• BUY, new MYR6.39 TP from MYR6.30, 38% upside with c.2% FY25F yield. Press Metal’s 9M24 core earnings of MYR1,407.3m exceeded our and Street expectations, driven primarily by stronger contributions from its associates. We remain optimistic on the aluminium sector, supported by the recovery in aluminium ASPs and growing awareness of green industries. PMAH is trading at an undemanding 20x 2025F P/E (1SD below its 5-year mean of 25x), following a 14% decline in its share price over the past six months.

• Results beat. 3Q24 core earnings came in at MYR475.8m (-7% QoQ, +49% YoY), bringing 9M24 earnings to MYR1,407.3m (+55% YoY), which is at 91% of our and 85% of consensus full-year projections. 9M24 revenue grew 10.5% YoY, supported by a 10.4% YoY increase in the average LME aluminium price (USD2,384.70/tonne) and a 43.9% YoY rise in Main Japanese Port (MJP) spot premiums, with greater demand on value-added products. Core net margin improved by 3.5ppts, benefiting from better smelting margins and higher contributions from associates. QoQ, core profit declined due to a 4.5% drop in revenue, impacted by a weaker USD and aluminium ASP. A third interim DPS of 1.75 sen was declared, bringing 9M24 DPS to 5.25sen.

• Outlook. Alumina prices remained elevated at USD508.50/tonne (+18% QoQ) in 3Q24, driven by tight supply, while carbon anode prices remained stable below CNY4,000/tonne. We expect alumina costs to normalise in 2025, with new projects in Mempawah, Bintan, and Odisha scheduled to commence commercial operations from 1H25 onwards. RHB Economics expects to US Federal Funds Rate to be cut in Dec 2024, with an additional 100bps decrease anticipated in 2025 – indicating a potential uptrend for aluminium prices. PMAH should benefit from: i) A hike in global aluminium prices; ii) the removal of the 13% tax rebate on aluminium exports by China; and iii) increased demand for aluminium from non-China manufacturers. Our outlook remains cautiously optimistic, as PMAH is well-positioned to capitalise on the potential spillover effects of a heightened US-China trade dispute as well as the growing demand for low-carbon aluminium.

• We lift FY24-26F earnings by 14.4%, 12.2% and 7.5% after revising our associate contribution and cost assumptions, as well as USD/MYR assumptions to 4.3 and 4.2 (from 4.0 and 4.1) for FY25-26. We also modify hedging assumptions per tonne to: i) 40% from 35% for 2025 (at USD2,650); ii) 35% from 30% for 2026 (at USD2,700), and iii) 30% from 15% for 2027 (at USD2,750). Our new DCF-derived MYR6.39 TP (with an 8% ESG premium) implies 27x 2025F P/E, ie slightly ahead of its 5-year mean of 25x. We reiterate our BUY call, highlighting PMAH’s cost advantage, potential rate cut boosting global demand, and growing awareness for lower-carbon footprint smelters. Key risks: Plunge in aluminium prices, sharp weakening of the USD, elevated raw material prices, and a slowdown in global economic growth which would undermine primary aluminium demand.

Source: RHB Securities Research - 2 Dec 2024