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
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