Press Metal set to see record high earnings this quarter
KUCHING: Analysts are expecting Press Metal Bhd (Press Metal) to see record high core earnings for its first quarter of financial year 2022 (1QFY22) which are tentatively scheduled for release on May 30, 2022.
Researchers with Hong Leong Investment Bank Bhd (HLIB Research) expect Press Metal’s core earnings for the quarter to come in at a record high of between RM420 million to RM470 million, barring any unforeseen swings in cost structure.
This will be driven by the following reasons: higher LME aluminium spot prices, averaging at US$3,248 per tonne in 1Q22; and full commissioning of the Phase 3 Samalaju project – resulting in full sales tonnage contribution in 1Q22.
“Impacted by the China lockdown since March, aluminium spot prices have corrected 21 per cent as the lockdown in the largest consuming country has triggered a possible downward shift in the aluminium consumption curve,” HLIB Research said in its review.
“Consequently, Press Metal’s share price has corrected 25 per cent in a span of two months.
“Long-term structural supply issues continue to linger. Nevertheless, we reckon the fall in aluminium prices may be temporary amid a structural supply deficit in the near term.
In our view, the robust demand for aluminium is here to stay, as we are just at the start of the adoption of EV and solar panels on the back of the rising de-carbonisation efforts globally.”
On the other hand, HLIB Research believed that aluminium supply will continue to face disruption following the Ukraine and Russia conflict and power rationing (especially on fossil fuel-based power source) in China.
“We believe that the combination of robust demand and stunted supply will cushion further downside to aluminium prices. Also, taking cue from China’s easing domestic new Covid-19 cases and potential relaxation of its SOP and reopening of its major economies, we reckon the aluminium prices will stage a turnaround in anticipation of an increase in aluminium consumption from China.”
“Hence, current Press Metal’s 40 per cent correction from its year-to-date high of RM7.40 provides a good opportunity for investor to accumulate, as its share price is highly correlated to aluminium prices.”