Affin Hwang upgrades Press Metal to ‘buy’ with RM5.92 target price

KUALA LUMPUR: Press Metal Aluminium Holdings Bhd is poised to benefit from its Phase 3 expansion in Samalaju, Sarawak, which should coincide with a global aluminium demand recovery.

Affin Hwang Capital said the smelting plant, scheduled for commissioning by January next year, should coincide with an aluminium demand revival.

The expansion will increase Press Metal’s smelting capacity by 320,000 tonnes to 1.08 million tonnes from 760,000 tonnes currently.

The firm said based on Press Metal’s track record, it had been able to achieve more than 95 per cent take-up of its aluminium production, either in the form of ingots or value-added products, due to a constant deficit in the world-ex China.

Besides that, Affin Hwang said the commissioning of the PT Bintan Alumina (PT BAI) plant should translate into better margins as Press Metal would benefit from logistics cost savings as Indonesia was closer to Malaysia than Australia.

PT BAI is also set to be commissioned i n Ja n u a r y n e x t year.

Affin Hwang said due to a global demand recovery, the aluminium price had trended upwards.

In April, the London Metal Exchange’s (LME) aluminium price bottomed at US$1,422 per tonne amid global demand disruption as governments imposed movement restrictions and limited business or production activities in an effort to contain the spread of the Covid-19 virus.

Since then, the LME aluminium price has bounced back and is trading at the US$1,600 to US$1,780 per tonne level (inching closer to the end2019 price of US$1,800 per tonne).

“Moving i nto next year, we expect economies to recover and consumption to normalise as the public adapts to the new normal.”

As such, Affin Hwang has raised its financial year 2021 aluminium price assumption to US$1,820 from US$1,780 previously.

The firm also upgraded Press Metal to “buy” from “hold”, with a higher target price of RM5.92 from RM5.42.