Posted by BURSAMASTER > 2015-05-07 21:39 | Report Abuse

Press Metal - Strong 1Q on higher output and better prices HOLD
Author: kiasutrader | Publish date: Thu, 7 May 2015, 02:19 PM

- We maintain HOLD on Press Metal Bhd with an unchanged fair value of RM3.20/share – pegged to 14x PE over FY15F core FD EPS.

- Press Metal reported a net profit of RM43.1mil for 1QFY15 (+54% YoY, +3% QoQ). This is on the back of an 18% YoY revenue growth to RM1.1bil (from RM897mil). On a sequential basis, sales has fallen by 7%.

- Stripping off extraordinary items – i.e. marked-to-market forex loss provisions primarily on USD-denominated borrowings – Press Metal would have reported a core net profit of RM139mil (vs. 4Q14’s RM123mil).

- While Press Metal’s 1Q core earnings exceeded our expectations, we maintain our numbers for now (it made up 47% and 43% of our and consensus estimates).

- Press Metal declared a first tax-exempt interim dividend of 3 sen/share (vs. 5 sen/share for 1QFY14). We are expecting total DPS of 16 sen for this year (FY14: 16 sen).

- The topline growth can be attributed to higher production output from both its Mukah and Bintulu plants during the quarter. Recall that the Mukah plant was shut down in June 2013, and only resumed full production in April 2014.

- With production at full capacity, Press Metal saw its earnings improve on better aluminium spot prices and premiums during the quarter. Spot price was trading at an average of USD1,801/MT during 1Q (vs. USD1,710/MT a year earlier).

- While 1Q numbers are encouraging, outlook on the global aluminium market remains muted. Recall that Alcoa, US’ largest producer, is now forecasting a global deficit of 326,000 metric tonnes (vs. expectations of a surplus earlier) for this year due to anticipated oversupply. Also, China had recently removed a 15% export tax on aluminium products while LME implemented rules to move metal out of its warehouses faster.

- As a result, global premiums have fallen by as much as 40% YTD while spot prices are trading at an average of USD1,810/MT during the same period.

- We maintain our numbers and HOLD call as we expect global prices to remain muted on the back of a mixed global economic recovery. We have forecasted an average selling price of USD2,150/MT for this year.

Source: AmeSecurities Research - 7 May 2015