Press Metal set for another sterling quarter

KUALA LUMPUR: Press Metal Aluminium Holdings Bhd is on track to post another record-high quarter, with its net profit anticipated to be between Rm420mil and Rm470mil for the three-month period ended March 31, 2022.

The first-quarter results are slated to be released on May 30.

Hong Leong Investment Bank Research (HLIB Research) said the group is on track to more-than-double its profits year-on-year for its financial year ending Dec 31, 2022 (FY22).

This is due to elevated aluminium prices, full commissioning of its phase three Samalaju expansion and further contribution from its 25%-owned PT Bintan alumina refinery.

“The higher London Metal Exchange aluminium spot prices and the full commissioning of the group’s phase three Samalaju project will result in full sales tonnage contribution in the first quarter,” it said.

However, HLIB said aluminium spot prices have corrected 21% as China’s lockdown has triggered a possible downward shift in the aluminium consumption curve.

Consequently, Press Metal’s share price has corrected 25% in a span of two months.

Nevertheless, the research house reckons 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 electrical vehicles and solar panels on the back of the rising decarbonisation efforts globally.”

On the other hand, HLIB expects the aluminium supply to continue facing disruption following the Ukraine-russia conflict and power rationing in China.

“We believe the combination of robust demand and stunted supply will cushion further the downside to aluminium prices,” it said.

That said, HLIB believes aluminium prices would stage a turnaround in anticipation of an increase in consumption from China.

“As such, the current Press Metal’s 40% correction in share price from its year-to-date high of RM7.40 provides a good opportunity for investors to accumulate, given that its share price is highly correlated to aluminium prices.”