China's energy crunch spells margin erosion for Press Metal, but Affin Hwang still likes the stock By Farah Adilla - October 20, 2021 @ 10:22am
KUALA LUMPUR: China's energy problem, which is expected to remain until 2022, should translate to some profit margin erosion in Press Metal Aluminium Holdings Bhd's earnings, Affin Hwang Capital said.
In a note today, the firm said raw material supply including alumina, carbon anode, magnesium and silicon metal were expected to be under pressure in the coming quarters as China struggled with its electricity shortages, causing disruptions in production.
It said cement, steel and aluminium production being the most energy-intensive industries were expected to be worst hit from the power crunch.
"Nevertheless, we believe the rise in raw material prices will be partially passed through to customers, mitigating the impact, while the resulting global supply shortage would translate to elevated aluminium prices for a longer period of time.
"Despite the potential squeeze in margin, we continue to like Press Metal for its strong earnings growth outlook and scarcity premium as it is the only aluminium smelter to be listed in Malaysia and the largest aluminium smelter in Southeast Asia," it said.
Affin Hwang said Press Metal's Samalaju Phase 3 plant was operating at 96 per cent capacity and on track for full ramp-up by the end of the year.
Upon full commissioning, Samalaju Phase 3 plant's total capacity will expand to 1.08 million tonnes per year, up 42 per cent from the current 760,000 tonnes per year.
Affin Hwang has adjusted Press Metal's 2021-2023 ernings by 9.5 per cent, -5.9 per cent and -4.3 per cent respectively.
This was after incorporating higher aluminium prices as a result of the global aluminium shortage, higher raw material costs and lower value added products sales volume mix as a result of potential disruption in magnesium and silicon metal supply.
Affin Hwang has maintained its "Buy" call on Press Metal with a lower target price of RM8.20 from RM8.70 previously.
The shortage of aluminium n aluminium products being exaggerated by local research houses; next year profit before tax decide whether Press metal is overvalued or undervalued at 5.50-6.00 but with top Chinese manufacturers producing about 50% of the aluminium of the world, the aluminium prices at china should be good barometer to think whether shortage of aluminium is reality or just a news being wild spread by western top investment banks then local research houses…
whats happened with the big drop? Aluminum price still above 2600; Q3 result is good and expecting Q4 will be good too. Thus, P/E ratio will be coming down too rite?
PMB Technology poised for a rebound, says RHB Retail Research theedgemarkets.com
December 07, 2021 07:40 am +08
KUALA LUMPUR (Dec 7): RHB Retail Research said PMB Technology Bhd is poised for a rebound following a recent pullback, as it bounced off the support while heading towards the immediate resistance of RM12.64.
In a trading stocks note today, the research house said if the stock manages to push above that level – crossing above the 21-day average line – the bulls may propel the stock towards the RM13.20 threshold, followed by the next resistance of RM13.68.
“This expectation will be nullified if it falls below the support level of RM12.04,” it said.
The new variant poses a dilemma for some central banks: Should they simply wait to see its impact, or act pre-emptively?
Major central banks spent much of the year telling investors that the surge in consumer prices would prove temporary. They have dialed back those claims in recent weeks as inflation soared ever higher. Global supply-chain bottlenecks, one cause of higher prices, are now expected to persist through at least the first half of 2022.
“I think there is a concern that inflation isn’t coming back down as quickly as people had felt and central banks need to react,” said Iain Stealey, a portfolio manager with J.P. Morgan Asset Management.
KUCHING: PMB Technology Bhd has secured an additional supply of 25-megawatt (MW) electricity from Syarikat Sesco Bhd to power the production expansion of its metallic silicon plant in Samalaju Industrial Park in Bintulu, Sarawak.
Its wholly-owned subsidiary PMB Silicon Sdn Bhd entered into a legally binding term sheet with SESCo last week, which would be formalised with an agreement later to revise the amended and restated power purchase agreement to, inter alia, increase the existing supply of electricity at its metallic silicon plant from 104MW to 129MW.
PMB Tech said the additional electricity supply is due to an expansion of operations at the silicon facility.
PMB Tech is an associate of Press Metal Aluminium Holdings Bhd, which is South-East Asia’s largest integrated aluminium producer. PMB Tech diversified into the manufacturing of metallic silicon with an investment of some RM320mil in Phase 1 of the plant with an annual production capacity of 36,000 tonnes in 2018.
Metallic silicon, according to the company, is a vital raw material with a compounded annual growth of 4% globally.
PMB Tech’s earnings have received a major boost this year, thanks to the strong metallic silicon prices. In the first nine months to September 2021, PMB Tech’s group net profit soared to RM45.5mil from RM11.8mil a year ago, as revenue climbed to RM542.8mil from RM409mil.
According to CEO Koon Poh Ming, the price of metallic silicon has risen to a record high, as the commodity market has reacted positively to the fast recovery of the world economy from the effects of the Covid-19 pandemic.
He said the surge in the metallic silicon price was primarily caused by the initiative of the Chinese government to cut back on the power supply as well as tightening of environmental control in China.
However, the company expects the record high metallic silicon price to correct by itself and stabilise in the near future.
With the recent encouraging commodities market, Koon said the group is expected to benefit from the positive movement in the price of metallic silicon after offsetting higher logistics, raw material and operating cost.
He said the group’s other aluminium businesses are gradually moving into the positive position.
The group is into manufacturing of aluminium access equipment, marketing and trading of other related products while its construction and fabrication segment is involved in contracting, designing and fabrication of aluminium curtain wall, cladding system and system formwork.
'Aluminum prices continued to march higher to above $2,900 per tonne in the first week of January, the highest since late October 2021, amid falling inventories and expectations of large deficits as the power crisis, specially in Europe persists, and smelters need to cut production. Stocks of aluminium in LME approved warehouses fell more than 50% since the middle of March. Meanwhile, a ban on Indonesia exports of thermal coal prompted a surge in coal prices, which will likely to push aluminum production down in both China and India.' TRADINGECONOMICS
An MSCI gauge of Southeast Asian, or Asean, equities fell less than 2% this week and rose to an 18-month high relative to the Asia benchmark, which slumped almost 5%.
“Asean is now less vulnerable than in the past as current account balances have improved and valuations on equities, bonds and currencies are less demanding,” UBS Group AG strategists including Niall MacLeod wrote in a note Thursday. “Markets are in a much better position relative to 2013.”
Malaysia and many emerging markets like Philippines are about to outperform G10 stocks and currencies.
FKLI derivatives are pretty active these few days. We see a strong return to mid and small caps after the latest statement from BNM. You can read the article on Bloomberg Markets news. KLSE could reach 1800 after the next election due August 2022.
Time to take profits guys. JP Morgan always recommends a stock at the end of the bull cycle. The value trade is almost over. 1 more quarter at most and the price will be stagnant. Not much meat left on the table. Short term traders exit. Long term traders hold
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....
Bgt 9963
7,445 posts
Posted by Bgt 9963 > 2021-11-05 08:46 | Report Abuse
Holding steady !