Press Metal’s 1H16 within expectations, bright outlook ahead
KUCHING: Press Metal Bhd’s (Press Metal) first half of 2016 results were within analysts’ expectations and now they foresee a bright 2H16 outlook for the group.
Press Metal’s filing on Bursa Malaysia revealed that for the six months ended June 30, 2016, the group recorded RM303.26 million profit for the period, compared to RM89.76 million for the year-earlier period.
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), Press Metal’s 1H16 core net profit (CNP) at RM158.4 million was within expectations at 46 per cent and 47 per cent of its (RM343 million) and consensus (RM338 million) forecasts, respectively.
“Note that our financial year 2016 (FY16) core earnings estimate excludes year-to-date insurance claims of RM76 million (RM95 million less 20 per cent minority portion) and unrealised forex gains of RM7.5 million,” it said.
In the third quarter of 2016 (3Q16), the research arm expected the release of third and final tranche of insurance compensation of RM45 million for a full-year total claim of RM115 million.
A second interim dividend of three sen was proposed, for year-to-date dividend per share (DPS) of six sen, within the research arm’s expectation of 12 sen (2.8 per cent yield).
Looking ahead, Kenanga Research projected a bright 2H16 outlook for the group as the research arm expected results to continue improving in 3Q16 with the new Samalaju plant fully operational in June 2016.
Meanwhile, the research arm note that quarter to date aluminium prices are on an uptrend with a quarter to date (QTD) average of US$1,630 per metric tonne (MT), or 3.9 per cent higher quarter on quarter (qo-q) and 1.4 per cent higher year on year (y-o-y).
“In the longer term, we expect aluminium prices to continue its recovery as global capacity cuts lead to inventory drawdowns, while Asia ex-China production remains consistently lower than Asia ex-China demand,” it said.
On estimates for Press Metal, Kenanga Research maintained FY16-17E earnings as the group’s 1H16 CNP was within its forecasts.
Kenanga Research maintained its positive view on the company with a higher target price of RM5.00 per share (ex-bonus/split target price: RM1.79 per share) as the research arm upgraded its Fwd. price earnings ratio (PER) to 15-fold (from 12.7fold) applied to unchanged FY17E fully diluted (FD) earnings per share (EPS) of 33.4 sen.
The research arm’s Fwd. PER of 15-fold was based on an ex-capacity PER-to-aluminum price ratio of 0.5fold (when aluminium prices range between US$1,600-1,800 per MT).
Based on its FY17E aluminium price forecast of US$1,700 per MT and the 73 per cent capacity growth from Samalaju Phase 3, the research arm derived a Fwd. PER of 15-fold.