Press Metal’s earnings prospect remain promising
KuCHING: Press Metal Aluminium Holdings Bhd’s (Press Metal) earnings prospect remains promising, analysts note, despite the group’s third quarter of financial year 2021 (3QFY21) results coming in below expectation.
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), 3QFY21 was another record quarter with core profit rising 15 per cent quarter on quarter (q-o-q) to RM285.4 million but came below expectation as operating costs accelerated faster than expected that capped its earnings jump.
Kenanga Research also noted that the first nine months of FY21 (9MFY21) core profit of RM753.4 million only made up 61 per cent and 66 per cent of house and street’s FY21 estimates, respectively.
“Current aluminium price remains solid at above US$2,600 per metric tonne (MT) level with quarter to date (QTD) average of US$2,789 per MT and year to date (YTD) average of US$2,456 per MT against our FY21/FY22 assumption of US$2,050-2,100 per MT,” the research arm said.
“Post 3QFY21 results, we raised aluminium price assumption to US$2,100-2,400 per MT with higher operating cost assumptions as well.
“This led to FY21E core net profit (CNP) cut by 10.3 per cent but FY22E CNP is raised by 3.5 per cent.”
As such, FY21E and FY22E CNP have been adjusted to RN1.112 billion and RM1.703 billion, respectively.
On the other hand, Kenanga Research’s forecasts did not factor in the IRB’s additional assessment amounting to RM106.1 million that was imposed on PM Bintulu on November 25 for the years of assessments from 2014 to 2019.
The research arm gathered that Press Metal will appeal the Notice of Additional Assessment.
“Although 3QFY21 results came below our expectation, we remain upbeat on its earnings prospect given the elevated aluminium prices coupled with the new 42 per cent additional capacity expansion from P3 Plant.”
As such, Kenanga Research continued to rate the stock an ‘outpeform’ with a higher target price of RM6.96 per share from RM6.50 per share previously.