LB Aluminium Berhad is the largest supplier of aluminium extrusion products in Malaysia and one of the largest aluminium extrusion manufacturers in South-East Asia. The existing integrated production facilities including extrusion presses from UBE, Japan have an annual production capacity of 100,000 metric tonnes. The production facility includes a 4,300 tonnes extrusion press which is the largest press currently available in Malaysia. The Group’s export sales contributed approximately 40% to the total revenue of FY2022. The top three major export markets of the Group are North America, ASEAN countries, and the Oceania region. The company is subject to currency exchange risk,

Currently, the company has got 2 segments: aluminium and property. In 3^rd quarter fy 2023, the aluminium segment recorded profit before tax of 43.59million while property segment reported a loss before taxation of RM2.22 million.  Most of the time, the company had single digit of ROIC and ROE, one of the reasons is that the company had high inventories and receivables.

Even though the company gearing ratio is about 50%, it seems not to be very high, but the company has got net debt of 150million, the company repay about 10million in fy 2022.The company has negative free cash flow over the years, largely owing to high inventories. This is one of the reasons that the company borrowings increased from 100million in 2017 to about 280million in 2022.

At the price of 0.49,the PE ratio is about 5, do you think that the company is attractive at the current price given that it is working in a cyclical industry ,has high debt amount, and low free cash flow generation capacity?

Disclaimer: This information is intended for educational purposes only. It shall not be understood or construed as, financial advice. It is very important to do your own analysis before making any decision

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Raymond Lim, CFA