KUALA LUMPUR: Kenanga Research expects even higher earnings to come for Press Metal
Aluminium Holdings Bhd following a record high core profit on the back of aluminium price prospects and new capacity expansion.
“We remain optimistic on its earnings outlook which is also driven by new capacity.
“Thus, it remains an OP with unchanged TP of RM6.50,” it said.
The research house said aluminium prices remain more than 10% over 1QFY21 levels and are expected to stay high in the near term due to tight supply trailing behind high demand as economies reopen.
Aluminium prices remain strong at above US$2,300 per metric tonne with a quarter-to-date average of US$2,363 per metric tonne for 2QFY21 and year-to-date average of US$2,247 per metric tonne.
This is well above the research house’s FY21/22 price assumptions of US$2,050-2,100 per metric tonne.
In addition, quarter-to-date and year-to-date alumina-to-aluminium price ratio are only 12.7% and 13.5% against 14.6% in 1QFY21 and its assumption of
16.5%.
“Therefore, this indicates margin expansion would continue and our prudency in earnings estimates. For now, we keep our forecast unchanged,” said Kenanga.
For 1QFY21, Press Metal’s core profit hit a record high of RM220.5mil, which came to 18% of Kenanga’s and consensus full-year estimates.
Kenanga deems the results in line as it expects stronger results ahead given the elevated levels of aluminium prices.
Press Metal also declared a first interim net dividend per share of 0.75 sen payable on July 2.
