil in batteries for electric vehicles.

A Prospering Growth for Midstream Segment

We are positive on the deals as it will enhance the group midstream  segment with additional sales of its VAPs products, and therefore its  revenue potential. This will further increase utilisation rate for aluminium ingots where it currently has about 200,00 metric tonne capacity per annum. Notably, VAPs made up 36% from extended  total molten output for FY22 with a 20% YoY increase in VAPs  volume. On top of that, Press Metal position as a low-carbon  aluminium maker is expected to attract more businesses in the  future given global decarbonisation agenda and rising investor  interest in Environment, Social and Governance (EGS) initiatives.

No Change to Earnings Estimate

No change to our earnings estimates pending further information  about these deals.

Reiterate BUY at TP of RM4.00

Maintain a BUY call on the stock with an unchanged target price of  RM6.54 based on average 5-year historical PER of 30x that ispegged  to FY23F EPS of 21.8sen.

Source: BIMB Securities Research - 10 Apr 2023