The  good  FY14  results  with  core  earnings  of  MYR289m  exceeded  our and street’s estimates. Reiterate BUY, though we cut the TP to MYR5.53from  MYR5.75  (88.7%  upside).  We  continue  to  like  Press  Metal,    a world-class  low  cost  aluminium  smelter.  Also,  while  the  commodity’s LME prices  have softened, they have been more resilient vis-à-vis  other metals. Its margins are also partly cushioned by the weaker MYR.

Core  numbers  exceed  expectations.  While  Press  Metal’s  headline profit  appears  to  fall  below  expectations, the  main culprit  was the  sharp weakness  in  the  MYR  post its  migration  to  USD-denominated  loans in mid-2014.  This  required  it  to  book  a  marked-to-market  unrealised  net forex loss  of MYR76.3m  in 4Q14.  As the provision  was  non-operational and  non-cash,  we  reconciled  those  numbers  as  exceptional  items  toderive a FY14 core net profit of MYR289m, ie way above our and street’sestimates.  Other  than  benefiting  from  all-in  aluminium  prices  that  rose 3%  QoQ  to  USD2,413/tonne  on  average,  the  positive  flipside  to  the weaker MYR  is  the  extended benefit  of  lower smelting costs,  which  arepartly  in  MYR,  while  its  sales  are  quoted  in  the  USD.  A  fourth interim dividend of 3 sen/share (YTD: 11 sen/share) was also proposed.

Look  beyond  temporary  volatility.  Undeniably,  the  London  Metal Exchange  (LME)  aluminium  price  has  softened  since  late-2014  in tandem  with  the  sharp  plunge  in  crude  oil  prices.  Nevertheless,  the premium charged  on top of  the  LME cash price  remains firm,  with  1Q15 Japanese  premiums  inching  up  1.2% QoQ  to  USD425/tonne.  All in  all,aluminium prices  are  more resilient vs other metals,  thus  supporting  our view  that  the  former  is  bottoming  out  on  a  supply  deficit,  which  has already occurred since 2014. Meanwhile, we project a stronger 2H15.    

Reiterate BUY,  with a MYR5.53  TP.  On top of  a  favourable  aluminium market,  we  continue  to  like  Press  Metal  as  it is  a  world-class  low-cost smelter  in  the  first  quartile  of  the  global  cost  curve.  Together  with  its ongoing Phase III expansion, which  will lift smelting capacity to 760,000 tonnes per annum (tpa), it looks all set to ride on the expected aluminium up-cycle. That said, we tweak  our earnings assumptions  to  better reflect the  present  market  conditions.  Our  FY15/FY16  estimated  profit  are raised  by  3.8%/8.8%.  To account for  the  volatile commodity market, we now apply  a  20%  discount  (from 10%)  to our latest DCF valuation  on a fully-diluted basis, trimming our TP to MYR5.53 (from MYR5.75). 

Tweaking our assumptions.  Meanwhile,  the  lower LME aluminium price prompted us  to  lower  our  base  price  assumption,  which  started  in  2015,  to  USD1,900/tonnefrom  USD2,000/tonne.  However,  we  are  keeping  our  assumption  that  the  LME aluminium  will  stabilise  from  2015  levels  and  grow  by  a  marginal  1.5%  per  year thereafter. We  are  also keeping our long-term physical premium of USD400/tonne. Separately,  the  sharp  weakness  in  the  MYR  over  the  past  couple  of  months  also prompted  us  to  revise  our  USD  to  MYR  assumption  to  3.50/3.40/3.30  from3.25/3.20/3.10 for FY15/FY16/FY17 onwards  respectively.  That said, we decided to exclude  the  temporary  impact  from  the  quarter  to  quarter  marked-to-market  of  its USD-denominated  borrowings. We  deem those  as  exceptional items  from  now  on. Following  the  changes,  our  FY15/FY16  profit  estimates  are  raised  by  3.5%/8.8%respectively. W e are also introducing our FY17 estimates.