KUALA LUMPUR (Nov 5): OM Holdings Ltd’s (KL:OMH) near-term outlook appears cloudy as metal prices soften, while market uncertainties dampen demand for its manganese ore and ferroalloys, said BIMB Securities.

China’s recent stimulus measures lack clear details, and there is no short-term boost to demand for the metals, BIMB Securities flagged in a note. Market sentiment has also been tempered by uncertainties surrounding the US presidential election on Tuesday, the research house noted.

The short-term challenges will likely dampen risk appetite for the dual-listed company’s shares, BIMB cautioned following an analyst briefing. The house slashed its target price (TP) by nearly 18% to RM1.61, but nevertheless maintained the stock on ‘buy’ for its long-term prospects.

While the broader rally in prices of industrial metals in September provided a temporary boost, prices of manganese and ferrosilicon alloys declined again in October, which continued into November.

Shares of OM Holdings, listed on Bursa Malaysia and the Australian Securities Exchange, have declined 25% so far this year, amid a sharp decline in earnings as average selling prices fell with lower demand amid excess inventory.

There are now three ‘buy’ calls on OM Holdings, including BIMB’s, and one ‘hold’. The consensus 12-month TP is RM1.56, according to Bloomberg, implying a potential gain of 41% from its last price. The stock was down 1.8% to RM1.12 on Tuesday, valuing the company at RM827 million.

Along with its peers, OM Holdings’ TP carries a 30% discount to its forward earnings, reflecting the downside risks stemming from uncertainty surrounding the US presidential election and the minimal impact of recent Chinese stimulus efforts on the industry, BIMB said.

In the third quarter of 2024, sales of ferrosilicon were down 15% quarter-on-quarter to 42,500 metric tons, while that of manganese alloy sales were lower by 18.1% to 69,800 metric tons, largely due to shipment delays.

On a cost-insurance-freight basis for Japan, the average selling price of ferrosilicon also fell by 1.2% to US$1,275 (RM5,569) per tonne, while silicon manganese fell 24.9% to US$875 per tonne.

OM Holdings, however, expects a price recovery for both alloys as high-cost producers exit the market, and that production remains on track this year with profitability maintained across all furnaces, BIMB added.

In the longer run, the house is betting OM Holdings’ diversification into the metallic silicon market will allow the company to tap into emerging opportunities in various industries, particularly within the growing renewable energy sector.