Journey to Wealth
Aluminium Sector - Strong signals from Alcoa's 4Q12 results OVERWEIGHT
- Global aluminium giant Alcoa recorded 4Q12 results that bested consensus expectations. 4Q sales reached US$5.9bil (+1% QoQ) beating the street's estimates of US$5.6bil.
- Profit from continuing operations doubled QoQ to RM64mil on an improvement in its pricing mix as amid a recovery in regional premiums.
- Average selling prices for Alcoa's aluminium metals rose 4.6% QoQ (YoY: -2.1%). This more than masked a decline in production levels at 912 kmt (-2.8% YoY and -5.2% YoY) and seasonal increase in energy prices.
- For FY12, Alcoa achieved its full-year targets and broke a few records among key operating parameters. This would include an all time high for adjusted EBITDA margin of 19.2% for its downstream businesses.
- On its outlook, Alcoa highlighted strong consumption trends where short-term global demand growth (2010-2012) for aluminium grew at a faster CAGR of 8% vs the 6.5% estimate that the group made back in 2010 (implying a doubling of demand from 2010 to 2020).
- Moving into 2013, Alcoa is projecting global aluminium demand to accelerate 7% YoY at 49.4 mil mt with China accounting for nearly half of global consumption. Segment wise, the aerospace industry is tipped to chart the strongest growth at 9%-10%. Net surplus is seen to stabilize at ~535k (China: 65%).
- Taken together, we foresee Alcoa's consensus-beating 4Q12 results as a precursor of an imminent recovery in global aluminium markets. This largely stems from improving macro data points - including in key economies such as China and the US.
- Notably, there is renewed optimism of a resumption in China's infrastructure spending following the finalisation of its new leadership. From our channel checks, a key focal point of the Chinese development agenda would be on highway/railway and urbanization projects.
- Not unlike other base metals such as steel, global aluminium prices appear to have bottomed in 4Q12 and managed to finish 2012 up ~3.5% YoY at US$2,027/tonne.
- We therefore see Press Metal as an excellent proxy to a recovery in global aluminium pricing trends. It is one of only two smelters operating within an expanding ASEAN market.
- Press Metal's capacity would triple to 360,000 tonnes when its new Samalaju smelter is fully commissioned.
- We expect the ramp-up of Phase 2A of Press Metal's new Samalaju smelter (120,000 tonnes) to be fully felt by end-1H13. Press Metal trades at undemanding FY13F-14F PEs of 6x-8x against an improving operating backdrop.
Source: AmeSecurities
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
jkngo2003
what is the target price for Press metall 8869??
2013-01-11 08:43