Journey to Wealth
Press Metal - Secures RM350mil loan facility BUY
- We maintain our BUY call on Press Metal with an unchanged fair value of RM2.63/share that is based on a target PE of 13x.
- The facility is to part finance Phase 2B of its new aluminium smelting project within Samalaju Industrial Park, Bintulu division, Sarawak. Prior to this, Press Metal had secured another similar facility worth RM400mil from both banks to part finance Phase 2A of the project.
- Taken together with another RM324mil nominal value Redeemable Convertible Secured Loan Stocks (RCSLS) that the group had raised last year, we estimate that Press Metal has thus far, raised ~RM1bil to fund Phase 2 of its expansion program which is estimated to cost up to ~US$600mil (RM1.8bil).
- For the balance of its funding requirements for this project, we understand that management is mulling a few options. This would include (ii) Forward sales to trading houses/financial institutions; and (iii) Conversion of warrants.
- Not to forget, we do not discount the possibility of seeing renewed interest from strategic investors when Phase 2 kicks off. Notably, Japan's Sumitomo has the right of first refusal to take up a 20% stake in Phase 2, after having a similar stake in Phase 1.
- With its funding program in place, we draw comfort that progress on its new aluminium smelting plant in Samalaju is will on track to be completed by end-3Q12. When fullycompleted, Press Metal's capacity should triple to 360,000 tonnes ' thus solidifying its status as the largest aluminium producer within ASEAN.
- Moreover, Press Metal has recently signed a pact with Sarawak Energy Bhd (SEB) for the long-term supply of some 480MW of electricity under Phase 2. We understand that the plant was successfully energized late last month, with the power supply coming from the Bakun Dam.
- We make no changes to our FY12F net profit forecast of RM112mil (+22%), as the additional debt already forms part of our existing assumptions. FY13F-14F net gearing should improve to 1.4x-1.8x vs an estimated 2.1x, once contributions from the new smelter filter through meaningfully from FY13F onwards.
Source: AmeSecurities
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