Posted by kcchongnz > Jun 17, 2013 03:16 PM

Posted by chengyee > Jun 16, 2013 07:04 PM | Report Abuse 
Kcchongnz, have you done study on LBALUM and PMETAL before? Please share if you have. I am interested to know your valuation on them. Thanks. 

No, I haven't before you mentioned here. In fact I don't know what this LBALUM is also. But since you asked, I have a look at P Metal. 

I saw a "big Head Devil" here. PMetal has impressive projects in Sarawak, the huge aluminum smelting plant which is in full operation now, and a few huge operations in China. Appeared to be very impressive. However, after normalizing its earnings to just about 100m last year (this year doesn't appear to be better), its ROE is only about 7%, way below my required return of 15% for this company. 

PMetal has an astronomical amount of debts, 2.6b against its equity of just 1.4b. So yearly interest payment alone is 108m last year. So Pmetal didn't even earn enough to pay interest payment alone! Worst of all, it has no positive cash flow at all from its operations for at least the last two years(mind you I am not taking about free cash flow). So how? I jsut wonder how Pmetal could pay 6 sen a share dividend last year??? 

Since you want my valuation, I just give a shot. I use a simple but very useful valuation method basing on its ROE. My requirement of return for this kind of financial is at least 15%. With a NTA of 2.52 per share, I value Pmetal equal to 7%/15%*2.52 or just RM1.20 per share, against its market price of RM2.52 now.